ESG & Climate Investing

Logan Soya, K Street Capital Investor & Founder/CEO of Aquicore, discusses climate change and its impact on venture investment.

It’s been a hot summer - and the world is only getting hotter. According to the Intergovernmental Panel on Climate Change, the global annual temperature is expected to increase to 2.8°-3.2°C above pre-industrial temperature levels by the year 2100, even with the new Biden administration’s policies in place. Not a good situation for us, resulting in forced migrations out of flood zones, fires, and food shortages. The urgency to address climate change has created a new market for green technology looking to both reduce existing atmospheric CO2 and reduce future emissions, known as CO2 avoidance.   

Last week, in a K Street Capital event, Logan Soya, KSC investor and Founder/CEO of Aquicore, a leading provider of ESG analytics software for commercial real estate,  helped illustrate the gravity of climate change to our investors, and its impact on venture investment. 

Why are companies now starting to care? The shift is driven by consumers, capital markets, and regulators. Consumers’ concerns about their footprint have forced companies to respond to changing priorities. Furthermore, companies have had to adapt to comply with ever-evolving regulations. ESG is the buzz - with investors considering environmental, social, and governance factors as part of their analysis process in identifying risks and growth opportunities. Capital markets are proving to be the strongest driver of change, as companies like Blackstone and Vanguard are honoring ESG disclosure and reporting. This is evidenced by the Climate Action 100+, comprised of 617 global investors with more than $55 trillion in assets under management, that have all committed to some form of ESG disclosure prior to allocating funds.

Over the past three years, we have seen a surge in climate technology venture investments led by individuals like Chris Sacca, Robert Downey Jr., and Bono. Industries with large carbon footprints - such as transportation, construction, electricity & heat, and agriculture – will increasingly create opportunities for investable, innovative technologies that fall into the following focus areas:

• Agriculture Technology – Rethinking food supply chains to reduce waste and emissions
• EV Technology – Combating the effects of climate change like forest fires and sea levels
• Carbon Technology – Capturing and finding commercial use for carbon removed from the atmosphere
• Building Technology – Analytics, Heating & Cooling, Construction Materials
• Renewable Technology – All things accelerating to the transition to renewables
• Climate Finance – Accounting, Management, Compliance, Disclosure, Trading
• Climate Data – “Bloomberg for ESG data” type services

When evaluating investment opportunities, it’s important to consider the solution’s size of impact, timeline of impact, and core focus. 

Because climate technology investments are a slow burn, with 10+ year return profiles, most investments will not meet venture goals of a 3-5 year return. However, Mr. Soya notes that climate data, in addition to building, carbon, and renewable technology, may have the quickest returns within climate investment, and could offer investors the opportunity to make their money back sooner than 2030.

By: Scott Lurie