How Google, Meta, Salesforce and other companies are joining forces to fund climate action

In June, Salesforce announced that it had joined Frontier, an advance market commitment (AMC) from over a dozen companies for the purchase of credits for durable carbon removal credits. The announcement followed the May news that Salesforce had teamed up with Google, Meta and Microsoft to launch Symbiosis Coalition, an AMC for nature-based carbon removal. 

Salesforce has also been a long-time member of the LEAF Coalition, another carbon AMC, making it the only company to have joined all three groups. These announcements are the latest signs of rapid growth of AMCs to accelerate climate action.

Advance market commitments pool buyer pledges to purchase or subsidize a product once it’s developed, stimulating the growth of nascent markets. And they’re becoming increasingly popular tools for accelerating deployment of climate technology. The First Movers Coalition, launched in 2021 by the World Economic Forum, has pledged $12 billion in purchases of climate tech products from low-emission aluminum and steel production to sustainable aviation fuel. 

“While there’s much we can do within our own four walls, much of our, and the world’s progress, will come from new innovative solutions and ways of doing things,” said Max Scher, VP, Sustainability Research and Innovation at Salesforce. “Advance market commitments (AMCs) are a key tool for incentivizing the creation of those solutions.”

A tool for scaling new industries 

Over the last three years, more than 30 companies have joined the three carbon AMCs to accelerate and scale deployment of carbon removal and reduction projects. 

• The LEAF Coalition was launched in 2021 by non-profit Emergent. It has since assembled over $1 billion in purchase commitments from more than 25 companies for jurisdictional avoided deforestation carbon credits. 
• Frontier, started by Stripe in 2022, is pooling more than $1 billion in purchase commitments for durable carbon dioxide removal by 2030. 
• Symbiosis Coalition, the newest group, has pledged to purchase 20 million nature-based carbon removal credits by 2030. 

Market uncertainty has proven one of the biggest barriers to global-scale deployment for many existing climate solutions; without clarity about future demand, project developers and financiers underinvest in product and market development, leaving potentially high-impact climate action on the table.

AMCs give entrepreneurs and investors the confidence to scale operations and propel their industries over high early-stage product deployment costs. 

media_caption

Source: Frontier 

4 reasons buyers join AMCs

Carbon buyers’ motivations for joining an AMC typically fall into four categories.

Streamlined due diligence and contracting

One of the biggest costs of purchasing high-integrity carbon credits is the extensive due diligence to assess each project. Frontier, LEAF and Symbiosis take on the project vetting, reducing members’ needs for building in-house expertise. 

“These are complex projects that require deep technical expertise,” said Julia Strong, executive director of the Symbiosis Coalition. “We’re not going to scale the market if every company has to have a massive internal team.”  

Frontier’s network of more than 60 technical reviewers conduct project due diligence. “We obsess over finding the most promising companies … and writing catalytic offtakes for them,” said Nan Ransohoff, head of climate at Stripe and Frontier lead.

Access to research

All Frontier members have access to its project due diligence documents and an opportunity to ask questions via Frontier office hours. 

“We spend a lot of time on trying to make our research legible to members,” said Ransohoff.  

LEAF members similarly benefit from “the opportunity to work alongside, and share ideas and insights with other corporate climate leaders, as well as our government supporters,” said Eron Bloomgarden, CEO and Founder of Emergent.

Access to high-integrity carbon credit supply

AMC participants receive not only highly vetted carbon credits, but also benefit from purchasing as a coalition. Some LEAF members find that “the integrity of LEAF is the key benefit for them,” said Bloomgarden, helping ensure that “they are buying credits which represent the highest quality.”

In addition to the carbon credits that each AMC delivers to its members, the offtake agreements can also provide access to additional high-integrity carbon credits in the future, via a right of first tons. 

Impact amplification

By pooling their commitments, buyers send a louder and stronger demand signal than they could on their own, said Ransohoff. And working in partnership with other companies committed to climate action gives AMC participants greater confidence than working alone, according to Strong. 

“A major benefit to AMCs is that it spreads risk and costs across a group of buyers in a way that allows for more buyers to participate, and therefore more capital to flow to solutions,” said Ryan Macpherson, director of climate innovation and investment at Autodesk, which joined Frontier last year.

How midsized carbon buyers can participate

The members of these groups are primarily large technology, finance and professional services companies. But all three plan to extend opportunities to participate beyond large corporations.  

Frontier offers two pathways for small and midsized companies to bypass the minimum member investment of $10 million: Stripe Climate Commitments provides tens of thousands of companies on the Stripe platform the option to dedicate a percentage of their revenue to support Frontier’s prepurchase agreements with early-stage carbon removal companies. And Stripe’s Climate Orders enable organizations such as Patch, Terraset and Watershed to offer their customers the option to reserve tons from Frontier’s offtake portfolio with no minimum purchase requirement.  

LEAF is looking to involve mid-sized companies going forward, possibly via the supply chains of current members, according to Bloomgarden.  

The path forward

“It’s the age-old adage of ‘if you want to go fast, go alone. But if you want to go far, go together,’” said Macpherson. “Frontier has served as a catalyst to garnering that alignment, and it has been heartening now to see momentum beginning to build and capital beginning to flow.”

But “demand for permanent carbon removal still needs to grow substantially,” according to Ransohoff, exceeding $500 billion per year by 2050 by some estimates. Frontier’s goal of providing $1 billion in CDR demand over eight years, while ambitious compared with the current market size, is a fraction of the industry scale needed. 

“We need a portfolio of demand bets,” said Ransohoff. Some of those might be AMCs, some might be public policy or other mechanisms. “The world needs to be placing more of these demand bets and we need to place more in parallel.”

What’s next for carbon removal: Join Ransohoff in conversation with GreenBiz’s editor-at-large Heather Clancy at 1 p.m. EDT July 17.