How Capital Structures Are Evolving for Climate and Nature
A simple guide to the new fund structures powering long-term solutions for climate and nature.
Hey, Cristina here! 👋
Welcome back to my corner of the internet, where I try to make venture capital feel less intimidating and a lot more interesting!
I just had a great conversation with an entrepreneur from Costa Rica. We ended up getting weirdly excited talking about different funding structures. I know, it doesn’t sound fun. Let me explain, we talk about which startups get funded or which VCs are hot, but we rarely talk about the actual mechanics of how money moves. And those mechanics? They’re changing in some pretty fascinating ways.
The traditional VC playbook has been pretty rigid for decades: raise a fund, invest it over 3-4 years, wait 7–10 years for big returns, then do it all over again.
But something interesting is happening right now.
VCs are realizing that not everything fits into that old model, especially when you’re trying to solve massive, complex problems like climate change or biodiversity loss. These problems are huge, urgent, and they don't always play by the traditional "scale fast and exit" rules.
So, capital is getting more creative. New models are popping up and some of them feel like they finally make sense for the kind of change we actually need.
Quick note before we go further:
I'm not going to go deep into each of these. This isn’t a fund-structuring masterclass. It’s more like a sampler tray of what’s happening and what’s possible beyond the traditional VC playbook.
If something catches your attention, I’ll share links to people and resources who’ve written more in-depth about each one. My job here is just to help you see the landscape more clearly.
The Traditional Fund (So We're All on the Same Page)
Before we dive into the new stuff, let's quickly cover the classic VC model that everyone knows.
Traditional VC funds work like this: investors (called limited partners, or LPs) give money to a fund manager (the general partner, or GP). That fund has a set amount of money, say $100 million, and the GP has to invest it all within a few years. Then everyone waits and hopes the companies they backed will grow big enough to return way more than they put in.
It's worked pretty well for software companies, but it has some obvious limitations. What if you find an amazing company in year 8 but you've already spent all your money? What if the company you backed needs 15 years to pay off? You're basically stuck.
Evergreen Funds
This is where evergreen funds come in, and they're probably my favorite of the new models.
Instead of raising a fixed pot of money that gets spent and then disappears, evergreen funds are designed to keep going indefinitely. When investments pay off and money comes back, it gets reinvested into new companies rather than returned to investors.
Think of it like a revolving credit line, but for investing in startups.
Examples:
Fund Size: $450M
Focus: Cleantech and climate tech, especially regenerative technologies and carbon reduction.
Evergreen Structure: Backed by the UK-listed IP Group, Kiko has no fixed end date and reinvests returns in new ventures.
Stages: Seed, Series A/B, and public capital markets.
Example Sectors: Clean energy, decarbonization, and deep tech climate solutions
Fund Size: €170M+
Focus: Impact technologies for climate, biodiversity, and well-being.
Evergreen Feature: Flexible, long-term capital allocation focused particularly on large-scale CO₂ reduction and positive ecological outcomes.
Example Investments: Sustainable forestry, energy-efficient technologies, regenerative agriculture
The beauty of this model is patience. Climate companies often need more time to prove themselves than your typical app startup. Solar panel technology, carbon capture systems, new battery chemistry, these things take years to develop and scale. An evergreen fund can afford to wait.
Other articles to learn more about this type of fund structure: Evergreen Funds, Exploring Evergreen Funds with a VC Investor Who Raised One
Blended Finance
This is where different types of money—grants, public funds, private capital—all show up to the same table. You might have some investors who are totally fine with lower financial returns because they care deeply about the environmental impact. Then you mix in some investors who want market-rate returns. The patient, impact-focused money takes more risk, which makes the whole deal safer for the profit-focused money.
So, the idea is to share risk and make investments possible that wouldn’t happen otherwise. This is specially important for solutions that are too early or risky for traditional investors and especially in emerging markets.
It's like carpooling, but with capital. Everyone gets where they want to go, and it costs less for everybody.
Examples:
Fund Size: $1.5B+ initial commitment
Focus: Early-stage climate technologies, such as clean hydrogen, sustainable aviation fuel, direct air capture, and long-duration energy storage.
Blended Finance Structure: Combines concessional capital from philanthropy (including the Gates Foundation), government funding, and private sector investment to reduce risk and drive innovations to commercial scale.
Climate Impact: Invests in high-risk, transformative technologies to accelerate decarbonization and make next-generation solutions viable for future commercial investment.
Stage: Demonstration and first-of-a-kind commercial projects, often with long payback periods not attractive to mainstream VC without risk mitigation.
Fund Size: $625M target (multiple partners in capital stack)
Focus: Coral reef restoration, coastal resilience, and blue economy projects in developing countries.
Blended Finance Structure: Mobilizes public (governments, development banks), philanthropic, and private capital. De-risks investments through concessional funding and guarantees to crowd in private investors for marine conservation.
Nature Impact: Protects and restores vulnerable marine ecosystems while supporting sustainable livelihoods for communities at risk from climate change.
Stage: Pilot through scale-up investments for projects too fragile or early-stage for standard market finance
Some useful resources if you want to dive deeper: Blended Finance 101 — Convergence, Every Deal is a Blended Finance Deal — Jake Cusack, Co-Founder & Managing Partner at the Cross Boundary Group, Blended Finance in African Climate Tech VCs, Making blended finance work for nature-based solutions, How blended finance initiatives can align capital behind climate action.
Revenue-Based Financing
This one's growing fast, especially for companies that have steady revenue but might not be headed for a billion-dollar acquisition.
Instead of waiting for a big exit event, investors get paid back as a percentage of the company's monthly revenue. The company keeps control, doesn't get diluted to death, and investors get their money back more predictably.
It’s a more flexible path for founders who don’t want to chase hypergrowth. The fund earns returns gradually, in line with company performance.
Examples:
Lighter Capital
Fund Size: $100M+ deployed
Focus: SaaS and technology companies; now expanding into sectors including clean tech with recurring revenues.
RBF Structure: Capital provided is repaid as a fixed percentage of monthly revenue until a multiple of the investment is returned, avoiding dilution.
Climate Impact: Beginning to support clean energy service providers with steady cash flow, leveraging RBF to fuel growth without equity loss.
Stage: Early to growth-stage companies with recurring revenue.
It works really well for companies selling to utilities or governments, customers who might pay smaller amounts over longer periods rather than generating the hockey-stick growth that VCs traditionally love.
Other resources in the topic: RBF for renewable energy-projects
Fund-of-Funds
Some investors are getting creative by building funds that invest in other funds, each with different structures and strategies.
This lets them back an evergreen fund focused on early-stage climate tech, a blended finance vehicle doing sustainable agriculture, and a traditional fund doing climate software, all at the same time.
Examples:
Generation Investment Management (Fund of Funds and Direct Investments)
Fund Size: $30B+ (assets under management across funds)
Focus: Sustainable investing including climate change mitigation, nature-based solutions, and sustainable business models.
Structure: Combines investments across sectors and stages, offering diversified access to sustainability-themed funds and direct assets.
Climate/Nature Impact: Supports companies and funds integrating ESG factors and sustainability at their core, including nature conservation.
Stage: Early growth to mature companies.
Fund Size: Largest global climate fund, mobilizing billions annually globally.
Focus: Transformative climate action in developing countries, with a balance between mitigation and adaptation investments.
Structure: Blended finance fund investing through accredited partners including MDBs, funds of funds, and direct projects.
Climate Impact: Supports paradigm-shifting climate projects, including nature-based solutions and resilience building.
Stage: Wide range from incubation to large infrastructure.
A note on what’s not covered
Before I wrap, I just want to say that this piece focused specifically on fund structures: the actual containers we use to move money. But there’s also the question of how money shows up, and why. Things like catalytic capital (money that’s willing to take more risk or lower returns to unlock progress) or systemic investing (capital that targets root causes, not just symptoms) aren’t fund structures, but they’re equally important. They shape the role money plays in a deal, not just the structure behind it. I didn’t go deep into those here, but they’re absolutely worth learning about and if you know great examples or are experimenting with something new, I’d love to hear about it.
So why does this matter?
Because how we structure capital decides who gets to build.
The old model of venture capital was designed for a specific type of company in a specific type of market. It worked great for software companies that could scale fast with minimal physical infrastructure.
But the problems we're facing now—climate change, nature destruction, inequality—don't always fit that mold. They require patient capital, different risk profiles, and longer time horizons.
These new capital vehicles aren't just financial innovations. They're tools that let us direct money toward problems that actually matter, in ways that might actually work.
The Personal Bit
If you're a founder or funder trying to build something long-term and meaningful, fund structure isn't just a legal detail, it’s strategic design. It shapes the incentives, the patience, and the kind of future you're betting on.
I've been watching this evolution happen in real time, and what I like the most is how much more interesting the conversations have become.
Five years ago, most VC conversations were about growth rates, user acquisition costs, and exit multiples. Today, I'm hearing investors talk about carbon removal tonnage, biodiversity credits, and 20-year payback periods. They're thinking like builders and problem-solvers, not just financial engineers.
That shift in mindset might be the most important change of all. Because when you have new tools, you start seeing new possibilities. And when you see new possibilities, you start taking on problems that seemed impossible before.
The climate crisis and nature destruction are still massive challenges. But for the first time in a while, I'm seeing capital structures that feel actually designed to tackle them. It feels like progress and it’s time.
Let me know which model you'd like to explore more deeply or if you're experimenting with one yourself. I’m always up for learning.
About the author
Thanks for reading to the end! I’m Cristina — a feminist, community builder, problem solver, and people connector focused on driving investments and innovation where gender and climate meet.
If you’re interested in Nature Tech, Spirit Tech, Gender, Climate, or the intersection of these areas, let’s connect on LinkedIn.