Carbon Direct: Catalyzing Low-Carbon Infrastructure

Summary

In 2024, Carbon Direct Capital committed to catalyzing low-carbon infrastructure with an investment strategy focused on commercial-scale sustainable infrastructure projects to address the funding gap in decarbonizing industrial sectors. Despite high demand for these solutions, private investment lags due to the specialized technical, market, and policy expertise needed to successfully allocate capital to these projects. Carbon Direct Capital’s Engineered Solutions investment strategy will leverage interdisciplinary expertise to successfully finance, de-risk, develop, and manage a portfolio of projects, focused on carbon removal, capture, utilization, sustainable aviation fuel, and low-carbon hydrogen projects. Carbon Direct Capital offers distinct investment expertise, while Carbon Direct Inc. will serve as the implementation partner, providing expertise in carbon science, engineering, environmental justice, and policy. Carbon Direct Capital will also involve investment, pipeline, demand, civil society, and government partners to holistically approach this challenge.

Approach

Carbon Direct Capital commits to launching its Engineered Solutions investment strategy to develop innovative low-carbon first-of-a-kind infrastructure projects. The company will lead deal sourcing, fueled by an actionable pipeline of projects with a focus on carbon removal, carbon capture, carbon utilization, sustainable aviation fuel, and low-carbon hydrogen projects. It will conduct investment underwriting using rigorous frameworks, manage portfolios throughout the hold period, and provide support during critical development and construction periods.
Carbon Direct Inc., a separate technical and scientific advisory affiliate, will serve as an implementation partner and technical advisor, leveraging its Industrial Decarbonization team and expertise in carbon science, engineering, policy, and environmental justice to understand and manage market and project risks, conduct project diligence, and oversee project management, including offtake structuring and contracting. Extensive diligence incorporates relevant proprietary research such as technology landscape assessments, expert policy reviews, environmental justice reviews, and life cycle carbon analyses.
Initial partners to this Commitment to Action also include Mission Possible Partnership as a pipeline partner, First Movers Coalition as a demand partner. These relationships will be facilitated by implementation partner, Carbon Direct Inc.
Although exact dates will depend on the timing of external commitments, Carbon Direct Capital’s action plan is already underway, and will continue from Q4 2024 through Q1 2025 with additional internal hiring and investor partnerships. By Q2 2025, Carbon Direct Capital expand pipeline development to identify potential investments for deeper diligence. Scientific and technical diligence will be supported by Carbon Direct Inc. In Q3 and Q4 2025, Carbon Direct Capital will continue to stage-gate capital deployment, optimize the overall capital stack by leveraging and government financing, and support offtake structuring and marketing.

Action Plan

A projected timeline is as follows, although exact dates will depend on the timing of external commitments.

Carbon Direct Capital’s action plan is already underway, and will continue from Q4 2024 through Q1 2025 with additional internal hiring and investor partnerships.

By Q2 2025, Carbon Direct Capital expand pipeline development to identify potential investments for deeper diligence. Scientific and technical diligence will be supported by Carbon Direct Inc.

In Q3 and Q4 2025, Carbon Direct Capital will continue to stage-gate capital deployment, optimize the overall capital stack by leveraging and government financing, and support offtake structuring and marketing.

Background

Heavy industry and transport are responsible for 40% of fossil fuel usage and 30% of global emissions in total, which are attributable to processes that are too energy-intensive to electrify, therefore requiring innovative climate technologies to decarbonize.
Currently, the market fails to meet the rapidly increasing demand for these solutions. Although there are significant infrastructure development opportunities in the pipeline, specialized skills are required to effectively identify and manage their unique risks. It’s often observed that traditional investors are not equipped with these specialized skills, which obstructs financing for the sustainable industrial development required to address a significant share of global emissions.
At the center of this story is money. The IMF projects a need to double the private sector’s share of climate finance to 80% (IMF, 2023) to avoid the worst effects of global warming. To achieve this, we need institutional capital at scale. Institutional investors will require sophisticated partners to understand and manage the risks and capture the opportunities available in emerging infrastructure today.
Carbon Direct Capital’s Engineered Solutions investment strategy fills this gap by investing with a science-based and commercially-focused approach to maximizing returns. Its invesments all focus on the carbon management ecosystem and benefit from special access to the technical advisory services provided by Carbon Direct Inc.
Success in this space requires multilateral effort. This Commitment to Action will bring together institutional investors, corporate buyers, solutions providers, and civil society partners. Carbon Direct Capital’s ability to harness and direct diverse expertise towards hard but achievable goals will uniquely drive the initiative’s success.
By correctly assessing and managing risks, Carbon Direct Capital can invest, develop, and sell projects to gain an advantaged return, with the goal of offering early investors strong performance tailwinds and catalyzing climate impact

Progress Update

Partnership Opportunities

Carbon Direct Capital expects to seek investment commitments in this innovative strategy, capital partnerships to de-risk investments, and partners for successful project development and offtake., Carbon Direct Capital offers the opportunity for other organizations working in this space to be part of an end-to-end solution for financing and developing first-of-a-kind low-carbon infrastructure projects. Offtake partners will gain access to the supply of sustainable commodities required for their climate strategies and commitments. Finance partners will gain exposure to an essential component of the future market portfolio, in a way that meets their financial and fiduciary needs.