Neighborhood Nonprofit Spotlight: The Climate Trust

Patch talks to The Climate Trust about the work its doing to keep the environment clean and safe in Oregon.

Patch: Tell Patch a little bit about your organization!

The Climate Trust: Building upon a legacy of innovation and leadership in the carbon market, The Climate Trust mobilizes conservation finance to maximize environmental returns. We value air, water and soil through the development, purchase and sale of qualified offsets and a relentless investment in people and projects with environmental purpose. Climate Trust Capital (CTC), an independent firm of the mission-driven nonprofit The Climate Trust (The Trust), has launched an investment fund to provide upfront capital to early-stage projects in the U.S. that need to depend upon the long-term revenues generated by carbon markets. In 2016, CTC will deploy funding in our preferred sectors—forestry, livestock digesters, and grassland conservation. As our investment fund scales, we plan to incorporate additional sectors.

Patch: How does your organization help to strengthen your local community?

The Climate Trust: We are committed to staving off a disastrous rise in global temperatures by accelerating the pace of carbon mitigation through increased deployment of conservation finance. To expedite the pace of project development, we have found that early-stage funding is critical—offering greater potential for impact and supporting a vital stage of project development. We are assembling additional impact investment dollars into the first of a series of funds (Fund I) to make these early-stage investments. While climate change is a global issue, up until this point in our organizational history, the majority of our projects and programs have been locally focused, enabling The Trust to grow strong grassroots support for climate action.

In fact, 55% of the money we invest on behalf of utilities stays in Oregon. Since its inception, The Trust has committed to purchase over $32.9 million in carbon financing for greenhouse gas emission reduction projects. The Trust has also been successful at managing carbon acquisitions for multiple special purpose programs in Oregon, Washington, Colorado, Montana, California, and Massachusetts; each providing exceptional benefits to our partners. Through NW Natural’s successful voluntary offset program, Smart Energy, The Trust has committed over $4 million in carbon finance to ten methane energy utilization projects, anticipated to deliver approximately 490,652 carbon offsets for the program.

Patch: What is the biggest struggle your organization faces?

The Climate Trust: Lenders heavily or completely discount the future revenues conservation projects can generate by selling carbon offsets, given the complexity of carbon markets and the perceived uncertainty around the future of carbon pricing. This significantly reduces the ability of carbon markets to mobilize capital for conservation projects. The Trust, an organization with almost two decades of experience working in domestic carbon markets, is in a unique position to manage the risks associated with investing in carbon projects. The Trust is structuring its existing $22 million of program funds to act as a “buyer of last resort” to assure project developers and investors a minimum value for future carbon credits.

Backed by this risk mitigation, as well as grant funding from the David and Lucille Packard Foundation and the United States Department of Agriculture, The Trust is launching a pilot investment fund to provide $5-15 million of upfront capital to conservation projects in return for partial ownership of the resulting carbon credits. After demonstrating the success of Fund I, seeded with a $5.5 million anchor Program Related Investment from Packard, we will scale the next series of carbon investment funds to the $100 to $250 million level to appeal to institutional and impact investors. The biggest struggle will be cultivating enough projects to fill our pipeline as we scale.

Patch: What do you hope for the future of your nonprofit?

The Climate Trust: By using The Trust’s existing programs to mitigate the policy and market risks associated with emerging environmental markets, our investment fund will demonstrate how limited public support can be used to mitigate risks in order to leverage the investment of private capital at scale. Because investments are repaid through credits that represent a verified reduction in greenhouse gas emissions, Fund 1 will tie financial performance directly to verified environmental performance. Not only will this create a new source of capital for conservation projects, we believe that making environmental credits a finance-able asset class can result in paradigm shifts to help restore and protect our planet.

As a more immediate impact, we anticipate that through the $5.5 million Fund 1 vehicle, we can catalyze the development of four anaerobic digesters, three forestry projects and one grassland conservation program. These projects will collectively reduce 978,157 mtCO2e over their ten-year life. Proceeds from the resale of emission reductions to California compliance and voluntary buyers are anticipated to generate sufficient revenues to provide a market based internal rate of return to Fund 1.

Image via The Climate Trust