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Climate compensation 2.0: Democratising climate finance

29. November 2020


System change, not climate change!... Ok, maybe we’re not that radical, but – it is clear that the way our economy works has to change. Recent reports by the IPCC and IPBES as well as a plethora of other scientific literature have highlighted how our climate has changed, why it has changed, and what past, current, and future impacts are and could be. This year’s COP26 in Glasgow is just around the corner, and we hope that politics is getting on track with what science has been demanding for a while now: Rapid decarbonisation!  

Of course, this is no simple feat. Our globalised world is complex. You can wake up on a beach in Thailand and go to bed in a simple Rorbu along Norway’s coastline, all in one day. During that trip you might read a French newspaper, have a coffee with beans from Costa Rica and a sandwich from the US, write a message on your Korean smartphone that contains metals from the DRC and plastics based on Nigerian oil, carry your bag made of Argentinian leather on the bus which was manufactured in China while wearing clothes made in Bangladesh and Italy from Uzbek and Australian cotton.  

Such a trip is certainly not your everyday commute. Yet its possibility shows how interconnected the global economy is. Add to it inefficient, linear, emission intensive production processes and insatiable western lifestyles, and it becomes clear why we are where we are. Quite a bit of it (read: a lot!) must change.

Yet not everybody who wants to change can. Navigating in these overly complex value chains is difficult enough for some companies. Add to it rules and regulations and you’ll see that only a small share of global business can afford to run the extra mile.

Crucial policies and mechanisms towards decarbonisation have been put in place such as emissions trading systems (ETS). Very often, however, such schemes are inefficient and target only a small portion of companies, such as the EU ETS that primarily targets only large corporates and which was flooded with offset credits a few years ago. Small and medium-sized enterprises (SMEs) are repeatedly left out of such policies. Some companies, however, want to be part of larger emission reduction schemes. To reduce their virtual environmental burden, many of them try to offset their emissions with carbon credits on the voluntary carbon market. Although offsetting schemes do have their merits as an interim solution to achieve net-zero emission targets, the question remains: what can they and we do to achieve real zero-emissions?

Not much as it turns out. While some of the extra-large corporates such as Amazon have set up their own funds to finance novel solutions to decarbonise their own value chains, most SMEs and some other large enterprises are left empty-handed. We want to change that. We want to democratise climate finance. And we do that through what we call climate compensation 2.0!

We at ClimatePoint enable companies to fund the low-carbon solutions that their future value chains will rely on. Through our Green River fund, our clients can invest in young-growth ventures that provide technologies that are of direct relevance to our clients’ respective sectors. In return of this newly gained ownership, our clients receive returns on investments. It does not end, though, with this pure financial incentive. In addition, we attribute the avoided emissions enabled by our investee companies’ solutions to our clients’ investments so that they can keep track of the emission reductions they facilitate. Not only does this approach alter our clients’ existing value chains, it may well restructure the greater economy through repercussions based on competition among producers for low-carbon solutions. By that, we offer a climate compensation mechanism that radically changes the economy.  

To learn more about our approach, don’t hesitate to get in touch with us.

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