As the great and the good gather for Climate Week NYC, we are served with a poignant reminder of the extensive efforts underway in both the private and public spheres to improve the state of our climate.
Attending will be individuals spanning business leaders, influential political figures, and visionary entrepreneurs who are collectively committed to spearheading change and advocating for transformative developments within the climate sector.
And, as the thousands gather in the Big Apple to attend the event ahead of the 78th United Nations General Assembly, the climate conversation seems to be hitting a crescendo. Even the UN will show itself as a platform for fighting Climate change, as UN Secretary-General Antonio Guterres will convene the Climate Ambition Summit to galvanise decarbonisation efforts around the world.
But amidst the diligent efforts of these events, climate leaders must confront a stark reality: the world is, to put it simply, veering off-track in our environmental goals.
According to the UN Intergovernmental Panel on Climate Change (IPCC), to limit the global temperature to the all-important 1.5°C figure, we need to actively remove 5-10 gigatons (billion tons) of CO2 from the atmosphere every year. This target is imperative to our journey of reaching net zero by 2050, and a fundamental component of the Paris Agreement, which pledged to keep global warming low and to reduce carbon emissions by 45% come 2030.
Thus the stage is set, with the need for carbon removal left standing as an indisputable global necessity.
Our planet is demanding a call to action. Not only to dramatically lower CO2 and Greenhouse Gases (GHG) but to actively remove them from the atmosphere. But, who has responded? After all, sequestering carbon emissions is a monumental task that demands sustainable and cost-effective solutions.
Part of the answer lies in the remarkable work of an emerging generation of fund managers worldwide.
ClimateTech organisations work tirelessly around the globe to drive progress for our planet, but their missions wouldn’t be possible without sufficient funding. As such, it is often thanks to forward-thinking capital allocators across venture capital (VC) and private equity that we can fuel environmental initiatives, chiefly long-lasting carbon offset and, the even more urgently needed, carbon dioxide removals (CDR).
Fortunately, investment into the ClimateTech industry is something that has defied an otherwise sluggish state of affairs in the VC ecosystem. Bloomberg reports highlighting that, while VC funding has suffered from the overarching slowdown caused by larger macroeconomic forces, like higher interest rates, there have been some bright spots in the climate sphere.
“Startups focused on the built environment – which includes sustainable building materials and low-carbon heating and cooling…saw a 7% increase in funding compared to the first half of 2022.
Seed funding for ClimateTech overall also rose 23% compared to this time last year.”
Even in 2022, when the tech sector shed jobs, Russia’s war in Ukraine spiked oil and gas prices and the collapse of the Silicon Valley Bank caused a cautious investment environment, the ClimateTech industry remained resilient in comparison to other areas of innovation.
Indeed, after experiencing years of breakout growth, the ClimateTech sector has been well-placed to weather this recent investment dip, with major economies worldwide, alongside scores of ambitious early-stage VCs, putting their money where their mouth is to help the world build a carbon-free future.
Having watched the last decade of solar panels and electric vehicles evolve into mature products with growing markets, we have now entered an era characterised by new technologies, new players, and greater capital availability than ever before.
Rarely is this enthusiasm for sustainable innovations better exemplified than in the various government-funded schemes. The recently announced Biden-Harris Administration investment programme, for example, aims to fund clean energy projects across the U.S. with a $20 billion competition. The scheme is just one example of some of the exemplary initiatives that have come in the wake of the Inflation Reduction Act (IRA). Signed by President Biden in 2022, the IRA is the largest climate investment in U.S. history – designed to mobilise private capital to achieve our climate goals and strengthen long-term growth.
Thanks to enterprises like the IRA, the Rhodium Group and MIT’s Center for Energy and Environmental Policy Research have revealed in a report that a record-breaking $213 billion has been poured into new clean investments across the U.S. in the past year. This is “a 37 per cent increase from the year before and a 165 per cent increase from five years ago”, GreenBiz reports.
Such enterprises demonstrate how effective financially structured incentives are in motivating industries to become more environmentally friendly. They showcase an awakening in the global market to the importance of sustainable investments, signalling a move towards a second, and more successful, wave of green innovation.
Indeed, there have been several pureplay climate funds that have been set up to help catalyse this space and direct capital across the multiple stages of company building. And, traditionally where VCs have shielded away from investment into hardware-led operating models, this generation of emerging managers seems to be far more comfortable with investing into atoms and not just bits. There appears to be a recognition that software alone cannot move the dial on carbon at scale and that capital intervention is necessary for early-stage startups fighting climate change with deep science and technology working together.
One noteworthy startup in this regard is 44.01, a company whose mission is clear: remove as much carbon from the atmosphere as possible and safely store it where it cannot escape.
This practice is what is known as carbon dioxide removal (CDR), and it involves actively extracting the widely out-of-control amount of carbon (the result of a century’s worth of GHG production) from our atmosphere.
44.01 achieves CDR by combining two central approaches: nature-based (Nbs) and engineered solutions (ES). Nature-based solutions involve, for example, planting trees and mangrove reforestation to sequester CO2 and breathe new life into the carbon cycle. Alternatively, engineered solutions involve large-scale technological innovations, such as carbon capture storage systems, to combat carbon pollution. But when working towards CDR, things aren’t typically so black and white as using Nbs or ES – often both solutions are required to achieve CDR, as is exemplified in the work of 44.01.
The startup has embarked on a mission to provide a safe, natural, and cost-effective way to eliminate CO2 from the atmosphere. Based in Oman, this innovative company can accelerate the natural process of peridotite mineralisation, a technique with the potential to mineralise up to a billion tons of CO2 every year.
The process is as follows: engineered infrastructure is used to capture CO2 from the atmosphere, dissolve it in water, and inject it into peridotite formations underground. Once injected, the natural process of mineralisation takes over. The carbon mineralises, transforming it into rock and making sure it remains permanently sequestered underground. It can never again escape back into the atmosphere.
This methodology is what is known as direct air capture (DAC), a technique wherein CO2 is directly extracted from the atmosphere and then permanently stored in deep geological formations. To ensure this carbon never escapes, 44.01 uses point source capture (PSC) to ensure CO2 is durably stored and converted to a long-lived product, resulting in an overall reduction in CO2 emissions.
Having already completed a pilot project, 44.01 has agreed with Oman’s Ministry of Energy and Minerals to kick off a new carbon removal project, scheduled to commence in 2024 in the Hajar mountains and conducted in Al Qabil.
Regarding the upcoming project, Talal Hasan, Founder and CEO of 44.01, said: “We are delighted to have agreed this concession with the Ministry of Energy and Minerals. We hope this project paves the way for the Sultanate of Oman to become a world leader in permanent CO2 removal.”
Regarding what led 44.01’s founder to the field of CDR, Hasan commented in an interview with PDIE: “There are very few solutions out there that could help you put away that carbon dioxide permanently and at scale. This is when I started researching and came across the mineralisation process.”
Having received the Earthshot Prize 2022 for its exceptional carbon capture efforts, 44.01’s achievements have already convinced several high-profile investors, including Bill Gates’s Breakthrough Energy, to back the company.
44.01’s goal is to have 1bn tonnes of CO2 mineralised by 2040, but it’s not the only startup with ambitious CDR goals. HyveGeo is another promising organisation committed to permanently removing CO2 from the atmosphere.
Founded in 2022, this UK-based company is still in its early stages of development and has newly embarked on its mission to grow microalgae to remove deadly carbon, planning to create a sustainable future through CO2 removal.
Regarding its methods and the startup’s future aims, Eva Morales, co-founder of HyveGeo, explains: “HyveGeo uses the power of microalgae to remove millions of tons of carbon from the air while greening the desert for sustainable agriculture. Merging cutting-edge engineering and abundant resources, we aim to tackle a trillion-dollar challenge masked as an existential crisis – removing 5-10GtCO2 per year.
Our circular approach uses untapped resources in desert regions to cultivate microalgae at scale to permanently sequester carbon and produce sustainable agronomic products while boosting job creation and biodiversity. Starting in the UAE, HyveGeo will be poised to scale up megaton scale globally.
As the saying goes, we need to plant the seeds today so that our descendants can sit in the shade.”
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Both 44.01 and HyveGEO are committed to removing carbon from the atmosphere. But, why on carbon removal specifically? After all, there is the option to pursue carbon offset, which involves the much easier task of simply reducing the outgoing amount of carbon to compensate for the GHG being produced.
As put in her TedTalk, Dr Gabrielle Walker explained: “Why do we need carbon removals? Isn’t it easier to stop putting carbon in the atmosphere in the first place? Yes, this is easier. But we’ve left it too late. We can’t do it fast enough.”
“The science is utterly, utterly clear. If we’re going to have a fighting chance of staying below 1.5 degrees – that’s a safe limit – we need to have carbon removals”. A lot of carbon removals.
Of course, it’s important to focus on carbon offset to reduce the amount of CO2 being released into the atmosphere. But, as poignantly stated by Dr Walker during The Rising Tide: Future of Everything podcast, “What goes up must now come down.”
The only thing that will give us a fighting chance of staying below that all-important 1.5-degree mark is billions of tons of carbon removals between now and 2050.
Not only has Dr Walker been a vocal proponent of the importance of CDR, but along with co-founders Marta Krupinska and Mark Stevenson, she has also co-founded CUR8 to facilitate this very practice. As a broker, CUR8 is different to companies like 44.01 and HyveGeo. It does not innovate and run CDR projects, but it facilitates the next crucial step in the value supply chain: funding.
CUR8 collaborates with top-tier partners in both natural and technology realms to construct high-quality carbon removal portfolios and carbon removal credits. By doing this, CUR8 confronts a key challenge in the CDR supply chain: the limitation of capital among suppliers.
Simply put, many suppliers lack the necessary funding to scale up their operations. This poses a real obstacle, especially since traditional VCs often steer clear of capital-intensive opportunities. This is where CUR8 comes in. The company can help clients buy CDR credits and offtakes from organisations, such as 44.01, which can allow these companies to scale up their CDR operations.
CUR8 supplies a way for corporations to participate in purchasing to aid environmental efforts, and it’s not alone in this pursuit. Frontier Climate is another organisation that has banded together to fund CDR initiatives.
Frontier is a group of corporations that have joined to command better supplier terms. Together, they help to funnel capital into CDR initiatives. Members simply set their maximum annual expenditure, and Frontier uses this to facilitate high-quality carbon removal technologies.
The platform recently obtained a third round of carbon removal purchases worth $7 million on behalf of buyers Stripe, Shopify, and H&M Group which, based on their projections, could collectively remove more than half a million tons of CO2 annually by 2026.
Frontier’s latest round of facilitation demonstrates the growing maturity of the CDR industry. But it also indicates how interest in the broader market for sustainable technologies is growing. Indeed, the demand for green innovation is something that extends beyond the realm of CDR initiatives.
While carbon removal is a huge area of focus for many startups, plenty of other companies help to pursue other environmental aims. GalaxEye, for example, is building the world’s first multi-sensor imaging satellite, and its technology offers unique insights for Earth Observation (EO) purposes. Established in 2020, its proprietary mission, named Drishti, provides comprehensive weather information that can help detect adverse climate events and emergencies.
Global warming has already led to an alarming increase in natural disasters. In this decade alone, global floods and extreme rainfall have surged by over 50%. By combining the strength of a Multispectral imager (MSI) and Synthetic Aperture Radar (SAR), the Drishti Mission can supply critical all-weather intuitive imagery. This technology can play a crucial role in the next step of the supply chain: providing data that relief groups and governments can observe and measure, allowing them to take action and mitigate the effects of climate calamities.
Though already providing crucial data, GalaxEye is still in the early stages of its mission. This is much like many organisations in the ClimateTech sphere, due to the ClimateTech market itself still being a nascent, burgeoning market with significant and constant capital requirements.
Some are taking aim at helping some of the largest supply chains in the world get on top of their net zero goals. One such startup is OpenESG. Launched earlier this year, the company is pioneering the use of Generative AI to help enterprise customers get on top of their Scope 3 responsibilities that span the breadth of their suppliers across the value chain.
To date, data collection and verification have been a significant challenge for many of the largest organisations in the face of a changing regulatory and reporting landscape. OpenESG’s founders aim to reduce the strain on sustainability teams by changing how companies collect, verify and report on supply chain data, allowing for focus on actual outcomes rather than onerous report writing.
Their ChatESG product may be a first-of-a-kind in the market allowing their customers to harness the power of AI and “chat” with their data to get the insights and reports they need quicker and cheaper than ever before.
As the capital demands for these innovative companies pushing the boundaries of science and climate continue to grow, new players are entering a market that was not traditionally a mainstay for Venture Capital Investors. SystemaNova.vc, a UK-based investor is one such partner and offers capital and more to help right at the earliest stages of business building and creation.
Often taking a punt on the promise of mission-driven talent and market potential, investors like SystemaNova back startups and add fuel by way of human and financial capital and crucial connections to industry as well as sector experts. They are known to have been the very first institutional investor in 44.01, the climate CDR leader that won the Earthshot prize in 2022.
And while the funding SystemaNova supplies is crucial to helping early-stage startups to lift off and begin working towards delivering their ambitions in the climate sector, it really does take a “village” to nurture and support early-stage pioneers. The fund recognised this created a talent platform to aid startups to connect with the very best Go-To-Market (GTM) and sales experts.
The need to grow revenue is acute in today’s funding environment ahead of the next stage of funding. Founded by Stephane Mardel, the group also sees its role as a crucial convener of minds and mission. Most recently they hosted a Climate and Carbon dinner attended by a broad spectrum of stakeholders ranging from the Earthshot Prize to Corporate Venture Capital funds. “We want to shine a light on the best innovation in the market, and importantly connect talent and capital to where it can further Climate goals with the best impact”.
Their portfolio companies seem to value the approach also. 44.01’s founder Mr Hasan stated: “Good, early-stage investors are hard to come by. SystemaNova is one of the few.
They were one of our first backers and moved quickly. They helped us with more than just capital and that support continues to this very day. I cannot recommend them enough.”
Farid Haque, General Partner at SystemaNova, explains: “We are at a critical juncture where large enterprises and other stakeholders need to step up to the plate and take serious responsibility for their plans and impact on the planet. While the carbon markets are voluntary at present, legislators and regulators have caught on to the need for companies to substantiate their environmental claims.
The recently proposed “Directive on Green Claims” released in March 2023 will look to introduce new rules that will ensure that voluntary environmental claims are independently verified and proven. Most importantly green claims based solely on carbon offsetting schemes are going to become a relic of the past. Companies can see net zero targets looming large against a shrinking window. Only a mix of offset activities and carbon removals will get these large enterprises to their net zero ambition.
The earlier teams get smart and allocate human and financial resources to pursue appropriate carbon removal strategies, the better a chance to get to net zero across their vast supply chains.”
While companies reducing plastic waste and investing in renewable energy are commendable habits, merely adopting such practices, however environmentally conscious, is insufficient to counteract the century-long impact of carbon pollution.
To witness substantial progress in our planet’s well-being, the implementation of early-stage capital interventions across the supply chain that endorse innovative environmental objectives is essential.
But, ultimately, to not only enhance our planet but also reverse some of the harm we’ve inflicted, carbon removal initiatives are what stand as the conclusive solution, giving us a fighting chance at combatting climate change for the generations to come.