The Brief: How Europe is ‘streamlining’ its regulation of climate finance

Greetings Agents of Impact!

In today’s Brief:

• Europe’s regulatory reboot 
• Green Climate Fund’s nature-based solutions
• Soil health in Washington state
• Flexible finance for social entrepreneurs 

Featured: Policy Corner

The European Union is poised to scale back its ambitious climate finance regulations. In the US, the Trump administration is taking a wrecking ball to sustainability policies, from the SEC’s climate disclosure rules to the nascent “green bank” for financing low-carbon community infrastructure. The European Union, long the standard bearer for climate-forward regulation (and perhaps for regulation in general), is engaged in its own effort to weaken signature sustainability initiatives, reports Climate Proof’s Louie Woodall. The regulatory overhaul has divided investors and companies. A group of more than 160 investors representing €6.6 trillion ($6.9 trillion) in assets under management, including AXA Investment Managers and L&G Asset Management, warned the commission not to water down rules they called “fundamental cornerstones of the EU’s sustainability policy architecture.” Compliance with the regulations, which apply to any company or fund active in the EU, has been difficult and costly. “We have a very clear signal from the European business sector that there is too much complexity,” European Commission President Ursula von der Leyen said last month. “We have to cut red tape.” 

• On the table. Up for revision are a mouthful of regulations, including the Corporate Sustainability Reporting Directive, or CSRD, which mandates corporate disclosure of social and environmental data; the Corporate Sustainability Due Diligence Directive, or CSDDD, which requires companies to identify and address human rights and environmental impacts in their operations and value chains; and the EU Sustainable Taxonomy, which classifies sustainable investments. The three “omnibus” legislative packages – the first of which could be released this week – aim to make Europe’s tangle of sustainability regulations easier to implement and more supportive of economic growth. “The taxonomy is, as far as I’m concerned, mostly a headache,” says Seb Beloe of UK-based WHEB Asset Management. Potential changes include exempting more companies from the rules, eliminating the need to track the sustainability of a company’s suppliers, and making the taxonomy voluntary. A bright spot: The revised taxonomy could boost investment in climate adaptation by helping investors more clearly identify such activities. 

• Compliance costs. Yet another EU regulation, the Sustainable Finance Disclosure Regulation, is also under review. The SFDR was intended to fight greenwashing, but “wrongly puts the cost of this effort on funds that set the highest bar in terms of environmental, social and good governance factors,” Mesofinance Media’s Bob Summers writes in a guest post on ImpactAlpha. The regulation has helped investors distinguish vehicles that aim to be sustainable from those that do not and has driven the alignment of reporting practices. But it has also raised costs for impact investors – especially those working in emerging markets, he says. “Frustratingly, this conflicts with the goal of encouraging more investment in the sector.”  Read the full piece.
  
• Keep reading, “The European Union is poised to scale back its ambitious climate finance regulations, too,” by Louie Woodall on ImpactAlpha. Catch up on ImpactAlpha’s policy coverage at Policy Corner, supported by the US Impact Investing Alliance.

Committed to fueling growth for startups. Morgan Stanley Inclusive and Sustainable Ventures provides early-stage innovators with access to capital, powerful networks and hand-picked mentors to help them develop and scale their startups. Morgan Stanley Inclusive and Sustainable Ventures includes two in-house accelerator programs – the Lab, designed for startup founders, and the Collaborative to support emerging nonprofits. 

Through Friday, March 14, the Lab and Collaborative are accepting applications for their 2025 cohorts. Learn more about the mission to foster a more equitable and sustainable investment landscape. 

• “To help tackle sustainability challenges, we need to advance innovative systemic solutions.” – Jessica Alsford, chief sustainability officer, Morgan Stanley

• “Our approach is tailored and customized to each founder. It’s never a one-size-fits-all approach.” – LaToya Wilson, global co-head of Morgan Stanley Inclusive Ventures Group
• “We deliver the breadth of Morgan Stanley to drive inclusive innovation.” – Sanghamitra Karra, Global co-head of Morgan Stanley Inclusive Ventures Group

Dealflow: Nature-Based Solutions

As the US withdraws, Green Climate Fund backs Mirova’s sustainable land fund and 10 other projects. The Green Climate Fund is down but not out. Just days after US President Trump rescinded $4 billion pledged for the UN-backed fund by the Biden and Obama administrations, the Green Climate Fund fund announced $687 million for 11 climate resilience projects in vulnerable countries. The fund committed $70 million in equity and a $5 million grant to a sustainable land fund launched last year by Mirova, an affiliate of Natixis Investment Managers. Other projects range from an early warning system to improve disaster preparedness in Togo, to promoting climate-adaptive forestry in Serbia. The commitments come as the Green Climate Fund scrambles to make up the $4 billion hole, nearly a third of its capital, left by its largest donor. Other donors have called for countries such as China and Saudi Arabia to step up. 

• Sustainable land. The Green Climate Fund’s $75 million commitment is the latest round of capital for Mirova’s second Sustainable Land Fund, a blended finance and impact fund launched last year. The fund aims to address land degradation and promote sustainable land use practices in Costa Rica, Côte d’Ivoire, Ghana, Malaysia, Morocco, Peru and the Philippines. Mirova has partnered with the Rainforest Alliance to develop a pipeline of locally-led agroforestry projects. Mirova is looking to raise €350 million ($377.8 million) by the end of next year. The SDG Impact Finance Initiative has come on board as the fund’s first junior investor. French development financial institution Proparco and insurance companies Abeille Assurances, Allianz France and BNP Paribas Cardif participated in the fund’s first close last year. 

MyLand Agriculture snags $4.8 million from Washington state to help farmers improve soil health. Phoenix-based MyLand Agriculture launched in 2014 to help small farmers  and other food growers replenish the nutrients in their soil. The agrifood tech company uses native microalgae and other nutrients to improve soil health and to sequester carbon. With the backing of Washington state’s Department of Agriculture, MyLand will create a statewide soil health program in Washington that covers up to 9,000 acres of farmland. Farmers will receive MyLand’s soil health management services at no cost for the first year. The program “offers growers a way to steward their land and improve their soil, while boosting crop yields and supporting more sustainable farming practices that benefit both growers and the environment,” said MyLand’s Dane Hague. 

• Blended finance. The partnership comes less than a month after MyLand closed $23 million in financing led by Proterra Investment Partners to expand its services in the US and internationally. The round included backing from the Borden Family Trust and FarmClub Investments, along with Climate Innovation Capital and several of its LPs. Meifan Shi of Waterpoint Lane, an investor in MyLand, told ImpactAlpha that MyLand stands out “both for its transformative impact on soil health and its unique ability to bridge public and private capital.” (see, “Make America Healthy Again“).
• Climate policy. Washington state invested in MyLand using funds made available under its Climate Commitment Act. The program requires the state’s largest emitters to purchase emissions allowances at quarterly auctions, or to buy and sell them through a secondary market. Revenues from the program, run by the state’s Department of Commerce, are invested in decarbonization solutions. The Climate Commitment Act aims to fund “new and exciting science that will increase the climate resiliency and ecosystem restoration of vulnerable land in Washington,” said Matthew Randazzo, who helped write the bill.
• Dig in.

Dealflow overflow. Investment news crossing our desks:

• Keyhorse Capital, Bluegrass Angels and others invested $1.6 million in Louisville, Ky.-based mental health startup Swell, whose service offers self-guided care for members of the military. (FinSMEs)

• Swedfund, Norfund and British International Investment invested $85 million in AgDevCo to invest in African agri-businesses producing food for both domestic consumption and export. (BII)

• California-based Twelve, which developed a type of industrial photosynthesis to convert carbon dioxide into chemicals, fuels and materials, raised $83 million from Amazon’s Climate Pledge Fund, Mitsui, the Development Bank of Japan and other investors. (Climate Insider)

Impact Voices: Social Enterprise

A systems approach to closing the social enterprise funding gap. Despite nearly two decades of impact investing, social entrepreneurs – especially those in the Global South – continue to face significant challenges accessing capital. In a guest post on ImpactAlpha, Brigit Helms of the Miller Center for Social Entrepreneurship lays out recommendations for investors that could open up a new era of entrepreneur-centric impact investing. Funders need to “break free from legacy molds,” in favor of flexible financing approaches that support social enterprises, she argues. Helms calls for a fundamental rethink of how capital is structured, distributed, and measured. Among the recommendations:

• Entrepreneurs first. “We should put the companies first and reverse-engineer the financing,” writes Helms, calling for financial instruments tailored to social enterprises’ stage of growth and cash flow realities. That means embracing patient capital, blended finance and catalytic debt. The Miller Center, for example, uses “highly customized debt financing [that] meets entrepreneurs where they are, rather than applying a one-size-fits-all model,” she says.
• Streamlined measurement. “Data collection demands an enormous amount of time and resources,” says Helms. Many impact measurement and management frameworks place excessive burdens on social enterprises. Standardized, adaptable methods, such as Acumen’s Lean Data approach, which is now being scaled by 60 Decibels, can help. Technologies like AI and blockchain can also streamline the process.Farmers for Forests in India, for instance, is using data from satellites and drones to track forest cover and tree health, “significantly reducing the financial and logistical burden of impact verification.”
• Keep reading, “A systems approach to closing the social enterprise funding gap,” by the Miller Center’s Brigit Helms on ImpactAlpha.

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

Atta Impact Capital appoints Verne’s Alejandra Garcia, Corinne Lebrun of Impacta VC, and Mastersfund’s Gillian Muessig as board members… Cherryrock Capital is looking for an MBA summer intern… Mulago Foundation seeks a project manager in San Francisco… AgDevCo is hiring an ESG associate or manager in Nairobi or Cape Town… Nonprofit Finance Fund is recruiting a consulting vice president.

Acumen has an opening for an investment manager for its Hardest-to-Reach initiative, a West Africa-focused investment associate, and a chief of ventures… GAWA Capital is on the hunt for a senior investment officer in Madrid… British International Investment is hiring an infrastructure and climate sector strategist in London… Finance in Motion seeks an investment management analyst in Istanbul.  

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Feb. 24, 2025