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In an economy of uncertainty, one thing has remained predictable—the past 10 years on Earth have been the hottest on record. But will companies’ climate mitigation efforts weather the uncertainty storm?
Yee Lee, chief growth officer at Terraformation, a forestry carbon credits supplier, spoke with CFO Brew about what CFOs and ESG departments that still want to invest in climate solutions during this new age of economic turmoil need to know.
This interview has been edited for length and clarity.
What is Terraformation and what opportunities are you most focused on in the next year?
Terraformation is a roughly six-year-old forestry company. [Yishan Wong, CEO, and I] have known each other for 20 plus years now and have done a bunch of tech stuff together in Silicon Valley, but in 2019 we both wanted to get out of tech and move into climate. As we were doing our research on how to enter this space, forestry jumped out to us as the thing that we should be focusing on. The more that we researched it, it turns out to be quite an opportunity to run forestry projects and generate nature-based carbon removals at scale.
So we created…Terraformation, and its mission is to grow forests around the world. Over the last six years, we’ve planted millions of trees and created almost 1,000 jobs in the carbon forestry space all around the world. We’ve got over 38 projects in places like Uganda and Tanzania and Kenya, and Indonesia and Malaysia, and India, Peru, Brazil, Colombia. We create high quality afforestation [establishing a forest where there wasn’t one before], nature-based carbon removals projects, and sell carbon credits mostly to corporate buyers.
What are you hearing from companies about their appetite for climate mitigation investment amid tariffs, the looming recession, and inflation?
We’ve been talking with all of our prospective buyers and partners for years, and it’s been a very steady pace of activity. And just because there’s a bunch of froth going on in the high level news, I think our meetings still end up proceeding.
How are companies budgeting for climate investment?
I think that that fundamental buying behavior is where a company says, Hey, we’ve got a certain budget to spend on climate stuff. So we’re just going to start at the very top…and buy at the cheapest dollar possible, usually conservation credits. And then followed by afforestation…And then five more tiers down, it’s [direct air capture] and then at the very bottom it’s [bioenergy with carbon capture and storage.]
What advice would you give companies wanting to buy carbon credits?
Keeping in mind it’s such a nascent early space, quality of projects really matters, and trust in the partners that you’re working with really matters. Because you’ll get very different results, depending on who you work with. Even though it may be attractive to try to do the price satisficing thing or the price optimizing thing, really actually try to spend the time to understand project quality, to understand what’s happening on the ground as a result of your dollar investments.
What would you say to businesses that think it’s too uncertain a time to invest in climate mitigation?
Set a longer time horizon. “We’re going to figure out our plan in two years or three years.” And that’s okay. Take the time to develop high trust relationships, and find a set of partners that you’re willing and able to deploy dollars at scale with.
Even big companies like Google and Microsoft and Salesforce, they’re recognizing that they don’t have enough staff to actually due diligence every single one of these opportunities that come up for their sustainability teams. And so forming alliances like Symbiosis [Coalition] has been an approach for them to be able to pool their resources together and then just be able to all collectively invest in the best projects.
Who are you usually working with from the company side?
It tends to be either large corporates which, of their own volition, have developed an interest in forestry and have the staff to be able to go and do research and due diligence on these projects. We’ve even had some corporate buyers literally fly to remote parts of the world and come walk around the forest plots and meet community members before agreeing to purchase. Or brokers. Almost always, it’s a sustainability team, usually a committee of folks who are appointed within the company to look after sustainability goals and to recommend. And then the final approver may be a CFO-level person.