Impact Investing Network Showcase - Climate Venture Capital Fund
The Impact Investing Network (IIN) taps into the minds of investors pioneering the impact investing space in New Zealand to share key insights with the IIN community. The purpose is to showcase how funds are strategically thinking about impact investing and demonstrate unique techniques and thought processes to demonstrate impact, meet market returns, and foster a community of practice.
This month we were fortunate to have the opportunity to showcase Climate Venture Capital Fund (CVCF) in a written interview with questions and answers provided below!
Please provide a brief background CVCF.
We know that the climate crisis means everything has to change. We need a revolution in how we create energy, how we travel, what we eat, and how we interact with the natural world. The CVCF is here to accelerate and to capitalise on that change.
We are the second fund from the team behind the Punakaiki Fund, one of New Zealand’s oldest VC funds, so we have plenty of experience in what works and what doesn’t for supporting innovation in our ecosystem.
How does CVCF approach the concept of intentionality and impact measurement? What resources, if any, are leveraged?
Our goal is to introduce and demonstrate best practice for delivering and measuring impact. Every investment must aim for emissions reductions that are additional, credible, material, and internationally comparable. Our Climate Impact Committee guides our due diligence and has final say over our investments. We work with the companies that we invest in to help them understand and measure their emissions impact. Metrics for VC are hard, given the long chains of causality between investment and impact but we’re finding that the IRIS+ metrics from the Global Impact Investing Network are the best option.
What makes the impact investing market in New Zealand attractive/unique? How may these characteristics differ globally? How can the impact investing ecosystem leverage these unique characteristics to capture growth and opportunity?
New Zealand start-ups are very committed to doing good. Turning those good intentions into credible impact and competitive advantage is harder. The resources and experience aren’t there yet and it’s fair to say that New Zealand is behind some other nations when it comes to thinking about impact. That said, we’re happy to share our expertise and work collegially with other investors to help develop those skills within the early-stage investment community.
Please provide some unique impact investing stories or examples of the companies you have invested in.
We pay attention to all the aspects of impact and ESG but we are explicitly focused on reducing greenhouse gas emissions, at a systematic level. Our investments range across economic sectors and cover every stage from “still doing the R&D” to on the shelves in your local supermarket. Hence the emissions mitigations are equally varied.
MGA Thermal is an Australian firm developing a clean energy storage technology. They’ve just announced a pilot project with AGL - Australia’s largest emitter. Their impact should be huge and will be indirect - their technology can store solar electricity from the middle of the day to the evening peak when it will displace fossil generation and the emissions that come with that.
Cleanery produces powdered household cleaning products that reduce emissions by avoiding the production of plastic waste and the fuel used to ship around the world the water in diluted products. The impact there should be very substantial for that product sector. Measuring such diverse impacts needs customised approaches but the end goals remain the same - greenhouse gas emissions mitigated.
What regulatory or policy settings changes are required to accelerate NZ’s progress towards our carbon reduction goals?
We’re increasingly of the position that achieving New Zealand’s emissions reduction targets needs more of a focus on domestic action to reduce gross emissions, more investment in mitigation technologies, and stronger policies to support roll-out and behaviour change through all the co-benefits those changes can deliver. Our current policies are pushing domestic investment towards permanent carbon forestry and hoping that as a nation we’ll be able to buy offshore mitigation at potentially huge cost. That’s what is politically feasible right now but seems an increasingly risky strategy.
We’d like to see an economy-wide carbon price with no free allocations for high-emitting industries and no overly generous exclusions and discounts for agriculture. We’d like to see stronger complementary policies to hasten progress as so many carbon-related decisions are not primarily directed by carbon prices.
We also recognise the big challenge that NZ’s animal-based agriculture faces with this revolution. Targeted and more extensive support is warranted to help farmers with the changes that our offshore markets are starting to demand.
What insights or trends are you seeing that can move more investment into climate initiatives?
New Zealand is rapidly putting in place climate reporting through the External Reporting Board for large listed companies, large asset owners, and financial institutions. This is the kind of boring change that mostly flies under the radar – it’s certainly not as interesting as the latest hot start-up but it’s a fundamental change that provides the information necessary to redirect huge flows of investment.
What should the IIN community keep their eye on with respect to CVCF? Any exciting new developments or updates?
There are so many ideas out there trying to attract attention and support. The hard part is understanding which are credible. We are looking for opportunities where the commercial story and the carbon story work together to create high-growth start-ups. We’re finding a good number and we’ve a very busy pipeline right now. Still, the scale of the challenge is such that we know we’ll need to scale up our own ability to provide support as climate investing grows.