Root Cause: Addressing Climate Change from the Ground Up

Asaf Rosenheim

Root Cause: Addressing Climate Change from the Ground Up

19 August 202517 June 2025
Asaf Rosenheim, Director, Profimex

The current climate crisis is the result of centuries of industrialization—and the economic and social factors that have driven this evolution. The fix will require investors to reconsider the problem from the ground up.

With greenhouse gas emissions at the highest levels in documented history, the UN projects that unless serious action is taken, the world could see a temperature increase of 3.1 degrees Celsius by 2100, resulting in catastrophic changes in the global climate (and how humans live, work, and invest in the same.[i]

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To understand the full picture of how we arrived at this point, we need a broad perspective that accounts for environmental, economic and social points of view. It is a combination of these factors, over decades, if not centuries, that has resulted in the climate and energy crisis we’re facing now.

How we understand these factors, and the evolution of the challenge, will frame how private and institutional investors have the power to slow down—and find solutions to—something that will impact the human economy (and ecosystem) for generations well beyond the life-cycle of our standard investments.

HISTORICAL CONTEXT AND ROOT CAUSES

While natural factors play a role, developed nations have driven climate change since the 1800s through fossil fuel use, deforestation, vehicle emissions, and air travel—releasing greenhouse gases that have warmed the planet and fueled the current crisis.

If we look back further in time, colonialism has had a direct impact on the environment through exploitation of resource-rich nations in the less developed world. Countries such as India, Kenya, and islands in the West Indies, originally colonized by the British Empire, are prime examples of how such regions have been robbed of their natural resources, including the exploitation of their labor forces. Many of these regions continue their economic struggle even now, even as Britain went on to accelerate its own growth and, for a time, to be one of the most powerful countries in the world.

Similar examples abound, with the related effects of colonialism also well-documented in regions such as South Africa and the United States. In these countries, the detrimental symptoms of economic and racial segregation persist (realized through environmental impacts), with a simple metric of cumulative carbon emissions from once-active colonizing polities (e.g., UK, Russia, Netherlands, etc.) displaying a stark difference with less colonially-oriented powers.

THE DISPROPORTIONATE IMPACT

As a result of historical power and investment imbalances between developed and “underdeveloped” nations, many critical geographies within these affected regions face notable negative impacts, including higher pollution and limited access to clean air and water. Decades of underinvestment and economic imbalance have left their population and talent with limited economic resources and educational opportunities, which are key to economic growth and increased knowledge share, ultimately hindering efforts to combat larger-scale global challenges, including the climate crisis.

These imbalances aren’t limited to underdeveloped countries, but also play out in “developed” nations, such as the UK, Canada, and the United States. Despite being among the wealthiest countries in the world, many areas across these countries still lag economically and in living standards (with these issues often exacerbated by race-based policies).

For example, Exhibit 2 shows a map of Contra Costa County in California, which is adjacent to the more established San Francisco County. The darker hexagonal regions in the exhibit represent areas with high percentages of rental housing as well as high levels of nitrogen dioxide (NO2), a harmful air pollutant. Conversely, the lighter hexagonal regions show similarly high levels of NO2, but fewer renters and more homeowners (i.e., more home ownership). Ultimately, the data show how people in rental housing in Contra Costa County have up to 10% greater exposure to NO2 than homeowners.

BRIDGING THE GAP IN CLIMATE ACCESS AND INVESTMENT

Despite a growing global and scientifically based urgency for businesses and buildings to transition to clean energy, the benefits of this transformation are not reaching all communities equally. Low- to moderate-income (LMI) households (which often overlap with communities of color), despite their relatively diminutive contribution to climate change, are often also the communities most impacted by negative climate change effects—and the least likely to benefit from emerging solutions.

Continuing our look at the Bay Area, for instance, communities with a larger share of LMI households are exposed to 55% more NO2 than the average resident, contributing to heightened risks of respiratory illness and premature death.[iii] Yet, these same communities are largely excluded from investments in clean energy transition.

Only 5% of community solar projects have meaningful participation from LMI households, even though these households spend, on average, 8.6% of their income on energy—three times more than non-LMI households.[iv] The disparity is similarly pronounced in the electric vehicle (EV) market, where 87% of EV buyers are white, and the typical owner is a high-income, middle-aged man.[v]

Systemic financial barriers limit access to clean energy for emerging, often minority-led, developers. Lacking large balance sheets or long track records of more established institutional investors, “small” developers are seen as risky by traditional lenders. Credit systems still rely on FICO scores, ignoring factors like projected savings or environmental impact. Even available financing is often geographically limited or restricted to individual projects, making scaling difficult.

The result is a climate finance ecosystem that reinforces existing inequities instead of addressing them.

INVESTOR PERSPECTIVE AND SOLUTIONS

Investors today must prioritize climate change and adopt environmentally and community-conscious approaches to real estate. Sustainability is no longer optional, as rising insurance costs and evolving legislative, investor, and tenant standards increasingly impact asset value.

Green bonds—loans dedicated to environmentally beneficial infrastructure and real estate—have long connected investors with climate-conscious initiatives. These instruments offer capital growth, long-term returns, and socio-economic benefits, such as advancing equity and lowering operational costs, while simultaneously contributing to the larger global transition to clean energy.

Community solar, for example, is gaining investment momentum within community-based energy programs. These types of programs ultimately help low-income communities shift from fossil fuels, reduce energy costs, and generate local jobs and income through solar panel ownership.

As shown in Exhibit 4, community solar is growing rapidly, with more than 5,200 MW of solar energy installed across more than forty states within the past several eyars—enough to power 344,470 homes. This fast-expanding sector offers institutional investors strong, stable returns while meeting ESG goals and reaching underserved markets.

UNLOCKING CLIMATE FINANCE FOR COMMUNITY BENEFIT

To close gaps between developed and underdeveloped communities—as well as gaps in energy burdens and clean energy transitions—new forms of climate capital are needed to de-risk community-based solutions and support developers at various stages of the project lifecycle. One prominent example is the Afterglow Climate Justice Fund (CJF), which illustrates a model for how this can be done effectively.

CJF identifies three core areas where catalytic finance can meet urgent market needs: (1) pre-development, (2) construction, and (3) permanent project financing.

In the pre-development phase—the riskiest and most capital-starved stage—flexible loans can fund early milestones such as site control, permitting, and utility interconnection studies.

Once a project is ready to break ground, revolving construction loans enable developers to draw capital incrementally and recycle it as each project is completed and refinanced.

Lastly, permanent project debt, repaid through long-term energy savings and tax credits, allows projects to scale while generating reliable returns.

For institutional investors, these mechanisms provide a pathway to align investment portfolios with climate justice outcomes—ensuring that clean energy reaches those who need it most.

Real estate investors are therefore uniquely positioned to drive change. By integrating these forms of capital into their ESG strategies and forming public-private or developer joint ventures, investors can help scale climate infrastructure in overlooked markets—contributing to community resilience and long-term asset stability in the process.

Full-stack financing supports solar projects from early development through operation, providing crucial capital to local developers. When paired with flexible investment models, it helps overcome barriers to renewable energy in low- to moderate-income areas. Collaborating with local installers, businesses, and community groups ensures projects meet local needs, driving sustainable outcomes, job creation, and economic growth.

INSTITUTIONAL INVESTMENT IN COMMUNITY ENERGY IN THE US

Sunwealth: Financing Impactful Distributed Solar

In December 2024, Sunwealth, a clean energy impact investment firm, secured a $30 million construction loan from Goldman Sachs’ Urban Investment Group (UIG). This funding aims to develop solar and solar-plus-storage projects across the US, focusing on historically underserved communities. With more than 58% of Sunwealth’s portfolio already benefiting disadvantaged areas, this partnership is set to expand access to clean energy, reduce energy costs, and create green jobs. The Kresge Foundation supported the initiative with a $3 million non-funded guarantee, underscoring the collaborative effort to promote equitable clean energy solutions.[vii]

Solar Holler: Scaling Solar in Appalachia

Solar Holler is transforming energy access in coal-dependent West Virginia, historically underserved in the renewable transition. With a $5 million construction-to-term loan from the Afterglow Climate Justice Fund, the developer is building 10,000 solar panels for Wayne County Schools—representing the largest solar power purchase agreement (PPA) in the state. The initiative is reducing school district energy bills by 20%, training union electricians for green jobs, and sourcing panels domestically, thereby reinforcing regional economic development.[viii]

INEQUALITY BUILT THIS CRISIS—EQUITY MUST SOLVE IT

It’s well-known and well-documented that the current climate crisis has been caused by a complex mix of economic and environmental practices, and problematic social ideologies. When it comes to the climate crisis, what we are witnessing (and trying to solve for) today is a culmination of centuries of harmful, overlapping, and deeply interconnected forces.

Now, the challenge we face is attempting to slow down the effects of climate change, while ensuring that nations who have been “left behind” not only receive the support they rightfully deserve, but also look to move towards cleaner energy. This represents a massive institutional opportunity for leadership, but because the climate crisis has been caused by a myriad of factors, it is vital that investors cultivate an intersectional understanding of the challenge. It is not merely financial, but social and environmental, as well. Investing in climate justice isn’t just the right thing to do—it’s increasingly a source of resilient, risk-adjusted returns. Institutional real estate investors are uniquely positioned to catalyze local solutions through blended finance models, joint ventures, and catalytic capital.

NOTES

[i] UN Emissions Gap Report 2024
[ii] Revealed: How colonial rule radically shifts historical responsibility for climate change
[iii] Aclima, Air disparities in the Bay Area, 2022
[iv] Examining community solar programs to understand accessibility and investment: Evidence from the US
[v] Consumer Report, Across Racial Demographics, Interest in Purchasing Electric Vehicles is Considerable, but Systemic Barriers Persist. September 2022
[vi] Source: NREL’s Sharing the Sun Community Solar Project Data, December 2020
[vii] https://www.sunwealth.com/blog/goldman-sachs-uig-loan
[viii] https://www.wowktv.com/news/west-virginia/cabell-county-wv/solar-holler-projects-bring-in-100-million-to-wv-neighboring-states/

ABOUT THE AUTHORS

Asaf Rosenheim is a Director for Profimex with a background in impact investing.