Corporate motivations and co-benefit valuation in private climate finance investments through voluntary carbon markets

Companies can prioritize diverse types of sustainable investment finance to reflect their concerns about climate change and carbon emissions. One such investment avenue is voluntary carbon offset (VCO) projects, in which companies invest to offset their carbon footprint. However, despite growing research into what and how these companies are doing in VCO markets, much remains to be learned about the motivations for such investments. In this paper, we utilized two datasets with a natural linkage to conduct a mixed-method analysis for a group of 186 companies globally with 534 carbon offset projects in 2017. This allowed us to assess motivations that drive companies to invest in the offset projects, and how different motivations map on to specific purchase decisions which then channel into larger financial flows. We identified three corporate motivations for carbon offset investment and found that companies using carbon offsets to achieve carbon neutrality has been coupled with some companies highlighting the importance of using offsets to contribute to company values and market competitiveness. Our study uncovered two contrasting trends in offset investment. Companies driven by values and market competitiveness demonstrated a willingness to invest in high-cost projects that provide significant local co-benefits. On the other hand, companies motivated by carbon management and efficiency showed a preference for lower-cost projects, particularly those related to renewable energy.

Jiehong Lou, Nathan Hultman, Anand Patwardhan, Irving Mintzer