Advancing corporate sustainability through structured finance

At its core, structured finance is a risk‑management tool. According to the World Bank, the value of structured finance is its ability to reduce risk to lenders, resulting in reduced rates of interest and longer time horizons.

This is particularly important for companies at earlier stages of their transition finance journey, as structured finance can reduce the perception of risk. For example, some structured finance mechanisms can be designed to sit off‑balance sheet, an attribute that can help gain buy-in from corporate finance and accounting teams. 

Structured finance can position sustainability investments in a way that aligns with internal capital allocation realities, improving the likelihood of approval and long-term support.

In many organizations, promising projects stall because they don’t meet the central finance function’s risk-return thresholds or compete effectively against core business investments. Structured finance offers a way to redesign the capital stack so that risk is reduced or reallocated and projects become more aligned with internal investment criteria.

For example, a regenerative agriculture pilot that may not initially satisfy central budget requirements could be financed through a dedicated special purpose vehicle (a distinct, legally separate entity), alongside external partners such as banks, other corporates, or philanthropic investors. By reallocating risk and introducing blended capital, the structure can improve the project’s overall risk-return profile, making it easier to secure central funds.  

Because structured finance instruments are inherently customizable, they can be designed to translate sustainability benefits into metrics that match the priorities of different investor types.

For instance, if you're using IRR as a threshold, it’s important to also incorporate sustainability benefits and the cost to mitigate the negative environmental impacts of operational investments. A structured finance transaction could incorporate metrics such as dollars per net present value (NPV) of sustainability impact – gallons of water restored, hectares under regenerative management, tons of emissions avoided, etc.

This framing might be particularly useful to a corporate investor interested in connecting sustainability performance to long-term continuity, cost stability, and brand value.