Investing in Climate Solutions: Insights from Chris Brown, Rubicon Carbon's Head of Principal Investments

We spoke to Chris Brown , Rubicon Carbon’s Head of Principal Investments, about the challenges and opportunities he finds in investing in climate solutions.

Q: What was your background before joining Rubicon Carbon, and how has that prepared you for your current work??

A: I began my career in traditional commodities trading, but I soon recognized there was an opportunity to contribute to the green energy transition. I pivoted into the nascent energy transition asset classes of EV charging and battery storage, which, in many ways, have similarities with today's carbon removal technologies. My interest in sustainable technology further guided me into climate tech M&A and venture capital. During this period, I discovered the immense potential of carbon markets, and I became intrigued when Rubicon Carbon approached me about the opportunity to build a financing platform, which I felt was a blend of my previous professional experiences to date.?

Q: How does carbon trading compare to traditional commodity trading?

A: Trading commodities and trading carbon are quite different. Commodities, like oil and gas, are physical goods with inherent value, influenced by supply and demand, geopolitical events, and economic activity. Carbon trading, on the other hand, involves intangible assets like carbon credits driven by regulatory frameworks and nebulous corporate sustainability goals. The participants and market dynamics also differ. Given the relative fungibility of globally traded commodities, traders and buyers in these markets are focused on optimizing price above all else in order to maximize profit. Carbon trading aims to reduce emissions and promote sustainability, making it a purpose- and profit-driven market. As a result, carbon traders, particularly within the voluntary space, need to understand the client’s unique buyer personas before committing to a position. Traders in the voluntary market buy and sell luxury or discretionary goods to discerning buyers focused on quality rather than transacting a traditional commodity.

Eventually, we’d like carbon markets to replicate some of the strengths of traditional commodities markets, including the ease of price discovery & transacting, uniform standards, and more infrastructure. Indeed, our risk-adjusted Rubicon Carbon Tonne? is the type of financial instrument we believe can help drive significant increases in investments in climate solutions.?

So, while they share some similarities, and there is much to learn from how commodity markets function, they’re fundamentally different because they set out to achieve different objectives.

Q: What do you see as Rubicon Carbon’s role within the larger VCM?

A: At Rubicon Carbon, we’ve set out to create a vertically integrated carbon credit management firm. To be vertically integrated means Rubicon Carbon services more of the value chain than traditional intermediaries. We partner with best-in-class project developers and invest in carbon projects, buy issued carbon credits, package those credits within our curated and build-your-own portfolios, which we call Rubicon Carbon Tonnes?(RCTs), manage those portfolios, and sell those portfolios to customers.?

Within that structure, my team provides early-stage development and construction capital to projects that ultimately produce credits for our RCT portfolios or long-term offtake agreements with customers. We're continuously building our pipeline of world-class supply by identifying and financing the highest-quality projects built by the most capable project developers.

Now, what is our role in the larger VCM? Companies with a net-zero target are both decarbonizing and compensating for their hard-to-abate emissions, ideally following the Oxford Offsetting Principles .??

To meet our clients' 2030 goals and aspirations (let alone their 2040 and 2050 goals) and contribute to the planetary effort around climate change, we need to provide critical construction development capital to enable high-quality projects to be built.?

Protecting and enhancing nature has traditionally been the domain of private philanthropy and government-driven conservation efforts.?

We still need public and private conservation efforts to help maintain a balanced planet and fulfill our role as good stewards of Earth. However, to meet the IPCC’s 2050 goals , we need much more investment than existing public and private conservation has historically provided.?

When viewed through the lens of preventing the worst effects of climate change, there is a massive shortage of capital, meaning we need a lot more money flowing into carbon projects.?

Our investments include technology-based CDR and nature-based solutions; however, we continue to see nature-based solutions having several advantages over tech-based solutions in the short and medium term.??

Nature plays a critical role in a low-carbon economy as it excels at cost-effective carbon dioxide capture and storage. It provides key ecosystem services like water filtration and biodiversity protection and additional benefits associated with the project that improve the livelihoods of communities within the project area. Investing in high-quality nature-based removals, including blue carbon and afforestation, reforestation, and revegetation (ARR), backed by improving methodologies, is currently the most cost-effective and scalable removals pathway at our disposal.?

By helping companies, especially the largest polluters, take responsibility for their carbon footprint, we utilize our balance sheet to help tip the scales in favor of the planet.

Q: As Rubicon Carbon scales up its investments, what types of projects are most interesting to you?

A: We listen closely to our clients to understand what types of projects interest them, and yes, recently, that has led us to high-quality nature-based removals.?

Having said that, we still firmly believe in high-quality conservation projects. Land-use change is still the second most significant driver of global emissions, and if we want to reach net zero, we need to reduce deforestation and degradation quickly. We feel a strong imperative to help find the models and methodologies to make conservation viable and sustainable.

Lastly, we expect the mix of credits we invest in to change over time. For example, we expect to see more technology-based removals in our portfolios as technology costs (and risks) decrease.

Q: Can you talk about Rubicon Carbon’s recent investments??

A: In the past few months, we’ve made a series of announcements about early-stage investments in projects.?

In May, we invested alongside Microsoft in Ponterra’s ARC Restaura Azuero Project in Panama and announced an investment in Imperative’s 100,000-hectare land restoration project in South Africa. Though very different, both projects represent the high-quality restoration credits we seek to include in our diversified portfolios.?

Lastly, we recently announced a long-term offtake with Next150 , an emerging biochar producer with operations in Mexico. We’re keen on investing in carbon removal projects in the global south.?

We will continue working with best-in-class developers across nature-based and technology-based carbon projects to procure credits for our RCTs.

Q: How can Rubicon Carbon customers get involved with our investment projects?

A: Based on customer feedback, we continue to broaden and deepen our product offering for our clients. To that end, we offer long-term offtakes to clients seeking exposure to specific projects. These types of partnerships represent the best way for clients to get involved in our pipeline. Interested parties can contact us through our website (www.rubiconcarbon.com/contact-us ) to explore these types of partnerships.?

Q: How is Rubicon Carbon differentiated from other funds in this space?

A: Given our vertical integration, with access to financing, portfolio management, and distribution, Rubicon Carbon can act more as a strategic guide in the Voluntary Carbon Market vs. a traditional fund. We recognize that financing projects is only part of the equation. Many standalone funds lack a robust distribution channel for carbon credits, thereby inhibiting their scalability.? Our best-in-class distribution channel allows us to package the credits generated from our high-quality investments into our RCT portfolios, which our clients consume and retire. We combine these elements to maximize outcomes and provide our clients with a holistic suite of solutions. Your average fund simply can’t offer this frictionless, integrated model.

We’re open to working with a wide range of developers. We are here to fill a gap in the market for construction and development capital.