Financial Due Diligence: Evaluating Environmental Opportunities and Risks

Financial Due Diligence: Evaluating Environmental Opportunities and Risks

Financial Due Diligence: Evaluating Environmental Opportunities and Risks

by Derek Six, Chief Business Officer | July 29th, 2020

Financial Due Diligence: Evaluating Environmental Opportunities and Risks

Over the past few years, we have observed a substantial increase in inquiries from Private Equity firms, Investment Advisors, and Mutual Fund managers seeking to better understand the environmental opportunities and risks related to investments in potential target firms.  Providing advice in this area has become one of the most interesting aspects of ClimeCo’s Policy & Advisory practice.  The subject has historically been nebulous and abstract, as many clients struggle to define environmental opportunities and risks, so getting started on this line of inquiry can be difficult.

Environmental Opportunities and Risks

So, what do we mean by the term “environmental opportunities and risks?”  In its simplest form, it can be defined as the impact, either positive or negative, that environmental markets and regulations may have on the value of a portfolio of assets.  While it is common practice to include an environmental assessment to identify potential liabilities associated with a targeted acquisition, we have found that surprisingly little attention is often paid to the potential opportunities and risks posed by environmental markets … those markets that facilitate the trading of environmental assets.

At ClimeCo, we believe in the power of financial markets to solve environmental challenges.  With this lens in mind, our approach to defining the question focuses on what types of environmental markets might impact the firm in question, whether positively or negatively.

For example:

  • Is the firm regulated under any local emission/pollution reduction programs?
  • Is the firm regulated under any state, regional, or national GHG cap and trade programs?
  • Does the firm have a technology or service that could assist other firms in these markets?
  • Is the firm likely to be pressured by consumers or other stakeholders to take voluntary action to address environmental impacts, or could it find a competitive advantage in doing so?
  • Are there opportunities where addressing environmental impacts can ease regulatory or permitting efforts?

As you can see, the analysis can be complex and requires a deep understanding of the various environmental markets to which a firm might be subject.  ClimeCo takes a unique approach to these questions, flipping the basic question on its head: rather than seeing only risks, we also search for opportunities and value.  Environmental markets provide incentives for firms to improve their operations, and they often convey valuable environmental property rights.

What Firms Should Be Aware Of

We often find that firms are unaware of some of the rights that they might hold.  As an example, a firm considering the shuttering of a manufacturing facility would not typically do so without attempting to sell and maximize the disposal value of the tangible assets on site.  However, we find that they commonly ignore the value of various intangible environmental permits the facility holds.  In regions where there are markets for permit capacity, these can be of significant value but only if sold in a timely manner.

More recently, the bulk of these types of inquiries have come from investment firms seeking to understand the potential impacts of current and proposed climate change legislation.  Entities doing business and/or located in California, Quebec, Alberta, or the US northeast region are likely to be impacted, though there are other states that are seeking to follow suit.  For example, California has comprehensive climate legislation in place; this legislation includes a Cap and Trade program for GHGs with transparent market pricing, as well as a myriad of other complementary programs and regulations.  For some entities that fall into this compliance program, there are provisions for free Allowances (permits to emit one metric ton of CO2e) based on historic emissions while, for others, allocations can be purchased at auction by the state or through a robust secondary spot and futures market. Meanwhile, firms that reside in the state but do not fall within the parameters of the compliance program may have the option to opt-in to the program to capitalize on market opportunities.  Therefore, firms need to understand the impact of this market on their own operations as well as on their supply chains, customers, and utility providers. 

Markets such as these provide opportunities, as there is tangible value in reducing GHG emissions, providing services to these market programs, or providing technologies to these markets.  Helping firms to understand future pricing expectations, potential regulatory changes, and market engagement strategies is one of the most interesting things that we do.

Regardless of what type of firm you are considering investing in, or where that firm has operations, understanding potential environmental market opportunities and risks should no longer be a pro-forma checkbox on your diligence list.  This should be an important lens through which to view every aspect of a firm’s income statement and balance sheet.

About the Author

Derek Six serves as Chief Business Officer at ClimeCo, where he leads the company’s cross-cutting business functions, as well as the firm’s ODS management program and private equity fund. He holds an MBA in investment management and portfolio analysis from Pennsylvania State University’s Smeal College of Business.

A New Tool for Rangeland Trusts

A New Tool for Rangeland Trusts

A New Tool for Rangeland Trusts

by David Priddy, Vice President of Business Development | June 24th, 2020

A New Tool for Rangeland Trusts

The prairies of the western United States, consisting of millions of acres of grassland, habitat, and complex ecosystems, have supported ranchers and their families for generations.  A symbol of pride, freedom, and independence, the prairies have sustained the American ranching lifestyle – a lifestyle that promotes hard and honest work, strong family values, and resilient communities.  Unfortunately, this lifestyle that embodies images of the old west and the growth of America is in jeopardy.

You see, prairies in the U.S. are quickly disappearing because they are being converted into farmland, though invasive species, overgrazing, and climate change are also culprits.  Many ranchers struggle to hold on to their family legacy due to rising property taxes, as the next generation considers other career options.  All of this contributes to a lifestyle that is sadly fading away.

A New Tool for the Toolbox

Rangeland trusts and other organizations dedicated to preserving the land and its legacy work tirelessly to combat this problem through the implementation and management of conservation easements.  Now, these organizations have a new means available to them that can further incentivize landowners to consider easements on their property.  This new tool utilizes the power of environmental markets by promoting good ranching practices that sequester carbon in the soil.  This can result in the development of carbon offsets, which are units of greenhouse gases that are prevented from being released into the atmosphere, the rights to which can be purchased and applied by another entity.  These offsets are typically sold to organizations that desire to voluntarily mitigate, or “offset”, their carbon footprint, the proceeds from which can generate additional revenue streams for ranchers. With more and more corporations and not-for-profit organizations committing to carbon-neutral goals, the demand for offsets continues to grow.

The process for developing grassland-based carbon offset projects on ranchland is a straight-forward one.  First, a property is evaluated for its eligibility and project feasibility by a facilitator such as ClimeCo, and then a financial proforma is developed and presented to the rancher and land trust partner.  Once the decision has been made by the landowner to proceed, the land trust will work to implement an easement that restricts the future tillage of the land.  After this is in place, the project developer will coordinate all subsequent steps, to include independent, 3rd-party project verification and then registration, certification, and monetization of the credits.  Depending on the project and the desires of the landowner, the developer may also choose to invest in the project to cover the upfront development costs, to include the implementation of the easement, thus removing a potential barrier for the landowner.

These offset projects can present multiple benefits to the rangeland trust:

  • First, the revenues from these projects may combine with Agricultural Conservation Easement Program (ACEP) funding to entice ranchers to preserve more land.
  • Secondly, the upfront payments to cover the cost of implementing and maintaining the easement can help address a typical hurdle faced by many landowners.
  • Finally, knowing that the project facilitator will handle all the activities outside of what the land trust does best will provide them with peace of mind.

Like ranchers, rangeland trusts must rely on tools of the trade in order to advance the preservation of our nation’s grasslands.  ClimeCo’s grassland offset program provides the latest tool for the land trust’s toolbox and we are ready to help you on your next preservation effort.

To learn more about grasslands preservation, please contact us.

About the Author

Dave Priddy is ClimeCo’s Vice President of Business Development. He has more than 25 years of experience in the environmental management field.  He is responsible for the strategy, development, and promotion of ClimeCo’s Nature-based Solutions initiative, and for developing mutually-beneficial partnerships with both landowners and conservation organizations that result in projects that generate positive environmental attributes. David holds a B.S. in Engineering from the University of Louisiana, Lafayette.

Motivation Can Mean So Much More

Motivation Can Mean So Much More

Motivation Can Mean So Much More

by Nancy Marshall, Corporate Marketing Director | May 27th, 2020

Motivation is a word that brings positive vibes to everyone.  Whether its on a sports field, in your child’s classroom, or simply something you say to yourself to keep going.  Motivation is the reason one has for acting or behaving in a particular way or for a general desire and willingness to do something.  It keeps us going, it inspires others to create something new, and if we all come together, motivation can bring positive benefits to our community and the world.   

Finding Partners that Motivate Us 

At ClimeCo, we know what motivates us to do what we do every day as a business and individually. We love learning about other companies and what’s motivated them to start their ventures to make a difference in the world.  However, one struggle the environmental movement has always faced is how to motivate billions of people to take the action needed to keep the planet healthy.  Given that our very survival depends on this, youd think that motivating the right action would be easy, and yet, as the last few decades have proved, getting everyone to take action is difficult. 

Earlier this yearClimeCo partnered with EarthUpa company that started in 2018 to help individuals and businesses make their lives on Earth more sustainable.  Stephen Bay, the CEO/founder of EarthUp, has been in energy consulting for the past eight years.  As we talked to him about his company and how we could work together, it became clear to me that Stephen is not only a very motivated individual who has a deep passion to make lives better, but he also has learned to motivate others to do the same.  Although Stephen’s initial goal of entering someone’s home was energy sustainability, he learned time and time again that some people were motivated by saving money, others were motivated by making their homes healthier, and some purely for comfort Having understood homeowners’ priorities around cost savings, health and comfort, and how to address them, Stephen and his team further motivated them to make even more positive changes, which in turn made their communities better.  The insight that Stephen took from this was simple: we do not need to have the same motivations in order to work towards aligning goals on combatting climate change.   

With EarthUp Stephen has taken that insight and begun building out software and content powered by the latest science in the psychology of motivation to help drive action on climate even when they are not necessarily trying to help the environment.   

The biggest impact we can make will come from empowering individuals, not asking them to make sacrifices., said Stephen.  Whether it was to be greener, more sustainable, or more energyefficient – people need to be empowered.  They need help understanding what resources are available in their local area to help them and how to team up with others to expand their efforts.  This is what drove Stephen to create EarthUpto serve as a tool/resource to help simplify sustainability. 

How it Works 

EarthUp allows employers to measure their employees’ emissions outside of the office.  They offer two paths for users to begin the process to become more sustainable: 

  • Individuals can go to Earthup’s website to complete a simple questionnaire to discover their household CO2 footprint and to compare it with that of their neighbors.  It will educate them on what their footprint means, and they can learn about local incentives and rebates that may be available to them.   
  • Companies and organizations can help expand their ESG programs so that they can engage their employees and multiply the overall impact of their efforts. 

Partnering Together 

ClimeCo joined EarthUp to offer carbon offsets for the EarthUp platform that provide a positive impact on communities.  ClimeCo also helps EarthUp with supporting local carbon offsetting initiatives by providing statespecific opportunities and expertise.  Along with Earthup’s carbon questionnaire and the ability to offset the user’s footprint, they also offer users the ability to take advantage of other environmental incentives in their area.  This allows them to track their impact beyond their initial activities.   

To learn more about EarthUp and how they can help motivate you to become more sustainable, please click here. 

About the Author

Nancy Marshall is the Corporate Marketing Director at ClimeCo and soon ClimeCoGreen.  She is happily married to her husband for 19 years; they have two daughters and one fur baby.  She is from Maryland but is currently living in Houston, TX.  She loves to go boating and fishing on Lake Livingston, cook and bake (especially at Christmas), and enjoys crafting.

Restoring the Earth Together

Restoring the Earth Together

Restoring the Earth Together

by Taylor Marshall, Director of Sustainable Programs, Restore the Earth Foundation | April 24th, 2020

As a result of hurricanes, tornadoes, wildfires, flooding and other natural disasters, many of our forests and wetlands vital ecosystems have been degraded or destroyed. The need to restore and rebuild these ecosystems is essential, especially when it comes to a sound sustainable environmental future that supports biodiversity, habitat and surrounding communities.  

In 2008, we founded a nonprofit organization, Restore the Earth Foundation (Restore the Earth), with the hope of restoring the Earth’s essential ecosystems. We offered a unique approach to affect landscape-scale ecosystem restoration by leveraging the power of public-private partnerships and utilizing an exclusive, innovative and revolving funding mechanism.  

Today, Restore the Earth has secured federalstate, private and philanthropic funding to reforest over 60,000 acres along the Gulf Coast damaged by Hurricane Katrina. We were also the first to deploy restoration on oilsoiled wetlands following the Deep-Water Horizon oil spill, and we continue to support restoration along the Gulf Coast and the Mississippi River Basin.

ur mission is to restore one million acres of degraded lands in the Mississippi River Basin, often referred to as “North America’s Amazon”.

                                                                                    *The blue area is the Lower-Mississippi River Basin

The Climate Forward Program 

To enhance the realization of these restoration opportunities for their corporate partners, Restore the Earth pioneered the development of the Climate Action Reserve’s (CAR) Climate Forward Reforestation methodology. The Climate Forward program provides a mechanism for Restore the Earth to quantify, verify and register forecasted mitigation units (FMUs), which represent emissions that are forecasted to be mitigated in the future, using rigorous and peerreviewed carbon reduction project methodologies.  These FMUs will be marketed to voluntary buyers by ClimeCo to help fund future reforestation efforts in the basin

The Climate Forward program is designed to accelerate action on climate change by encouraging companies and organizations to proactively invest today in projects that mitigate future greenhouse gas (GHG) emissions. This program provides a means to capitalize on the carbon mitigation potential of a reforestation project, representing a real gamechanger in our efforts to fulfill our mission.  

Pilot Project  

Restore the Earth’s first Climate Forward project reforests more than 5,000 acres of the historic bald cypress forest at the Pointe-aux-Chenes Wildlife Management Area in Terrebonne Parish, Louisiana, which is anticipated to sequester more than 1,000,000 tonnes of carbon dioxide equivalent. Working with Dow Corporation through their partnership with the International Olympic Committee (IOC), an initial 400 acres will generate the first registered FMUs, which will be used to mitigate a portion of the carbon footprint of the IOC and the Olympic movement. 

Moving Reforestation Forward  

Restore the Earth is proud to lead the way with such high profile partnerships and examples, and is hopeful that these efforts will inspire other companies with carbon emission reduction commitments to consider applying the Climate Forward program to address their annual needs, resulting in significant reforestation investments in the United States.  

These investments will arrive at a critical time for the environment and the economy by affecting meaningful climate action in their own backyards, as well as in the communities of their employees, customers and neighbors. Restore the Earth applies EcoMetricsa system that provides verifiable measurement of each projects’ environmental, social and economic impacts and co-benefits, to every restoration project that we implement. While reforestation projects may have different characteristicsthey all provide exponential co-benefits to restoring native ecosystems and habitats that can be measured, quantified, third-party verified and reported on to their project partners.  These can include such benefits as job creation, clean air, improved water quality, enhanced quality of life,  economic growthetc.  

Restore the Earth has spent the past 6 years building a robust business case for landscapescale restoration in North America’s Amazon. These projects provide real impacts to the environment in one of the most ecologicallydegraded areas in the United States, while simultaneously benefiting local communities and economies in an area with the nation’s highest concentration of underserved communities.  

With a portfolio of truly shovel-ready projects, solid public partnerships, the incorporation of rigorous accounting, forward-thinking methodologies and a collaborative culture, Restore the Earth is well-positioned to address climate action right here in the United States.  Our partnership with ClimeCo is a large piece of that business case, allowing for the wide marketability of environmental attributes and the execution of significant investments in a timely and cost-effective way.   

To learn more about our partnership with ClimeCo, please click hereTo learn more about Restore the Earth and how you can volunteer or support our projects, please click here. 

About the Author

Taylor Marshall is the Director of Sustainable Programs at Restore the Earth Foundation.  Wearing many hats, her responsibilities include project development, corporate relations and ontheground management of reforestation projects in the Gulf Coast and Mississippi River Basin. 

Prior to joining Restore the Earth, Taylor was with The Water Institute of the Gulf in Baton Rouge, Louisiana, promoting community-based approaches to protecting and restoring the Gulf coast from storm risk and land loss, and enhancing community resilience to such risks. Previously, she served as a Program Director with the American Council oRenewable Energy in Washington, D.C.  Taylor earned a Master of Science degree in Integrated Water Resource Management (IWRM) from McGill University. 

How to be Green for St Patrick’s Day & Easter

How to be Green for St Patrick’s Day & Easter

How to be Green for St Patrick’s Day & Easter

by Nancy Marshall & #TeamClimeCo | March 12, 2020

The next two holidays on our calendar are full of green – green clothes, beers, eggs and grass.  As we prepare for these two upcoming holidays, let’s take a minute to think about how we could celebrate them in a greener way.  How can we make St Patrick’s Day and Easter sustainable?

We asked our ClimeCo team to share some of their top tips on how they practice being green during these two holidays.

St Patrick’s Day

  1. Reuse vs buying new. We used to live in Savannah, GA, where they hold the biggest St Patrick’s Day celebration in the entire U.S.  I save all our green clothing, beads, headbands, etc. and use it year after year.  With kids who outgrow clothing, we have often bought their shirts at consignment shops.  Choosing a simple green shirt allows you to wear them throughout the entire year.  –Nancy Marshall, Corporate Marketing Director.

  2. Dust off your bikes and ride to the St Patrick’s Day activities! As an avid bike rider, I save tons on gas riding my bike, which in turns reduces auto emissions entering the atmosphere.  Don’t have a bike, get one! Riding your bike (to school, work, the store, etc.) will make you healthier and in 3-6 months. The money you saved on gas and parking has officially paid for your new bike.  –Erik Cramer, Business Development Manager (Erik rides 5 miles round-trip a day)

  3. Paddy’s Day is one of my favorite holidays to celebrate. I reuse my beads, shamrock headband, earrings, and shirts annually. –Dani Pingitore, Marketing Coordinator

  4. Drink draft beer over bottle or can beer. Draft beer keg is the most environmentally responsible beverage package in the brewing industry today – it is returnable, refillable, and recyclable. – Justin Freeark, Project Manager, Design/Build Programs

  5. If you plan to go out for St. Patrick’s Day – avoid the crowds and go local! The less you (and the products you consume) travel, the less impact you have on the environment. –Lauren Mechak, Program Manager


  1. We used to host an Easter potluck at our house for about 3-4 families. Everyone would bring drinks with them for their family and we would have coolers full of cans and bottles.  I made sure we had out recycling bins so all the bottle and cans were collected after use and we could get them to our local recycling center.  –David Priddy, VP of Business Development

  2. If you need to buy Easter eggs, try to find eco eggs. I have seen a handful of stores carrying plant-based Easter eggs made from 100% renewable content. –Dani Pingitore, Marketing Coordinator

  3. Reuse vs buying new. With two young kids, I have bought nicely made Easter baskets and use them every year.  I also reuse our plastic eggs and Easter grass.  Instead of buying a bunch of cheap plastic bunny toys, our Easter Bunny gets my kids things they need for the summer like swimsuits, goggles, beach towels, and of course, candy.  –Nancy Marshall, Corporate Marketing Director

  4. Want to dye Easter eggs? Try using natural dye from fruits, vegetables, and spices you find in your home. Natural dye is safer for the environment, your body, and the compost pile. –Zach Palm, Senior Associate, Policy & Advisory

  5. Shop locally to prepare for your Easter dinner. Purchase local fruits and veggies, homemade pies, honey, and local meat. Your food will have less packaging, fresh, and supports your community. –Maria Finneran, Office Administrator

Whether you’re planning to go out for St Patrick’s Day party with friends or hosting a family dinner for Easter Sunday, try incorporating some of our fun tips and tricks and celebrate sustainably! 


About the Author

Nancy Marshall is a Corporate Marketing Director at ClimeCo. She is originally from Maryland and currently lives in Houston, Texas. She enjoys boating and fishing on Lake Livingston, cooking, baking (especially at Christmas), and crafting with vinyl.