New Zealand’s Climate Venture Capital Fund Releases Inaugural Report – And Sets New Reporting Benchmark
The Climate Venture Capital Fund has published its inaugural Impact Report, marking firsts for the VC sector and for climate reporting in New Zealand.
Launched in 2022, the fund is New Zealand’s first dedicated climate VC fund, targeting emissions-reducing tech in New Zealand and Australia. The report is for the period ending March 31, 2023.
The fund is the first in New Zealand to disclose emissions from the companies that we invest in (called Scope 3 Category 15)
The fund is also the first to include the overall, systematic impact of our investments (called Scope 4 ‘avoided emissions’) resulting in an equity-weighted negative position on carbon dioxide equivalent (CO2e) emissions
Impact of 69 tonnes of CO2e in reduced emissions for the year from one company, and a clear path to higher emissions savings for FY24 across multiple investee companies
These early-stage impacts are expected to ramp up with the potential to reach 1 million tonnes from other investments within the first 10 years
Completing its first close in January 2023, including investments from a broad range of institutional, family office and high-net-worth investors
Investing in four companies, including:
MGA Thermal - thermal energy storage, NSW
Cleanery - low emissions powdered cleaning and personal care products, Auckland
Liquium - green ammonia, Wellington
Zincovery - recycling zinc without using coal, Christchurch
Confirming commercial terms for two follow-on investments into existing portfolio companies
“It’s incredibly satisfying to look back on this first year and see that we have delivered on what was promised,” says Rohan MacMahon, one of three partners of the fund.
“We know there is strong interest among investors in emissions reduction technology. And we’ve seen that there are more opportunities to invest than we can possibly support. It’s an exciting time to be in this space.”
Dr Jodi York, chair of the Fund’s Impact Committee and also Chief Impact Officer for Melbourne-based Kilara Capital says she is very impressed with the level of rigour in the report.
“It’s a real step forward towards what’s already happening in Europe, but not nearly as much in Australasia. A lot of the focus has been on industry reducing emissions but very little on investors. It looks like investors don't have a carbon footprint until you actually look at what emissions you are financing,” says York.
“This is one of the first reports to specify the impact of its investments.”
The fund recently invested in horticultural tech company Hot Lime Labs and announced an extension to its first fundraising round - though, both developments fall outside of the reporting timeframe.
CVCF’s success fits with global trends. In 2022, despite a downturn in broader venture capital fundraising, global climate tech funding grew 16% year on year.
Reporting Scope 4
The Fund’s impact report includes a rare Scope 4 analysis**, which measures the volume of avoided emissions.
“We believe this is the first report in New Zealand to include Scope 4 emissions,” says fund partner Dr Jez Weston. “Scope 4 emissions reductions are, for example, when a householder doesn’t buy a high-emissions product because they have bought a lower emissions product from one of our portfolio companies. So the overall emissions go down.”
“Only a fraction of VC funds are reporting on their direct GHG emissions and fewer have reported to the level of Scope 3 Category 15 for the emissions from the companies that they invest in and are responsible for. Even fewer are reporting their Scope 4 savings - but to genuinely address climate change, organisations need to take a holistic view of their impacts and ensure that they are reducing emissions overall).
“The impact from avoided emissions from our investments dwarfs the emissions from the Fund, and the companies themselves. We expect this trend to accelerate dramatically as our companies continue to trial and then shift systems into production,” says Weston. In particular, MGA Thermal’s energy storage technology can help hurry the transition to lower emissions renewable electricity.
In creating its first Impact Report, the Fund searched for templates or models, but found none existed. The team adopted a ‘wide boundary analysis’ (i.e. beyond just climate impacts) to:
· avoid investing in enterprises with potentially negative impacts in the short-, medium-, and long-term, and
· identify possible co-benefits against the Sustainable Development Goals (SDGs).
“There are no good climate templates for VCs as such, and there are certainly none that include Scope 4. In producing this report we think we’ve set a benchmark in climate reporting. It’s an evolving area with the first relevant standard (ESG_VC) being released this year. We look forward to collaborating with others to push for higher global standards,” says Weston.
About Climate Venture Capital Fund
Climate Venture Capital Fund (CVCF) is an Auckland-based VC fund investing in early stage and growth companies that show strong potential for emissions reductions. The fund has a twin mandate of VC-level financial returns and maximum emissions reductions. It is managed by 2040 Ventures, also the manager of Punakaiki Fund, one of New Zealand’s leading VC firms.