Just Climate, a climate-focused investment firm, has raised $175 million from Microsoft's Climate Innovation Fund and CalSTRS to tackle the significant investment gap in nature-based climate solutions. This move aims to address the shortfall in funding for companies working on natural climate solutions, which has historically been overlooked in favor of energy and transportation-related investments.

According to recent data, only $35 billion was invested in nature-based solutions in 2022, a mere fraction of the $1.46 trillion invested in the rest of the climate finance sector. This disparity highlights the need for more investment in this area, which is critical for addressing greenhouse gas emissions and biodiversity loss.

Just Climate, an offshoot of Al Gore's Generation Investment Management, has traditionally focused on industrial climate solutions. However, with this new fund, the firm is shifting its attention to natural climate solutions, which encompass a broad range of areas, including farming, forestry, and land-use change. These solutions address approximately 15% of annual global emissions, making them a crucial component of the overall climate change mitigation strategy.

Nature-based solutions not only reduce greenhouse gas emissions but can also eliminate carbon dioxide that's already in the atmosphere. For instance, reforestation projects grow new trees on degraded land, sequestering carbon in the wood. Microsoft has already invested in a startup, Chestnut Carbon, which is working on a similar concept.

The new fund will focus on restoring nature to reverse biodiversity loss and emissions from land use. Just Climate has identified several potential investment areas, including biological fertilizers and pesticides, restoration finance platforms, and technologies that verify carbon reduction and biodiversity protection.

In January, Just Climate made its first investment, leading a Series B funding round in NatureMetrics. The company uses environmental DNA (eDNA) to determine the biodiversity of a site, providing valuable insights for conservation efforts.

This development is significant, as it highlights the growing recognition of the importance of nature-based solutions in the fight against climate change. By investing in these solutions, Just Climate aims to make a tangible impact on reducing emissions and preserving biodiversity. As the firm continues to deploy its fund, it will be interesting to see the innovative companies and projects that emerge in this space.

The broader implications of this investment are far-reaching. As the world continues to grapple with the challenges of climate change, it is essential to explore and invest in a diverse range of solutions. By doing so, we can accelerate the transition to a more sustainable future and mitigate the worst effects of climate change.