Companies to Make Millions From Tackling Climate Change

Private companies are investing vast sums of money in projects that help tackle climate change as the market for carbon removal is increasingly being seen as a potential money-spinner.

On Tuesday, Cultivo, a public benefit corporation, announced it had raised $14 million in its first institutional investment round to regenerate 100 million hectares of land that is anticipated to remove three gigatons of carbon dioxide from the atmosphere—over half of America's emissions in 2021.

Much of that came from venture capital firms that invest in technology companies, but Cultivo has also signed an agreement with utility firm Octopus Energy for a further $40 million in direct funding for projects, much of which will be targeted toward the U.S.

However, the company's investment pales in comparison to what its CEO and co-founder, Manuel Piñuela, estimates is currently an $802 billion market for carbon removal—and one that is set to grow as companies attempt to limit their carbon footprint further.

He told Newsweek that in the future, the market is expected to be moving a total of $4 trillion a year. "Especially when you look at it from a long-term perspective, we're starting to see larger and larger institutional capital," he said.

This is due in large part to an increasing demand for carbon credits—an asset that companies can use to offset their carbon emissions.

Piñuela said that this demand meant that the returns on investments in natural carbon capture projects, producing credits by taking carbon dioxide out of the atmosphere, was anywhere between 8 and 22 percent for investors.

Many companies are now being compelled to limit their carbon emissions to government targets—which require carbon credits if they expect to exceed that limit—as well as making their own pledges to go net zero. Piñuela cited the aviation industry as facing increased scrutiny over its emissions.

"A really important movement in the market is how now the compliance and the voluntary market continue to converge," he said. "What do I mean by that? That not only [does] the company have to buy those credits because they are trying to voluntarily achieve a specific goal, but now they have to do it because they are part of that compliance scheme that's implemented wherever they're having operations."

With such demand for carbon removal from the private sector, the private sector is also increasingly seeing the projects that produce carbon credits as a good investment.

Piñuela said that the market was seeing a "big shift" from companies buying carbon credits to becoming investors in carbon removal projects, stressing that "it's an investment that provides that interest in return, as well as one that is very connected to an institution's mission."

However, there is a finite amount of land in the world that can be regenerated, and the more companies provide more carbon credits, the more the premium on carbon credits will go down, and the smaller the return on investment in carbon removal.

So, will those returns diminish as competition grows?

"Yes, and I hope that that happens soon enough," Piñuela said, expressing a preference for saving the planet over making more money. But he added that much of the world's land was "extremely degraded," making rewilding harder and that it was taking too long to decarbonize—so the likelihood of the market reducing over the next 20-30 years was "very small."

Private companies touting their climate credentials can be met with skepticism and accusations of greenwashing—the practice of using environmental commitments and marketing to mask their carbon footprints.

Asked if companies could use the work Cultivo does for greenwashing, Piñuela admitted there was "always that risk" but said that what had "shifted massively" in the last nine months was the strength of the rules surrounding carbon credits and how much they were deemed to offset.

Credits are evaluated and scored based on a number of factors, including how much carbon a project is sequestering and how sustainable it is.

"The amount of scrutiny, more importantly...the amount of data that's required to prove those claims has to be there," Piñuela said. "It is now absolutely fundamental—and existential from a reputational perspective—to make sure what's the data behind every one of those credits."

Investors in Cultivo cited the company's transparency through its online platform that monitors the projects it funds in their decision to pump millions into the company.

"Institutions and their stakeholders are demanding high integrity and greater transparency of nature-based carbon credits to achieve their net zero and nature positive targets," Mark Carney, a former Bank of England governor who recently joined Cultivo's board, told Newsweek, adding that the company's platform "addresses this."