INSIGHT by Naomi Morenzoni, Senior Vice-President, Philanthropy, Salesforce. This article was first published by the World Economic Forum.
〉Corporate climate action is no longer just a gesture of goodwill — it’s a business imperative.
〉Many companies are meeting the moment, with a third of the world’s largest companies setting net zero commitments, but only 7% are on track.
〉To take our dollars even further, companies must transform how we view our capital stack and align the right form of capital with the right climate action.
With climate change and extreme weather impacting everything from supply chain costs to workforce productivity, corporate climate action is no longer just a gesture of goodwill — it’s a business imperative.
Many companies are meeting the moment, with a third of the world’s largest companies setting net zero commitments. But only 7% are actually on track, requiring bigger and bolder action from the private sector. To reach corporate goals and limit global warming to 1.5°C, we need all hands on deck.
At Salesforce, this means using our full capital spectrum for climate action – including how we raise and deploy capital. Historically, we’ve taken a piecemeal approach, using different forms of capital, including philanthropy, venture capital, purchasing power, sustainability bonds and carbon credits – sometimes in isolation from one another.
Along the way, we learned that:
1. Each form of capital is better suited to advance different objectives.
2. When deployed and blended together, our dollars, and our impact, can go further.
We realized that to most effectively use the full power of our business for climate action, we needed to understand which financial tools are available, how best to use them and when.
| A blueprint for corporate climate finance
In partnership with the Climate Policy Initiative, and based on conversations with 18 peer companies, we developed a blueprint to do just this. This includes a taxonomy of basic corporate finance tools, guidance on when and how to use them for climate efforts and a framework for influencing key decision-makers.
No matter where you are in your journey, here are five steps to activate multiple forms of capital for climate action.
1. Understand your goals and the tradeoffs you’re willing to make
There’s no ‘silver bullet’ when it comes to climate finance. Companies need to first clarify their climate and business goals so they better understand what to optimize for in a climate finance strategy. At Salesforce, this started with publishing our Climate Action Plan as a way to align our goals internally, while also building awareness and accountability externally. With this as our North Star, it made it easier for us to prioritize complex considerations, such as whether or not we needed a financial return and how much, what kind of climate impact we were looking for and other co-benefits to the community and environment.
2. Work with key stakeholders to weigh these objectives and gain buy-in
This includes engaging the usual suspects, like finance. But we also heard a lot about the importance of legal, who can identify and mitigate risks and help structure climate finance interventions. Additionally, companies interviewed voiced the importance of partnering with procurement and other business units that will ultimately implement the climate initiative being financed. These teams can provide a pulse check on what’s realistic and identify unexpected road bumps that may arise.
3. Explore your climate finance options and what it would take to activate them
While companies may have access to similar corporate finance tools, it doesn’t necessarily mean every company will need or want to activate them. For example, when it came to green and sustainability-linked bonds, some companies found the instrument to be extremely relevant if they were in a growth and expansion phase. While others, who were highly liquid and didn’t need to raise new capital, had little to no interest in issuing a bond.
4. Put it all together to build a holistic climate finance strategy that optimizes for your goals, using your limited resources
For instance, as part of Salesforce’s Climate Action plan, we’re developing and scaling new innovations by investing in climate entrepreneurs. To do this, we leverage a mix of capital resources depending on the needs and stage of a climate innovation. This includes philanthropy, to de-risk early-stage ideas and fund organizations, such as Elemental Excelerator, which is building up the next generation of diverse entrepreneurs. Venture Capital to fund climate entrepreneurs and commercially viable companies, such as Pano AI. As well as capital expenses to finance programmes and partnerships such as UpLink, which sources new innovations and supports climate entrepreneurs globally.
5. Proactively prepare for big ‘climate moments’ so you can be ready with a comprehensive climate finance plan.
We’ve all been there, your CEO is headed to COP, new legislation is passed or a competitor announces a major climate commitment and senior leadership asks ‘what’s our plan on XYZ climate initiative?’ To be ready for these moments, decision-makers should prepare in advance by looking at what’s on the horizon, matching existing or new programmes with company priorities and getting buy-in early. One way this came to life for Salesforce is at Davos, where we launched 1t.org, in partnership with the World Economic Forum, to inspire greater investments in nature-based solutions.
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| Activating the private sector’s full potential
These tips are just a starting point and a way to spark conversation on what’s possible. Meeting global climate targets will require more than one form of capital alone. Companies of all sizes will need to take an integrated holistic approach to climate finance, deploying multiple forms of corporate capital in coordination with one another.
One way companies can do this is by using philanthropy to attract different forms of capital. Philanthropy is patient, risk-tolerant and flexible, making it well-positioned to de-risk investments from other funders and play a catalytic role. For example, Giving to Amplify Earth Action, a public-private-philanthropic partnership, is an initiative of the World Economic Forum that aims to unlock $3 trillion to meet global climate targets.
To take our dollars even further, companies need to transform how we view our capital stack and align the right form of capital with the right climate action.
To learn more, read the full Corporate Climate Finance Playbook.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
