Recalibrating for Impact and Returns
The investment arm is recalibrating its climate strategy to strike a deliberate balance between long-horizon carbon sequestration projects and faster-return climate-tech opportunities. The move reflects a wider recognition in impact investing: meeting climate goals requires both durable carbon removal and scalable, revenue-generating technologies that can attract private capital quickly.
Why the shift matters
Long-term carbon sequestration projects — such as afforestation, peatland restoration or coastal blue carbon initiatives — are essential for permanent emissions reductions. Yet these projects typically have lengthy timelines, uncertain near-term cash flows and complex measurement needs. On the other hand, climate-tech ventures in areas like energy efficiency, distributed renewables, circular economy solutions and decarbonisation software often show clearer unit economics and faster exit pathways.
By blending the two approaches, the group aims to keep delivering measurable climate outcomes while satisfying investor expectations for liquidity and returns. That combination helps mobilise more capital towards climate solutions overall.
Key drivers of the change
- Investor expectations: Limited partners increasingly want impact without excessively long lock-up periods.
- Scaling speed: Faster-return climate-tech can scale rapidly and create market signals that attract further investment.
- Risk management: A mixed portfolio spreads technology, regulatory and market risk across different time horizons.
- Market dynamics: Growing demand for credible carbon removal and improved carbon-credit markets make sequestration projects more attractive, but still long-dated.
How the strategy can be implemented
Recalibration typically involves practical adjustments across portfolio construction, fund design and deployment tactics. Possible approaches include:
- Separate vehicles: Creating different funds or mandates for long-term sequestration and short-to-medium-term climate-tech to match investor horizons.
- Blended finance: Using catalytic or concessionary capital to de-risk early-stage sequestration projects while attracting commercial investors to faster-return tech.
- Milestone-based capital deployment: Funding sequestration projects in tranches tied to development milestones to manage performance and cash flow timing.
- Active portfolio management: Rebalancing allocations as projects mature or as climate-tech companies reach exit-readiness.
- Robust measurement: Strengthening MRV (measurement, reporting and verification) and impact metrics to ensure transparency across both approaches.
Implications for different stakeholders
- Investors: A mixed approach offers diversified exposure to climate outcomes and the potential for more predictable returns.
- Entrepreneurs and project developers: Those working on climate-tech may find faster access to growth capital, while long-term projects can secure targeted, patient funding.
- Climate outcomes: Combining durable carbon removal with scaling emissions-reducing technologies increases the likelihood of meeting near- and long-term climate targets.
Balancing timescales is not without complexities. Key challenges include:
- Valuation and exit timing: Different payoff profiles make portfolio valuation and performance benchmarking harder.
- Measurement consistency: Ensuring comparable impact metrics across sequestration and tech investments is critical for credibility.
- Policy and market uncertainty: Carbon markets, regulation and subsidies can change the economics of both approaches quickly.
Outlook
The recalibration signals a pragmatic approach to climate investing: one that preserves long-term environmental integrity while unlocking capital through faster-return businesses. As private capital plays a bigger role in the climate transition, strategies that blend durable carbon removals with scalable climate tech will likely become more common. This dual focus can accelerate deployment, improve investor alignment and strengthen the case for mainstreaming climate finance.