Funding Beyond Value Chain Mitigation webinar Q & A

Just as there are many different companies which will need to take action if we are to reach a net zero world, there are many different business cases for BVCM. For the Science Based Targets Initiative’s report “Above and Beyond” they engaged with over 200+ companies and identified key drivers for its adoption. These included:

Companies face acute and chronic physical risks from climate change (e.g., rising temperatures, sea-level rise, extreme weather events, resource scarcity, ecosystem degradation), as well as systemic risks linked to climate tipping points and ecosystem collapse. Climate change and La Niña drove overall losses of USD 270 billion and insured losses of USD 120 billion in 2022. BVCM supports the mobilisation of mass amounts of climate finance to address these challenges.

Companies face market risks due to shifts in supply and demand for products and services as a result of climate change. Recent analysis showed that 14% of consumers cite ESG as their top buying criteria and more than 70% of consumers are willing to pay a premium of 10–25% for sustainability. An implemented BVCM strategy will provide a point of differentiation for climate conscious companies.

BVCM activities and investments act as a supplement to scope 1, 2 and 3 abatements. It therefore has the potential to further reduce policy and litigation risk where BVCM is aligned with the ‘polluter pays’ principle set out in the 1992 Rio Declaration, which signifies that those who produce pollution should bear the costs of managing it to prevent damage to human health or the environment.

Concern about climate change has been cited as the most common reason for financial groups to exclude companies from their portfolios, according to research from a coalition of non-profit environmental and sustainability groups.

Companies can erode the social license by failing to take externalities into account – even if they have committed to reducing their value chain emissions. Demonstrating a commitment to addressing the climate crisis through BVCM can help businesses avoid costs linked to loss of the social license to operate – for example, through the cost of replacing an employee (on average, 21% of their annual pay).

BVCM is a mechanism by which companies can deploy funds beyond their sector and their value chains to realise opportunities linked to technology R&D and innovation. As such, BVCM activities that accelerate technological innovation brings opportunities to access new markets and for associated return on investment. The global climate tech market is expected to reach USD 182.5 billion at a compound annual growth rate of 24.5% between 2023 and 2033.

• BVCM opens new potential markets for carbon credits. The approach outlined in our report has the potential to unlock over $20 billion funding from the world’s top 250 companies alone. While carbon credits do not need to be the entirety of a BVCM strategy, and other options such as funds, R&D and more exist, high impact credits are a practical and effective tool to finance climate action and sustainable development impacts.

• Carbon credits should not be used as substitutes for value chain emission reductions to avoid the possibility of companies using carbon credits to defer the difficult changes to their business model that may be necessary for reaching a net zero world.

• The traditional mitigation hierarchy advocates a sequential approach: abating value chain emissions and then taking responsibility for unabated emissions. The extent and urgency of the climate crisis means we need to act on both abatement and taking responsibility for unabated emissions simultaneously.

• Only measures that reduce the impact of a company’s operations on the planet can be used for value chain targets. Measures which cannot be used towards value chain abatement or measures that support wider transitions beyond just the scope of one company’s value chain (sectoral investment, R&D, portions of landscape approaches etc), can be considered in BVCM strategies.

• Building on the guidance, Gold Standard has released an expression of interest find here to join an exploratory working group on Beyond Value Chain Mitigation. This group will be comprised on some ngos, consultancies and most importantly companies looking to share learnings and solve key implementation tasks.