Croatan Institute is an independent, nonprofit research and action institute whose mission is to build social equity and ecological resilience by leveraging finance to create pathways to a just economy. We recently sat down for a conversation about climate justice and what it will take to bring about a just transition with the Institute’s Executive Director Christi Electris and Senior Fellow and Director of the Institute’s initiative on Racial Equity, Economics, Finance, and Sustainability (REEFS), Sharlene Brown. An excerpt of this conversation was published in Veris’ 2024 report A Framework For Investing in a Just Transition.

Why has climate justice become a major organizational focus for Croatan Institute?  

Christi Electris:  Croatan Institute launched 10 years ago – in 2014 on Earth Day. Integral to our work focused on how to invest in climate solutions is the idea of investing to build climate resilience and mitigation with a focus on the impact on people. It’s not just about saving the earth. 

In our first official strategic plan, Croatan Institute made an effort to explicitly integrate the social equity component into our work around ecological resilience. Since then, we have collaborated with low resource groups and communities of color on issues around place-based and economic development, as well as financing a just transition in specific regions including Appalachia and the rural south and Latino farmworker communities. 

Climate justice is integral to the way we approach our work. Our Soil Wealth program, for example, is focused on building community wealth through nature-based solutions to climate change and building climate and ecological resilience. 

Sharlene Brown:  I serve as the director of Croatan’s REEFS program, which stands for Racial Equity, Economics, Finance, and Sustainability. We cannot think about climate resilience or climate adaptation without thinking about social equity and racial equity. If you look at the legacy of environmental injustice, it has mostly been in the backyards of low income and poor people of color. Those communities are also on the frontline of the climate crisis. At this moment, as we’re thinking about significant climate investments in the US economy, and calling out the historical legacy, we have to prioritize those groups. This is an opportunity to address environmental and climate challenges, as well as wealth and income inequality. A lot of the Institute’s programmatic work is trying to meet at those two intersections. 

What are some of the top ways that asset owners and managers can help facilitate a just transition?

Christi Electris: The idea behind our Total Portfolio Activation framework is that, for every investment across asset classes, we have social and environment impacts – both positive and negative. We’ve applied this framework to sustainable agriculture, racial equity, and to climate solutions. 

Asset owners and managers need to make sure that when they’re investing in some of these programs, especially with the large amount of funding that’s coming out right now from the government, that we’re doing it with people who are authentically engaging with communities on the ground and stakeholders. The concern is that some people are parachuting in and working to deploy capital in ways that might sound good on paper but might actually be extractive in the long run. There have been stories of people getting solar put on their roof through the Property Assessed Clean Energy (PACE) program, but then they can’t financially afford it. 

We need to make sure that we’re working with organizations that are actually helping build climate resilience and community wealth at the same time. We have to consider how to do the due diligence so that it is not just about the finances, but also about the communities on the ground. 

Sharlene Brown: When we talk about our racial equity investing framework, we urge asset owners and managers to consider what needs to change in the system. I tend to frame it around risk management and the business case. Changing demographics combined with climate change and income and persistent wealth inequality means there is potentially unforeseen social risk at hand. There’s a business case here, that we don’t want our way of life to be threatened. And so, we have to invest in a way that ensures all communities are served and lifted. 

Many rural communities in the United States are now struggling economically. How do we take this moment and lift those communities? What does that mean for the corporations who are able to lead that charge? How can investors use their dollars to help accelerate that? That’s the opportunity at hand. We can create impact in real ways that will make America more broadly successful. And I think, in some ways, secure our place in the world. 

What are the innovations you are seeing in terms of investible solutions focused on ensuring a just transition?  

Sharlene Brown: The impetus of the Greenhouse Reduction Fund is intended to be the baseline so that there could be a significant leverage factor in the private markets. I think in the next 12 to 18 months we are going to see innovations that we have not yet been able to clearly identify. 

I think the most available opportunities are going to start in the public markets as industries begin to do this transition. And I think you will see an uptick in the number of public-private partnerships. Philanthropy has been playing a key role in the background setting the stage. If you think about some of the innovations that have been supported in regenerative agriculture, it has been private capital coming from philanthropic stakeholders. We need to recognize the work that has been done by those stakeholders to lay the foundation and demonstrate that these types of investments can be done and can be profitable to some extent.  

Going back to the equity lens, we’ve got to make sure that we are asking – what is risk? and who bears risk? And what are the appropriate returns as we structure these deals, particularly in the private side of the market, that’s where I see potential risks as we do this work and make sure that the justice lens doesn’t get lost. 

Christi Electris:  Nature-based climate solutions have been acknowledged to be a huge part of the share of the reductions needed by 2030 to keep global temperatures under two degrees. We’re doing a lot of nature-based solutions modeling.  Our Soil Wealth Program, for example, looks across forestry, fiber, farming, food systems, and finance to show how a total portfolio, multi-asset class approach can be used to build both soil health and community wealth through regenerative and organic agriculture. 

We have to do the work with smallholder farmers to make sure that they’re benefiting from these nature-based solutions as well. That’s where the climate justice part comes in to ensure they’re not just being extracted. Both philanthropic capital and the integrated capital approach, where we layer different kinds of capital to support these necessary investments, are really important. In the work we do with Soil Wealth, we are trying to help innovate to get more finance unlocked into regenerative landscapes and regenerative transitions. If you want to make a price premium to make it worth it, that investment needs some patient capital because there’s the three-year valley of death while you’re waiting for your land to be certified organic, while you’re waiting for conservation practices to actually take effect on your land. And so if you can access patient capital, that helps a lot. 

We’re experimenting at the Institute with some innovative capital mechanisms as well. Our Soil Wealth report from 2019 outlines all the types of mechanisms that we could identify across asset classes to get more money into regenerative agricultural investments, partly for this climate imperative. Soil Wealth Areas is taking a place-based approach to financing and thinking about what hotspot benefits you could aggregate and also the network value chain approach. Another one is loan guarantees. We’re exploring other de-risking mechanisms we can incubate here at the Institute or with partners to unlock additional capital. Investors that care about a just transition know that there’s a spectrum of returns. You can’t ask for extractive returns and expect a just transition, so I think that’s some of the innovation that is needed. 

Can you name a few of the top outcomes that you hope to see from today’s Just Transition efforts within the next three to five years?

Sharlene Brown: Within three to five years, after the $27 billion that is supposed to go into the US economy through the Greenhouse Reduction Fund is deployed, there is an anticipation that the potential impact of the private markets would look like a 10X leverage factor. 

Some of the more conservative folks say we should just double that and I think it probably looks more like a doubling effect. Because I think that there’s some infrastructure work within the financial system that needs to be done. Many of the players that are thinking about how they build the pipeline to get this money into local economies are trying to think about how to do business differently. Adjacent to what Christi was saying around the wealth building mechanism or the potential there, one of the discussion points, even though it’s not explicit within the EPA regs given explicit focus on equity to access. But there isn’t necessarily an explicit focus on wealth building. So that’s a distinction. 

I hope we can bring different ownership models to bear. That means that when we bring these technologies into communities, the wealth would stay in the communities. In my future projection, we’ve somehow managed to do that and that means that we begin to see communities look stronger, healthier as the income gap and the wealth gap begins to shrink and that the green workforce represents the nation that we live in, as opposed to all the benefits going into one group. 

Christi Electris: I agree. I hope a lot of the work, regardless of the future political situation, is on the way. There’s a lot of people that care deeply about it. The asset owners that are motivated to keep this work going and the philanthropic foundations will continue to press on. Obviously, policy has large implications in what happens. I would like to see positive outcomes. I would like to see growth around nature-based approaches like the resilient land practices happening more broadly across the country. Those will build resilience even if we can’t mitigate the carbon. I’d like to see that happen in a way that is not just the farmers that can afford to do it. Maybe it’s more of a hope, the outcome that I’m hoping to see. 

I also think communities would benefit also from more access to nature spaces, the green spaces, and less exposure to the chemicals related to conventional agriculture. There’s a whole other discussion about that that’s not climate specific, but ecological and health-oriented justice. That would be starting to change. 

And then we didn’t talk much about labor here, but that’s a big part of the Just Transition and having good jobs and not just for landowners, but for people across all industries. Just transition framing came out of Appalachia, where former coal workers need to have other good job options. I hope to see more focus on creating good opportunities to build wealth in those communities and decreasing gaps in income and wealth inequality and building resilience throughout the system. 

Christi Electris is the Executive Director and co-founder of Croatan Institute and a Senior Fellow at Croatan Institute. 

Sharlene Brown is Senior Fellow at Croatan Institute and Director of the Institute’s initiative on Racial Equity, Economics, Finance, and Sustainability (REEFS). 

Disclaimer

The content provided herein is provided for informational purposes only, represents only a summary of topics discussed, and does not constitute and should not be construed as investment advice. The opinions of the speaker interviewed herein do not necessarily reflect the opinions of Veris Wealth Partners. Information provided herein is derived from third parties and has not been independently verified by Veris Wealth Partners.