Carbon Calculation Is Coming: Should We Invest in Climate Change Solutions?
Climate change tackles get closer
We’re beyond debating climate change. Now, the winds are heading toward carbon footprint measures as it becomes a core concern to calculate and manage carbon emissions. The Harvard Business Review reaffirms that companies can expect regulatory pressures and penalties for carbon emissions. Alongside, there are consumer-driven expectations around corporate accountability. While there are many climate change solutions brewing, in this post, we explore carbon management software solutions, broadly, and later, zoom in on a carbon calculating software player, Persefoni—ranked in our EDGE100 report. Catapult-like, these software solutions seem to be gaining potential energy, poised and ready for, if (and seemingly when), the software becomes a necessity.
What’s enabling and driving carbon monitoring?
The technology is here, so avenues have opened. New technologies like open banking application programming interfaces (APIs) and blockchain as well as developments in the fields of GPS and GIS (Geographic Information System) have made intelligent carbon monitoring possible in recent years. Additionally, governments have begun imposing aggressive targets to lower GHG emissions over the next few decades (check out climate change initiatives explored here).
The EU taxonomy, issued by the European Commission (EC), which classified a system that defines which economic activities can be considered environmentally sustainable, is a strong example, indicating the region’s narrowing (we’ve explored the timeline and details that the EU is taking to be the world's first “climate-neutral bloc” by 2050).
More recently, the SEC proposed climate disclosure, which asks that companies be transparent in their climate risk and management calculations.
Another driving factor is that sustainable investing is becoming increasingly popular, as investors are more concerned with the ESG commitments of their investments. Or it could just be the bottom line; for example, the US sustainable equity funds outperformed their traditional peer funds by a median total return of 4.3 percentage points in 2020, up from 2.8 percentage points in 2019.
Startups are rising to meet these demands
Just in the last two months, we’ve seen that Measurabl launched ESG real estate data solutions, where its product offering enables investors, lenders, and other real estate capital market participants to integrate investment-grade asset-level ESG data into their underwriting, market intelligence, and business applications, to comply with disclosure requirements, risk management, and other investment requirements.
Digressing a little into an adjacent segment, the carbon trading marketplace, we’ve seen how Finnish startup, Puro.earth and Nasdaq launch carbon removal indexes. The indexes track the price of carbon dioxide (CO2) removal from the atmosphere, through Puro.earth’s CO2 Removal Certificates (CORCs), allowing customers the transparency to make investment and financing decisions.
We can make a case for carbon management’s momentum with incumbents like Amazon Web Services launching a carbon footprint tool. In fact, we noted that AWS’ cloud services counterpart, Microsoft, has also introduced a similar application (known as the Microsoft Sustainability Calculator) for Azure enterprise customers to quantify the carbon impact of each Azure subscription over time.
Now, we zoom into Persefoni
Persefoni is a B2B carbon footprint calculating software company, which closed a USD 101 million Series B funding round late last year—this was the most raised in a venture round by a climate tech software startup at the time. Claiming to serve four of the 10 largest global private equity firms and four of the world’s 20 largest banks, Persefoni’s presence is somewhat established in this nascent space.
Two significant moves for the startup in October 2021 were that it partnered with Patch to launch the Zero Commission Offset Marketplace (ZCCOM), which enables customers to measure and purchase certified, long-term carbon offsets from a single marketplace, and launched its Climate Scenario Modeling Product with SBTi Temperature Rating Methodology and Finance Temperature Scoring & Portfolio Coverage Tool, enabling users to calculate carbon pathways by sector, across various base and target years.
Just last month, in April 2022, Persefoni partnered with Connor Group, a professional services provider, to optimize its platform to convert financial, operational, and supply chain data into carbon footprint data.
Explore more about the startup via a featured expert interview with Ryan Miller, VP & GM of Private Markets at Persefoni.
Climate change isn’t a debate, which is why we see these players proactively prepping for its eventuality and gearing up to mitigate the impacts of carbon emissions. Corporates may feel the pressure of regulatory and consumer wants. We see that startups are seizing opportunities to align with regulatory demands, aiming to tackle climate-change issues and enable accountability; and the tech to calculate carbon footprint is just one component of this segment (in this ecosystem). As seen via Persefoni, solutions have attracted funding and are partnering with other startups, to strengthen forces, or with corporates, to meet their evolving needs. We can’t predict the winds of (climate) change solutions, but it seems like carbon calculation is coming.
This is one aspect of the big picture, so if you’re keen on following the action and understanding the whole cycle in relation to carbon capture, climate tech energy optimization, or even more information within the carbon management space, such as to compare the players, write to us or, better yet, talk to us!