Clean Energy Ventures Q&A: There’s no ESG standard for early-stage investing

Principal Shanbor Gupta outlines the firm’s net-zero journey


Laura Miller

ESG Clarity is exploring the decarbonisation targets set by Net Zero Asset Managers’ initiative (NZAM) firms as well as talking to individual fund groups about how they are finding the journey to net zero.

See also: – ESG Clarity’s Net Zero Database

Here, Shanbor Gupta, principal at Clean Energy Ventures, which invests in scalable early-stage climate tech startups and clean energy technologies addressing global climate change, talks about how to navigate emissions targets and reporting for companies just breaking out of the lab.

Can you tell us how your journey to net zero started and how it’s going now?

Having previously founded two startups, I came to realise the challenges that companies face early on. The sustainability challenges in industry drew me to the climate tech sector, but I realised I could have a larger impact on the investment front. I joined the Clean Energy Ventures team due to the mission alignment; today, we’re finding and funding the most impactful climate innovations from metals recycling to carbon removal to hydrogen and beyond. We’re seeing incredible momentum across the globe for climate solutions that can slash gigatons of carbon emissions, and our goal is to back these world-changing technologies and transform them into market-leading commercial companies.  

How are you engaging companies on net-zero alignment (for assets or emissions)? 

As the real-world impacts of climate change become more of a reality, companies need to actively track and measure carbon emissions throughout the entire supply chain. At CEV, we saw the need for a standardised methodology in assessing and measuring each company’s climate claims and created our Simple Emissions Reduction Calculator (SERC). SERC empowers entrepreneurs globally to quantify their CO2e impact and accurately report a company’s potential to mitigate emissions to attract investors, customers, partners and hires and comply with tightening US federal and state disclosure requirements.

You have chosen ‘issuers themselves setting targets’ as one measure – how does that work and how is it going?

CEV invests in early-stage companies that in many cases, are ready to spin out technology from lab-scale to commercialisation. It requires a vastly different approach than that of large corporations, and currently, there is no formal global ESG standard for firms that invest at our stage. Therefore, setting targets ourselves is the only feasible pathway to allow the companies within our portfolio to scale quickly on a path to net zero. 

Following our overarching investment thesis CEV only invests in companies that can demonstrate the potential to mitigate or reduce 2.5 gigatons of greenhouse gas emissions over the next few decades. To validate this, we do deep technical analysis of the innovation and model emission reduction potential during our due diligence to ensure that any company we invest in can have outsized emissions reduction impact. Underlying our thesis is a policy to ensure that all our portfolio companies build out diverse and inclusive teams, which is essential to their success. 

How do you factor in Scope 3 to your investment and engagement activities?

All the companies within our portfolio have a strong focus on decarbonising their customer operations and/or their supply chain. For that reason, the majority of the emission reduction potential modeling that we undergo is targeted around the impact that they can have in Scope 3, or what some refer to now as Scope 4. 

What has been the biggest challenge in decarbonising your portfolio?

Early-stage teams have very limited resources and may not have robust processes in place to accurately measure and report on ESG data. Getting a system in place can be a significant challenge, but it’s certainly a growing requirement for the businesses of today. That need is one of the reasons why climate tech companies are hungry to work with our team; with decades of operational, investment and sector-specific experience under our belt, we can step in to bridge the gap to ensure that these companies are positioned to scale and map to net zero effectively and efficiently. 

When did you sign up to the NZAMI?11 December 2020
AUM committed to net zero ($) 100m
% AUM committed to net zero100% of total AUM was initially committed to be managed in line with net zero.
Timeframe2030 portfolio coverage target
100% of target portfolio companies that have raised a Series C financing or 30% of the target portfolio companies (whichever is greater) committed to achieving net-zero carbon emissions by 2050.

2030 engagement threshold target
These companies shall also be engaged to submit an application to SBTi’s PE/VC target setting programme.

2030 allocation to climate solutions target
100% of the portfolio to be invested in companies offering solutions that significantly reduce GHG emissions compared to the baseline technology.

2050 portfolio coverage target
100% of Fund I and Fund II companies commit to reach net zero by 2050. The emissions reductions will need to be supported by respective LCAs and SBTi reporting.
2050 portfolio decarbonisation reference target
Potential to reduce 2.5 gigatonnes of CO2eq emissions by 2050 (cumulatively) from the baseline.

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