The world has ten years to halve global greenhouse gas emissions, and until 2050 to reach net zero. To reach this goal, there is a need for investment in low-carbon technologies in private markets.
With minimum investments in many Private Equity and VC funds ranging in the millions of dollars, there is an opportunity for startups offering impact investment platforms to retail investors and the mass-affluent. Carbon Equity, a climate investing platform for alternative investments, is one of 300+ sustainable finance companies working to bring the best new climate technologies to the public by connecting otherwise inaccessible investment opportunities to everyday investors who want to make a change with their capital.
We spoke with the co-founder of Carbon Equity, Jacqueline van den Ende, on how to estimate meaningful climate impact in startups, carbon reporting, and the investment horizon of climate tech funds.
Why did you decide to found Carbon Equity?
I have a background in private equity, I was a partner in a venture capital firm and spent several years building a fintech company. My main lesson throughout those years was that money was very much the lifeblood of the economy. Capital allocation in a way is like the orchestra conductor, or the strings in a string puppet show - it decides what happens and what does not. So I started off with the question - how do we move the needle on climate change with capital?
We saw trillions of capital being funneled into ESG stocks - but as stocks soared so did Carbon emissions. We realized then - that if you really want to move the needle with your capital, you can have far more bang for your buck, in terms of impact and returns, in private markets - especially in venture capital and growth equity, than in public markets.
Unfortunately the vast majority of investors and net worth in the world has no access to private markets. Carbon Equity seeks to unlock the $150+ trillion sitting with mass affluent investors (€100K-10M) for the world's most impact private equity funds, whilst creating millions of shareholders of the net zero economy in the process.
Could you tell us about the criteria that you employ to select the funds?
For Carbon Equity, it is essential that each of the investments we offer creates meaningful climate impact. (...) A fund can show that it is serious about creating climate impact by doing at least one of the following:
- Set a fund-level greenhouse gas (GHG) reduction target.
- Commit to investing mostly or exclusively in companies that have a real GHG reduction potential.
- Link your financial incentives to the impact you create.
- Clearly define the climate problems you want to solve and base your sourcing strategy on this.
- Set a minimum threshold for what GHG impact an investment must have.
Secondly, we assess a fund’s investment mandate, team, organization, investment strategy, selection process, portfolio management and reporting across 35 criteria, to evaluate the extent to which impact is integrated in the fund’s policies and practices.
Once we are confident that a fund has the people, strategy and processes in place to create climate impact, (and the fund passes the general diligence), we also do an ESG assessment. Because while we are optimizing for climate impact, we want to make sure no harm is done to the environment or the wellbeing of people.
In addition to the financial reporting, are you doing any sustainability/carbon reporting on funds' performances?
We believe that enabling people to become owners of the net zero economy is one of the most powerful ways to engage people with regards to climate change. It's important to us to actively engage our customers and make the impact of their money as tangible as possible. Customers consistently receive updates on all of their portfolio companies and will down the line be able to track them in real time. Furthermore, we formally report on the impact of funds.
We share all funds’ impact reports with our customers, as well as a brief ‘how to read this report’ guide. Impact reports differ quite a bit in their methodologies, so we add a brief explanation to help our customers assess the quality of these reports and how to compare them. Currently we see that impact measurements across funds are super heterogeneous so we are very careful to make any sort of aggregate claims, but as impact measurements mature, hopefully we could one day calculate the exact carbon impact of your portfolio of Carbon Equity investments.
Read our full interview on the Dealroom app. 👈
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