Carli Roth, Principal in the Rockefeller Foundation’s Innovative Finance team, highlights new pathways for institutional investment and impact in nature and biodiversity.
COP30’s failure to deliver a clear ‘win’ in the battle against climate change prompted derision, disappointment and calls for a new approach. While the inability of parties to the conference to formally adopt roadmaps away from deforestation and fossil fuel dependency will cause a re-think, Belém’s claim to be the ‘implementation COP’ still has merit.
Even before governments began to temper their ambitions, we knew that public sector finance alone cannot tackle the intertwined causes of climate change and nature degradation. Operationalising the Paris Agreement is increasingly understood to mean finding the policy levers to change behaviour among non-state actors, not least investors. COP30 unveiled a host of detailed proposals and initiatives designed to incentivise private sector investment in projects that combine scalable impact with attractive returns.
An outcomes report from the COP30 Presidency highlights the scale and breadth of decisions taken over two weeks in Belém across six axes, including ‘stewarding forests, oceans, and biodiversity’, ‘transforming agriculture and food systems’, and ‘unleashing enablers and accelerators including on financing, technology and capacity building’. In particular, this latter category demonstrates the focus on implementation, outlining in detail the tools, plans, actions and timelines to match sustainable finance supply and demand.
The common factor in many of these blueprints and frameworks is that they ask different sources of finance to play distinct roles in efforts to arrest and reverse climate change and biodiversity loss. Importantly they ‘go with the grain’ of how those finance providers – philanthropic, institutional, quasi-governmental – operate. In short, they meet them where they are, rather than asking them to change their spots.
One organisation that has long recognised the need for multiple sources of capital to coordinate more effectively to deliver sustainable growth is the Rockefeller Foundation. The US-headquartered philanthropic foundation uses its resources – including US$6 billion in assets – to promote human wellbeing, with an explicit focus on climate change.
A key channel is its Innovative Finance impact arm, which aims to mobilise US$10 billion for “transformative financial solutions” by 2030. It aims to reach this target by deploying flexible catalytic capital, mainstreaming the “underinvested” segments of climate finance, and developing key climate finance and impact investing ecosystems.
“Our North Star has been to mobilise private sector capital through market-based solutions, acknowledging the fact that we need to tap into the large pools of institutional capital that exist to scale the impact that we’re trying to achieve,” says Carli Roth, Principal at Innovative Finance. “There’s just not enough philanthropic or public sector funding available for any one of our impact goals, let alone all of them.”
Proof points
Three years ago, President Rjiv Shah announced climate change would be incorporated into all aspects of Rockefeller Foundation’s work, as the most important crisis facing humanity – especially poor and vulnerable communities. The organisation committed to deploy US$1 billion over five years into people-centered climate solutions, aligned with its other focus areas of health and food security, energy access and economic opportunity.
According to Roth, scaling the nature-positive economy is a key focus of Innovative Finance’s priorities for its climate finance portfolio. Demonstrating that nature is an investable asset class is a core objective – partly due to nature’s role in addressing climate change but also because ecosystem health underpins the global economy and human wellbeing
Innovative Finance deploys catalytic capital across areas such as protection and restoration of ecosystems, enhancing ecosystem productivity and sustainable land management. Many projects target carbon emissions avoidance and removal, alongside other aspects of ecological health, such as water, air or soil quality. Critically, projects must be capable of delivering returns to investors.
“If we want to mobilise institutional capital, we need to demonstrate that these solutions can meet the risk/return preferences of these types of investors,” explains Roth. “While they might not be there yet – because models are nascent and require more proof points – there’s a case to be made that at least some could be both economically viable and meet the needs of institutional investors. That’s where we can really scale the impact.”
Because of the validation these projects provide on emerging technologies, models and techniques, their funding is sometimes described as ‘demonstration capital’.
“We’re looking to engage in a very surgical way, to demonstrate the viability of these models,” says Roth. “While it may be a small cheque size, we can use it in a meaningful way to prove models, to build an evidence base, to prove that this asset class is investable.
She draws a distinction between investments and grants. As well as investments of demonstration capital to attract other investors to new models, Innovative Finance deploys grants to build the enabling ecosystem that underpins the new asset class.
To build the investment pipeline, this means supporting project development platforms and facilities, as well as the enabling conditions. Key activities include the development of data and measurement of carbon stocks and biodiversity assessments, but can also involve helping to formulate policy, translating principles to local circumstances and environments.
Actionable models
The Rockefeller Foundation was an early investor in the Mombak Amazon Reforestation Fund, which finances a platform scaling native species reforestation in the Brazilian Amazon.
Mombak, a Brazilian startup, is seeking to prove that high-quality carbon credits alone can generate a return for investors. It buys degraded land and partners with farmers to plant native species to restore biodiversity and remove carbon, while providing stable income and jobs. Buyers of the project’s high quality carbon credits include tech giant Google, which announced a four-fold increase in its purchases ahead of COP30, following a successful pilot offtake agreement.
In August 2023, Rockefeller invested US$5 million into the fund, launched to raise US$100 million. Mombak used part of the funding to implement a land-testing methodology designed to optimise plant species mix for specific locations. A fellow investor at this stage was the Canada Pension Plan Investment Board. Others followed via the Amazon Reforestation Outcome Bond, a AAA-rated US$225 million vehicle launched last year by the World Bank to channel private investment into the generation of high-quality carbon removal units. Mombak received US$36 million from the bond, from investors including Danish pension fund Velliv.
For the Rockefeller Foundation, support for Mombak was partly about establishing proof points that could be scaled through other projects. “We wanted to understand: what is the demand from the corporate buyers that are generating cash flow into the model; and how viable is native species reforestation, in terms of the supply chain, eligible land and climatic conditions. While it’s still early, we’ve been incredibly pleased with the progress we’ve seen to date,” says Roth, who has witnessed the rate of growth first hand.
Roth describes carbon credits as “one of the more actionable models” among nature-based solutions, with much of the infrastructure now being put in place, increasingly demonstrating buyer willingness to pay higher prices for high quality projects.
More nascent models include pay-per-performance, pay-per-ecosystem service models, or bilateral transactions designed to achieve specific outcomes, related to biodiversity or water use. Some models provide cheaper access to capital and resources for smallholders who are more sustainably incorporating natural commodities into their business strategies. Examples include lower interest rates to incentivise use of specific tactics and techniques into land management practices.
While relationships with institutional investors are critical, the Rockefeller Foundation works with a wide variety of partners to drive capital to climate- and nature-positive investments. At the early stage of any project, this means engaging with NGOs, academics and scientists to provide a robust evidence base for action. Roth sees the organisation’s role as bridging gaps and creating pathways toward nature-positive investments for institutional capital.
“We have supported groups like Nature Conservancy to bring cohorts of carbon projects through an accelerator programme. But we also engage with corporates and investors who are sitting on the other side of the table, thinking about financing these opportunities or being an ‘off-taker’,” she explains.
“We need to understand what projects need to look like to meet their needs, then marry that with what is needed for the ecosystem to ensure that we’re building solutions that can attract those larger pools of capital in a way that’s creating the impacts that we need for nature.”
Confidence through coordination
This need for projects to match finance flows and innovative technologies to local circumstances is particularly essential in regenerative agriculture. In a report published last year, the Rockefeller Foundation highlighted the multiple steps needed to implement regenerative farming techniques and effect food system transformation.
The report flagged the “missing confidence” among financial institutions over whether investing in the regenerative transformation will meet risk and reward standards. To support coordination between finance sources, it listed multiple financing channels and instruments that can be leveraged at varying stages in the maturity of regenerative agriculture projects to help both the overall sector and specific projects to align with lenders’ and investors’ risks, returns and processes.
Increasingly, says Roth, institutional investors are getting to grips with the role they can play in the evolution of nature-positive practices, as part of a broader understanding of nature-related risks and opportunities.
“We see global actors acknowledging that there is a need to address the [nature-based] risks and dependencies in business models and supply chains because ecosystems are so complex that they influence nearly everything we do, whether we realise it or not,” she says.
“Institutional asset owners are keenly aware of the risks if we don’t very carefully assess the dependencies in our portfolios.”
Roth acknowledges, however, that corporates and institutions still need education and capacity-building support. “It’s important to bring along those investors and corporates who are earlier on their journey to understand the risks they may need to address over time. Showing that these models could generate a return is really important, also building the evidence base, and the capacity to educate and understand,” she says.
To this end, the Rockefeller Foundation provided grant funding to the Taskforce on Nature-related Financial Disclosures (TNFD), which has not only developed guidance for corporates and financial institutions, but has also stimulated the development of data and metrics that help the private sector to more accurately assess and monitor its risks and opportunities. In a recent ‘status report’ the TNFD mapped the rapidly rising number of private sector organisations reporting or planning to disclose nature-related impacts, dependencies and targets for the first time.
“Grant capital can be effective in that education journey and the establishment of disclosure frameworks, whereas our investment capital is better suited towards model demonstration when there is an opportunity to invest alongside others.”
Roth’s confidence in the ability of different sources of capital to coordinate more effectively to support the net zero and nature-positive transitions was boosted by her attendance at COP30. An important signal was the growing appreciation of local nature stewardship.
“As a philanthropic funder, we were encouraged to see the role of indigenous communities, as stewards of nature. It is so important to incorporate them from the outset in these solutions – both to leverage existing knowledge and to ensure that we’re not creating further discrepancies in the global system in the future.”
More broadly, the evidence of focus on implementation – both on the ground in Belém and in the Presidency’s outcomes report – further deepened Roth’s resolve.
“The more we can solidify the rules and the frameworks around what works and what doesn’t, the more confidence that investors and corporates will have in engaging.”
