- Speaker #0
Welcome to the SOSV Climate Tech Summit podcast series. I am the AI voice of Ben Joff, a partner at SOSV and co-curator of the Climate Tech Summit. In this panel discussion focused on measuring and attributing climate impact, moderated by Hampus Jakobsen of PaleBlueDot, investors from various climate tech focused funds discussed the importance of impact measurement in startups and investment decisions. Speakers included Agnes Svensson from Norsken VC. Jessica Burley from Planet A, Elena Stark from ANU, and Morgan Scheel from World Fund. They explored the challenges and methodologies of impact assessment, the role of legislation in Europe, and the correlation between high impact and high returns. The conversation highlighted different perspectives on setting impact KPIs, the influence of investors on startups, and the complexities of attributing impact across the value chain. Good morning, good afternoon, good evening everyone. This is Ben-Giorg from SOSB and this is for a new session of our Earth Day Plus webinar series about climate tech. Today we have a special session focused on measuring and attributing climate impact, which is something important for startups but also for investors. Today joining us we have five investors focused on climate tech. in a conversation moderated by Hampus Jacobson, founder and general partner at PeerBlue. So, Hampus,
- Speaker #1
please take it away. Thank you very much, Ben. No, so this is really interesting. And I think that the conversation we're going to have here is about, as Ben said, about climate attribution. And I think a big difference between the US and Europe is really how mandatory this is and how legislative it is. And I think it's going to be a great conversation. We're all European funds here. So this is going to be a very European lens of how we do it in Europe. But it's hopefully going to be a very good international conversation as well. So first of all, I think it's great if people just do a quick intro about themselves and the fund. Do you want to start, Jess? You're up in my left corner.
- Speaker #2
Happily. Hey, I'm Jess. So on me, my background is originally climate policy. I then switched to the entrepreneurial side and a climate startup, then a climate micro fund, and I've been at Planet A since pretty much the beginning. And so not an impact expert, I have to say, but I can give you maybe the perspective from an investor. And then on Planet A, we're an early stage VC focused on companies with highly scalable and significant impact. We're a little unusual in that we have our own in-house science team who assess the environmental impact of each product or service or innovation. And we're actually the first European VC with a science team that has a veto power over our investment decisions. So they work really hand in hand with us on the investment team through the DD process and also initial assessments, as well as then full on portfolio enablement. And actually post-investment, we set impact KPIs with the portfolio companies, and that's tied to our own carried interest, so we don't get interest unless they hit their impact KPIs. So yeah, that's a little bit of an overview on our impact, but I'm sure we'll dive deeper later on. Thanks a lot, Hampus.
- Speaker #1
You want to go next, Elena? You're up in the right corner now.
- Speaker #3
Yeah, I'm happy to. I'm Elena. I previously worked especially in startups on their impact and ESG strategies before joining ANEW. And we are also a climate tech fund focusing on early stage European ventures within the climate field that have the potential to abate or reduce 100 megatons of carbon at scale. But. Yeah, happy to join the conversation on how we might be measuring impact in different buckets than climate as well.
- Speaker #1
Oh, do you want to go, Agnes?
- Speaker #4
Yeah, sure. Hi, everyone. I'm Agnes. I work as Chief Impact Officer at North Skin VC. North Skin VC, we're also an early stage VC impact fund. European focus can make some investments across the US. Otherwise, a very broad kind of impact mandate. We invest across all 17 SDGs, climate obviously being one of our most important sectors that we invest in. I myself previously before this led the sustainability team at Klarna, so first role within VC, but I spent my whole career basically on impact and sustainability in different ways. So excited to join this conversation.
- Speaker #1
Great, thanks a lot. Morgan, do you want to take it away?
- Speaker #5
Absolutely. Hi everyone, I'm Morgan Scheele, I'm head of impact at World Fund. From my background, I come from a technical background, so I started my career as an engineer in the energy industry. pivoted and I've worked across several large cap private equity and VC firms, namely KKR and EIP. I've since joined World Fund. We invest in companies who we view to have the highest level of climate performance potential, CPP. It's a methodology we created and led the development of. We've also worked with large organizations in developing industry standards. So I'm one of the primary authors for Project Frame and the methodology for impact measurement with VC and private equity. Also working with Venture Climate Alliance and GFANS on climate solutions measurement for impact. We also have impact pretty central to our core DNA. It's pretty much required for an investment to go forward. And we also set KPIs post-investment that link to our carry as well.
- Speaker #1
Nice, thanks. And I mean, for my end, I'm post Pilbara. And so Pilbara is the one that is not measuring of the crowd here. We're doing a very lightweight measurement and I think that we do mostly precede but also seed and yours, you, us and Europe and I think that's what I think started this conversation internally as well where Pilbara is like we're, I don't want to say we're against measurements, but maybe we're like in the crowd we're the least measuring here so I think that's like, it's going to be might be a conversation. But I want to start off with a question saying. I think for the international audience, Europe is maybe more famous for legislation innovation than anything else. And impact measurement for funds is one of them. It comes from a lot of requirements from a lot of LPs, investors in funds. But I want to start with an easy question. And I want, it's good if I'll answer what they view on this. But do you, in your role as a fund, and looking at this very crassly, do you think that a company with higher impact is correlated with higher returns going forward? And of course, we all agree. that if a company becomes bigger, they do both higher impact and higher returns. But if you choose a company, and remembering this is the year 2024, we can't really get historical data maybe as much. But the question is essentially, is a company that is good, does it also do well? And how strong is that correlation? So I'd love to kind of start that off with your beliefs about impact and returns. Do anybody want to start? Somebody has to start. Yeah, okay. Good. Go.
- Speaker #4
Where are you going to go? I'm happy to jump in. Just to kick it off, this is like the million dollar question, right? But I mean, we're an impact fund. This is, of course, our belief that higher impact is going to generate higher returns. I think to us, at the end of the day, it kind of comes down to all entrepreneurs out there solve problems. The bigger the problem, the bigger the opportunity. So where are the biggest problems that we see today? I think it's climate change, biodiversity, all of it. We don't have to go into the long list. We all know about it. But... If you're addressing one of those biggest problems, then you're also addressing what we think is going to be a great financial opportunity. So we also see it as a great way to future proof. It's basically future proofing investment opportunities, climate change and these big global challenges around the world. They're going to be around for a long time. Are you going to be? So basically, I think it's to us, these are solid investments that that we think are worth making. Thankfully, tailwinds are also there. So it's where the capital is moving. It's what customers are asking for. It's where regulators are asking for talents moving in that direction. So I think we just feel like our companies are in a really good position to both attract capital, talent, and respond to what the market's asking for. So we just think in general that there are very, very good reasons to, if nothing else, assume that impact will generate higher returns.
- Speaker #5
yeah happy to build on that um very agree our companies because we are also an impact investor focusing on companies you know in climate tech where they're really tackling the most difficult issues impact is really part of the dna of our startups and our portfolio companies and so it's not incidental it's intrinsic to what they do and so if they are having impact then they are having success in the work and scaling and selling and growing. And so because those go hand in hand, we absolutely think that for us, impact goes hand in hand with higher returns because if the companies aren't having impact, then they're not being successful.
- Speaker #2
Maybe if I can just also build on that. Yeah, we fully agree. It's sort of intrinsic in our definition of impact, right? That you are scaling that impact as well. I think maybe on like this tension of can it just be, you know, a good impact when you invest in it or should we really go deep in understanding whether it's a super important like large impact. The way that I think about it is, well, of course, understanding the impact on our biosphere puts us in a position to understand the innovation itself and thereby identify also the big winners of this transition. But I think the question actually goes back to the fundamentals of why green tech is exciting. It's not just that the products are faster, cheaper, better, because the reality is that often when they start, they're not. And it's rather the reason that... Green tech is exciting because there's this huge momentum of the world waking up to the crises that we're in. And it's creating a lot of push and pulls from talent and government and the public and the corporations and so on. And these different entities, they're not stupid. Like they will wake up if you're greenwashing and not really having true impact, then you will come on the firing line of these different entities. And so really like having throughout your supply chain and throughout your whole business model, like a strong impact at the core, I think will put you really far ahead and sort of being one of the winners of that transition.
- Speaker #1
yeah so it's like you know if you're saying i think which is a good question and there's a question from the audience which i'm going to bring up now soon and please everybody ask us use the question field if you're listening um but i think that as you're saying it's like big problems are big opportunities these are future poofing and as you said they're like all of these like big macro trends regulators customers talents but that essentially means that like by spear fishing in the climate bucket we think we're going to get better returns than happen to be on a track that's you know might disappear but of course there are probably, there are going to be companies that have a very high impact, but that might not have a high return. And I think to connect it here to the MW person's question, it's like asking the panelists, give concrete examples of believing higher impact gives higher returns. I think it's like, we can just all try to figure out. And I think it's good to give counter examples. And I think from my end, for example, I think that like, I really agree also like what you said and like what Agnes started saying is that of course, if you're investing in a, huge energy savings area. The customers want energy saving. It's clear they're from regulator. Now with the Ukraine war, it's obviously a massive market, right? And as you said, also with talent. So I think that's one where we think because this is a macro trend, you will get high returns instead of happening to us in something else. But I also see on the other end, we sometimes see companies where tackling some of the biggest problems, for example, say cement, which might be a very tricky market to invest in. due to like now how that market actually works. And that's a company where I think that there could be higher, like very high impact if solved, but the problem might be that the dynamic of that market makes it so hard. So I think it's for the listeners, it's not that just because it's high, like high impact area means that it will work, right? Just like any company idea. But like maybe if you want to give examples of other areas that you think are easier or harder, it would be good also for the audience.
- Speaker #5
Yeah.
- Speaker #1
Go, Marina.
- Speaker #5
You look like you're on that. Yeah. And I think impact can't be the only thing you're looking at. It needs to be kind of a multifaceted review. If you're only targeting companies that are going to solve the biggest problems, I mean, there's a lot of business models where the technology might be trying to address a really big emissions issue, but the business model might not make sense for that geography, or it might not make sense for that particular market dynamics and regulatory environment. So I think... you need to also be making sure that you're assessing the business model, the technology, as well as the impact and making sure that there's essentially a Venn diagram and you're aiming for the spot in the middle where all of those overlap to find the solution. I find also that there is often a really big focus on the technology and less so on the business model or implementation. And I think that's where there's a lot of opportunity for in climate to shift focus towards, because I think increasingly we have amazing technology, but not as clear pathways to implementation. So I think there's massive investment opportunities there. If you can really dive deep into markets and understand what is actually preventing these technologies from scaling and growing into the market. I think that's a really big area. I mean, technology opportunities as well, but I think implementation needs to be a big focus.
- Speaker #1
Yeah. No, I think a lot of times, I think when sometimes when we end up talking to a company and we're saying we're not investing, we, I mean, probably all of you as well, get the response where the startup and the CEO is saying, oh, I thought you were in like a climate investor, impact investor. I thought you cared. And I think that we're just like, yeah, but we're holding like the pension money of nurses or something. Like, I mean, at the end of the day, we have to return the pension money. Like this is not like a philanthropy, like we wanted to actually do. impact, but actually, like you said, Morgan, actually needs to be able to scale right now as well. So, but I'll move on to the next question here. So like, so like impact, I think that like, correct me if you feel like I'm wrong. I think these terms are fairly like they're sometimes moving, but I think impact, I feel like it's generally more about the size of the outcome. And then ESG is more to avoid negative effects. So it's like the filter versus the scale, so to say. And how much do you think that the impact assessment guides are looking at the outcome scale, not the SD part, do you think should guide? steer or even control the decision for the investment? Should it be enabled or a limiter? And I'm adding one more question to that. It's like, as an example, did we as funds invest in the greenest oil field, which is clearly something which is negative, but we don't think which is the best of the cases. So if you want to figure out the part of should, Two questions essentially. Should the impact part, how big of a part should it be in investments decision control or enabling? And then what do you think about greenest Oakfield? Do you want to start Jess because you started like by the science now, you said originally the vetoes.
- Speaker #2
Yeah, very happy to. So yeah, really happy that you flagged this actually, because we're often confused with ESG funds that are limiting negative impacts, whereas we're like trying to invest where there's demonstrable positive impact and that they're really having a huge change. And I think that this question really plays into the whole reason that we're going for consequential life cycle assessments. So life cycle assessments go really deep into a product, in case those who don't know, in terms of the entire life from sort of first manufacturing to second life and eventually the waste process. hopefully recycling, and then we're doing consequential life cycles. So unlike traditional life cycles, they measure the broader environmental impacts of a product or service throughout its entire life cycle. So it considers also indirect, like secondary and tertiary consequences of these decisions and innovations, such as market and supply chain. And so it's a much more forward-looking approach. that places it into a system context and then anticipates and tries to measure all the environmental consequences. So that we're essentially asking, will this company or technology be part of the solution in a more quantifiable way? So necessarily, we'd look at the effects of investing into a green oil field and it's systemically still extracting. So, of course, it would be naturally ruled out. So it sort of, you know, supports this earlier point also that identifying the champions of the transition will also identify the biggest winners, and that like the oil fields are not going to be the biggest winners if we really believe this transition is happening in five to 10 years time their story, when you want to exit is not going to be really like this huge growth potential. And so, and that I suppose is touching more on on the sort of second question there. For the first one on should it be like a guide or a control, I think we kind of already also discussed it. I really agreed with the earlier points that this is like, you know, we've got to, we have food is your duty. We've got to find those that are really scalable. And this has got to be, I would say, just as much. But it's not an either or question. You have to have both. Yeah, yeah.
- Speaker #3
Totally agree. I think in impact measurement we also oftentimes refer to the point of additionality, right? So we are looking at certain problems and we try to find the solution that is the most effective or efficient in solving that issue. And if you look at, for example, the greenest oil field, most of, as Jess already elaborated, most of emissions within fossil fuels lie within the scope three, so the use phase. So in order to tackle these emissions caused within the life cycle of oil, it's not, at least in our belief, not the most efficient to use to tackle the extraction, but rather reduce the use of it. So I think the whole point of additionality, which kind of refers to impact scale and impact measurement, but it's not totally quantifiable. I think that shouldn't be neglected and therefore for us impact assessment and. This whole topic of scale is one part of like a six-step framework which also covers interlock of the business model and how does the commercial success actually drive the impact success. So it's not truly limited to just the impact measurement, but it's a holistic view of the whole business model, which also, for example, covers team. So, for example, when we discussed before. on how resilient climate tech and investments in this field will be. I think it really comes down also to the purpose of the founders, which makes them more resilient. And this is also something that for us would be a crucial part of impact assessment, which is... one scale, but on the other hand, how are we actually going to implement these business models and what are we able to achieve in comparison to a baseline? So I think that's very crucial to keep in mind.
- Speaker #1
I think that like something we talk about like Pelvodoc, which I think is very complicated. I find because like we index so much on the founders and their ambitions and where they're going. And we want them to be like, we really want them to be leaders of tomorrow as people. And sometimes like the question is how, how big of a climate field do they need to go into? Like, are we indexing mostly on the founders being climate aligned or on the business being like the highest impact? And of course, like, as you said, also Jesse also said like, no, it. like it's not an either or, but we find that a lot. Like sometimes we have, we invested in like, you know, Jess and I'm in a board together where we're in a company called Hive to do last mile delivery. And it's one of those questions we can ask ourselves, do we need last mile delivery in the future? Like, come on people. Like if the world is coming to an end, do we need this? Shouldn't we just like make sure that cement works and we have food? And it's one of those things which is so tricky because like you find amazing founders and then at the same time, you have to ask yourself, is this the most optimal place to... but the money impact wise, or what is it? And I think that's an interesting conversation we usually have internally. It's like... if we have if it isn't either or where would we put it um but if there's no one else burning on the esg versus or like limiting questions i'm going to move on to the next one is anyone else running keen on jumping on this one no um i want to move to a question we've had early so because like we started at 2019 um and i think we had a lot of feedback from people when we did stuff like biodiversity and now we're looking a bit of engineering where we're very very happy that we don't have like a mandatory framework from our LPs. Like we don't have EIF, we don't have carry, tides or impact. Like we can do anything we want in sensitive investments. But sometimes when I talk to other climate funds or impact funds, I'm worried that a framework actually limits what they can. They can't invest in, for example, biodiversity because that might be in a framework. And some can. It really depends on how you set up your frameworks. So like my question is essentially, how like what what's your view on framework and it is like limiting and not only by your own fund but like other funds you've experienced and thinking about people in the audience that might think about setting up funds like should they set up a strict framework or not and how do you think about it anybody who's keen on it I mean, I'm hoping...
- Speaker #2
Oh, sorry.
- Speaker #1
Go Agnes. Go Agnes now. You
- Speaker #4
Jump in on this one, just because I think we're, as I mentioned in the beginning, we have a pretty broad impact mandate. We invest across all 17 SDGs. And I think that was actually because of this very reason to not necessarily be limited towards just basically saying in the beginning of a fund that we're just going to make certain investments, but rather be able to be opportunistic and actually identify these frontier topics, like you say, biodiversity. or whatever it might be. Having said that, obviously, of course, there are advantages of having a more narrow scope, that it becomes easier to aggregate impact, measure impact potentially. We obviously have education, health, climate in the same portfolios. How do you aggregate the impact of that? So there will be pros and cons and not by any means saying that we have cracked the perfect solution, but we, I think... From the very beginning, we basically said that we don't believe in narrowing our scope, spending endless time on kind of bulletproof impact frameworks that are very likely going to change anyway. The challenge that our planet humanity faces are just super complex, that not one framework will necessarily be able to encapsulate all of it. But we have obviously a few kind of key questions that we still think are super critical that we will still review every investment case against. So like what's the severity of the challenge that's actually being solved for here? How transformative is this potential? It obviously makes it super difficult to compare A against B if it's different like sectors. How do you compare the transformative potential of educational kind of investments versus within climate change? But it really is kind of a case by case. analysis that every deal, like the deal team basically still does. And I think we've had a big, like a really good point that you made there about the importance of the founder, like who are the founders behind the company? Will they basically stay true to their impact cause? Are they the ones that are really going to be able to take action on these ideas? So it's kind of like a number of questions that we still ask ourselves consistently across all investments, even if we don't necessarily have a more narrow scope. So I guess that's our framework. Like you can check on our web. We open source our methodology and everything we do. So you can read all about, like we do have a framework, but it's intentionally defined to allow us to make these more riskier investments in kind of frontier areas. We can make non-consensus investments because we think that's the best way to actually define our investment strategy. So yeah, I think that's probably our take on that.
- Speaker #1
Is somebody having the opposite, where you have a very narrow framework, who could have the opposite view here? Would be interesting.
- Speaker #5
I wouldn't say we have a very narrow framework, but we target climate mitigation and company. We focus on emissions reduction, savings removal, etc. So that is more narrow, certainly. Though we do also invest across energy, transportation, construction, food, ag. So we do invest across industries and areas. I would say. I don't think there is one answer of what's right or what's wrong. I think what's most important is that you're consistent and that you design your framework that aligns with your philosophy and your investment thesis. So our investment thesis is focused on that climate mitigation. And so it makes sense for us to be more narrow and to say, we think biodiversity is important. We think saving water and water is important, but if those don't target our thesis, we're going to focus where we're experts, where we have PhDs, where we have experience measuring that impact and doing that work. And so I think as long as it's consistent and as long as everyone is aligned, that's what's most important. And I think, honestly, a range of different teams and different approaches are going to have success. It's just you have to do what works best for you and your team and aligns most with your philosophy.
- Speaker #3
And it also comes down to value add, right? We also want to be value additive investors. And if we spread too far across, then of course it's also really hard to support the founders in the right way in order to scale their business and add value. And so I think for us, we are also fairly narrow, but have some wiggle room. So in some areas like climate mitigation, we have set targets and thresholds, but in others like biodiversity, we are a little bit more. flexible and then are able to adjust to the specific business model but of course always looking at additionality so as morgan said like having a set framework which isn't necessarily associated with thresholds for every area but an overarching strategy that we are to follow and i think that really helps like keeping some flexibility and some sort of opportunistic a mindset but being narrow in the areas where you have deep expertise really helps us at least
- Speaker #1
Yeah, it's a good point. And I think this is also, I think that to Agnes originally point, if this is a macro trend and to your point now, Morgan, it doesn't really matter how we target it, because like, we're all going to target the same macro trend. And like, some might say it has to measure this way. And some will say, no, it's just within the macro trend. And I think that there's a question here from the audience for Marco that I just wanted to leave. Like he's asking if each impact investor brings their own impact framework and KPI, it becomes very complex to manage these. And the question is like, what's your experience and has this been resolved? I have, like in our companies, we invest in roughly one company per month. And I mean, I co-invested with some of you guys here. We've never seen a problem, at least for our companies. I think the only thing that we're seeing now is we're trying to figure out how do we actually streamline if, for example, SFDR Article 9 reporting is needed to be done. And just making sure the founders don't have to fill out the same question twice. but I would say like, at least in my experience, I've never seen a problem for any of the startups where they're like, oh no, they have another framework. I think that the, for Marco's sake here, I would say the general due diligence process for a fund, in my view, is a hundred times worse than the impact assessment process. Because like the due diligence process, when you have to sell India, like anything from, you know, your whatever, electricity utility bill or like, you know, passports and like all the IP you have, like there's quite a lot of questions happening anyway. But is it, like, I don't know if you have anybody here who's seen like- conflicts between different frameworks or if that's been an issue in any of your companies
- Speaker #5
I've worked with co-investors so that we can streamline our requests to portfolio companies that we have in common, because I think, I agree with you, I think it's really important for us to make this meaningful and thoughtful, but also not burdensome to our portfolio companies. And I also think we as VCs have to keep in mind that we're not the only ones asking these questions. So we really need to arrive at a common consensus around like SFDR, Article 9, and what we need to be asking there. And sure, every fund is going to have... their different approach and specific questions. But I think it's really important for us to do our homework behind the scenes and make it as easy for founders as possible, which I think I've been seeing that happening. The market has been moving in that direction. And I think we just need to keep pushing forward towards that to make it as easy as we can.
- Speaker #1
Yeah, I think that the assessment part is more like timelines that sometimes, I guess, for the founders, they want it done tomorrow or yesterday. But going to that, and this also leads into Wim's question from the audience here, that my question was going to be that, that I view and Pelvodot's view is very much that
- Speaker #0
only the companies at scale will make any impact. Like, you know, a company that's going to be gone in 18 months won't do any impact or very, very little impact. And early on, there will also be like pivots, shifts, and discoveries. And I think a very tricky question that we find at Pilbunaut, and that's also where we are very, very light and swift on the impact measurements, are that we find it very, very hard to do measurement and estimates early on. And like when you're doing your Series A or even your Series B, it's like way easier because then you're on a track and like you can actually do it. And the question is, should we actually have different kinds of measurements? Like, you know, the payload way is like the three GPs, the three founders fight for 15 minutes and not wrestle a bit. And Ewell is very, very tall. So he usually just always wins. And then we decide if we're going to invest or not. So that's like our whole impact assessment process. And we just try to not burden the founders too much. And I think that we do burden the founders a lot about the previous discussion we have, which is why are they building the company? so we find a founder who is like using the opportunity of climate, but doesn't give a shit. We, that's something that we want to know very early on because we're going to work with these people for 10 years. And anybody who's tried knows that it's easier to get a divorce than separating from your investors or founders. So like, it's something that we find very important, but on your end, how do you view like early stage when it's very hard to do measurements versus later stage? And how do we balance that? Which is also like Wim's question.
- Speaker #1
I would even take it a step further, given that we invest so early stage, many of our highly impactful companies won't have any impact while we are having them in our portfolio, especially hardware and deep tech investments. Very likely they will have zero impact while we are still invested. So what I actually really like, and I'm very curious to hear Morgan's version, but I think we are very well aligned because we use the same framework. If we look at project A, at project frames. we are assessing potential impact. So we are looking at it from the technology perspective and not from the actual business model perspective. So if we do impact assessments, we are always looking what overarching impact can this technology and the problem that they are tackling achieve over the next couple of years and not necessarily how much is already embedded in their commercial forecast.
- Speaker #2
Happy to chime in there. Since I was tagged in, I completely agree. I think there's an impact pipeline that we have to be moving portfolios along as they grow and as they move from stage to stage. So we assess climate performance potential, which is a potential impact measurement. And so for Seed Series A, where it's very early, we're focused on the technology solution, not that specific company. We're trying to say, is this investable from an impact perspective? if this technology gets to scale, which we believe it will, if we're considering an investment, what would that look like? Then once the company is in B or C area, we're looking at planned impact once they have more robust manufacturing, sales plans, business models that are kind of annual or month by month. That's where we're looking and saying, OK, how are you scaling? What is your specific impact looking like over the next five to 10 years? And then once companies are going into the market, that's where we shift into measuring realized impact, which we think is really important. similar to, you know, VCs are investing often before companies have real revenue and sales numbers. They're not profitable yet. So you have to have those financial forecasts. And once they actually are making sales, you have to be looking at that real-time data that's backward-looking instead of forward-looking. And we think it's the same with impact. You should be looking backward once... units are in operation in the market to see what's actually been achieved and how do you scale that up? How do you optimize? How do you improve that?
- Speaker #0
So the answer is also Wim's question, which is like if a company does like the quote unquote Tesla strategy, if they're first taking a very high margin beachhead market cosmetics or something, and they can see that they can scale that into larger pharmaceuticals and they can shame it into all petrochemicals, that is completely fine because like we would probably all look at it as in potential impact would be all petrochemicals. And it's great. You're taking a high margin product at first that has like good traction. So let's go there. And we will not look at the company and say. why are you doing cosmetics? Like when you could be targeting something more important.
- Speaker #2
But we would want them to have very clear plans on how they're going to progress from space to space and how their technology would make that transition just to make sure that there's a real roadmap there. And it's not just, you know, a hopeful.
- Speaker #0
Not exactly. It's easy to just say like, yeah, sure. It's, it's similar. And that market is actually 4,000 gigatons. And it's like, well, that's another problem actually. But yeah. Maybe just to jump in here,
- Speaker #3
because I think in the most recent investments that we've made, having that discussion about them measuring their impact is usually a really well-received conversation with our portfolio companies. So usually it's actually a value add that we can bring as an investor that we're actually able to help them articulate what impact they will actually be having and also measure that over time. Obviously, if they're super early on their journey, as Elena was saying, some of them will not even reach any impact because there'll still be an R&D stage by the time we exit. And at that stage, we will probably be looking at milestones-based kinds of targets instead, because that's basically what they have. So we base it off of the information that they have. But in cases where we actually believe that we're able to help them develop a methodology around how can you calculate kind of CO2 savings, even if it's super early, even if it's difficult to know what is your kind of attribution here. we usually find that it's actually a really valuable exercise and a value add that we can bring. So we haven't actually had cases, maybe obviously there were some, but most, most cases, it's actually usually quite well received for them to receive that help.
- Speaker #2
Yeah, I've built impact models for companies working with them and their data and then given those models to them, which then are very helpful as they go on to raise future rounds. And, you know, they then can take ownership and we can update them annually. So I've seen it be really useful for companies and so that it's not just storytelling, there's also data backing it up.
- Speaker #0
I think on that, I think that, like, do you feel like a strong impact mandate attracts certain good founders? Or do you think that it also, and also do you think that it repels certain good founders? And I think this actually ties a bit to the geography question, I would say. Like, for me, at least, I find that this is a very, very cultural question. Like, in certain geographies, when you're saying, like, you know, it's a climate fund, people are very, very positive to it. And I think that in certain geographies, people are just like, oh, okay. I get it. Like we have to do this and that. And like the deck we get are like tons of like burning forests. And we're just like, what do you do? And we just scroll and scroll and scroll. And the crisis is here. And we're like, can you please get to the point where you're doing? But so like we see it sometimes like it almost attracts like a clean tech movement of like big installations and hardware. And sometimes it feels like it repairs certain founders that don't really identify with the climate movement as much, but they still want to work on big problems. Back to Agnes point about big problems. so like what's your view it's like does it attract founders does it propel founders how do we handle that that conversation anybody want to go i think just you seem like okay go ahead use now like good
- Speaker #1
I think it's very important to differ between impact and ESG very strongly because I feel like the impact angle is very well received across all founders. So whether they have high impact intentionality or not, I feel like this whole impact measurement part as Agnes and Morgan were saying, it's perceived as value additive. While this whole ESG conversation around maybe being SFDR Article 9 regulated is a whole different conversation that might be. not as well perceived and that we as investors might also see critical. So I think on impact, I think we attract very high intentional founders and I think it's not repelling at all. Rather the opposite way around, we see that companies who might not have the big impact angle are actively reaching out to us in order to get us on board and help them with the impact angle. But the whole ESG topic is a little bit more difficult to approach because since it's a regulation applicable to various asset classes, it might not be the most fitting to early stage VCs, which we understand, which founders understand. So this could be a little bit harder to navigate. But I think especially also looking at the round, if we are co-invested, we try to make it as smooth and well integrated as possible. So I do believe that, especially because there's so much collaboration going on between impact funds and between impact investors, the the burden of sfdr and esg isn't as big as it might seem if you are not familiar with it um so impact grade esg so and so any any opinion strong opinions against or for that uh
- Speaker #4
i would fully agree with esg side um and sfdr not really appropriate for the stages i think in our experience um of course for a lot of good founders it's really attractive and they love the support and the ongoing um sort of living document that we were providing them and um others it's not repellent but it's not exciting as much and i think no one of us probably and um at least definitely speaking for us tries to just offer impact as our only sort of value add we have other things right we have um maybe also from our software foundings where it's you know an enabling technology and the life cycle assessment isn't really uh it's using proxy data and it's not necessarily as like going as deep um then of course we offer a buffet of things right like impact is one of them and then we also have the platform team and um the you know network and gps having been in there and done it themselves and there to support and all of the very lovely things that we see is like to like to add and i think that to fully rely on our images being impact wouldn't be what any of us would be trying to like sell or do So yeah, just to say in our experience, it's not always like super exciting to founders and also investing like series A plus or not plus, but we invest up to series A. And at this stage, they're also sort of like, well, I can afford to pay for an impact assessment if that's what I really want. So you've got to bring me something else such as, you know, introduction to markets or whatever.
- Speaker #0
Yeah, exactly. Yeah. Yeah. I mean, because Pelvedot, we are very, very often the first ticket in. I think for a lot of times, like we have, we have a slight headache when other funds ask us, can you just share your impact assessment? And I shared like the video of our mud wrestling, the three of us, like, you know, that's not going to help other funds a lot. So I think it's like, because that's not necessarily what we do. I think it's, we're super happy. Like we've, again, we've done a couple of conversations with you here. And I think it's, it's, it's really good that we're like, yeah, yeah. You know. ask us or ask Elena here, like, you know, the ones we've done. It's way easier. And there's a question about geography where we invest. I think I'm going to tackle that before the next one. Pebble Dot, we do Europe. We also do US. We've done 20% in the US roughly. And this also aligns to Kieran's question. I'm going to use to answer geographies, but Kieran's question is saying there's a huge opportunity to invest in America. And why is there not more impact investors there? And I think the answer for me, and you can answer that if you want as well, is that. is set up to do Europe and US. So we can't invest in other geographies. And the reason is anything from AML, KYC, just like currency risks. So we have selected those geographies and we've aligned that with our investors. So we're not against any other geography. It's more, we just try to limit those in a way that we can actually run the fund. But if you want to go around the table and answer what geographies you're investing in, it's going to solve some of the listeners'question. Do you want to go, Jess, from like Jess, Elena, Agnes, Morgan, in order?
- Speaker #4
Yeah, we are just Europe including Israel. Cool.
- Speaker #1
We are also focusing on Europe.
- Speaker #3
Am I next? We also do Europe. We can also do US.
- Speaker #2
When we focus on Europe, there's regulatory reasons for that as well. As just knowledge-based ones, we want to invest where we're knowledgeable and where we have networks and where we know founders. Yes. And so I think the difficulty is investors who are really smart in one geography may not be the right investors for other geographies if they're just not part of those communities and not knowledgeable.
- Speaker #0
Yeah. And I'm going to pick one more question here from the audience, which I think is also about the lifetime of these measurements. So there's a question from Francois, who's asking question as a clean tech incubator, should they prepare startups for setting up? Like what impacts there are? And then a question from Sarah, who's asking a question about the exit strategy. And like, what is the extra strategy that align with the impact KPI? So like, if we look at the lifetime of the KPI. And I can just quickly answer for Pilpidot is like, we don't need those, like, we don't need people to kind of prepare. I think for us, it is really about the founders. I think if the first time anybody has a conversation with a founder about diversity inclusion, we're going to be pretty repelled. So I think that we want founders to be like, you know, modern people. But otherwise, like, we're fine with having a conversation about the impact for the first time. And I think for us, we can have seen a lot of our startups as they grow is that we completely lose control of being able to set standards for how they want to measure. and we're essentially hoping to have the founders, because again, we invest in founders. We hope that the founders are going to be stewards for those metrics, but honestly, we have no governance after two or three or four rounds. So even if we wanted certain things, we wouldn't be able to demand them in any shape or form. So I don't know what you think around the table, both on what should Accelerator set up, and then how do you do it through exit, if you want to go. Anybody ready? Like, Agnes? No, go, Morgan, go.
- Speaker #2
Quick answer. One, I would say check out Project Frame. We have a methodology that we've put out. We're also in the process of, we're soon going to be releasing what we're calling a one-on-one course, which is going to be free and aiming to like really teach people kind of the basics of climate impact measurement for forward-looking assessments from the ground up. So I think that would be really helpful. I have found it helpful where founders have taken the time to be thoughtful on these issues or these topics, makes it much easier for us to work with them and do the diligence we need much faster. So if founders want diligence to go quicker, they should familiarize themselves with these methodologies and be thoughtful about it. Not only do they have to build robust impact models from the beginning, but I think being thoughtful and conversant in it is very helpful. and then in terms of exit, I mean, we measure a lot of KPIs. It's hard for us to influence companies post-exit, but a lot of our KPIs, again, are built into the very DNA of the company, and so if the company is doing well, even past exit, then those KPIs are going to be, you know, that emissions impact is going to be felt just because that's core to who these companies are.
- Speaker #1
Maybe adding to that, like in every pitch deck, a data-backed problem statement is always well received. So from the commercial perspective, but also from the impact perspective. So I think we wouldn't necessarily need like specific impact calculations, but identifying the impact problem that you're trying to solve and putting like some quantifiable measure to it. I think. goes a long way from a commercial perspective, of course, but of course, also from an impact perspective. And in terms of exit, I would double down on what you two already said. It's really hard to influence, especially as early stage investors, and our shares will decrease in percentages over time. But I think what we try to do, and if I look at our portfolio, I think we are quite proud of that, since we are so impact focused. even though our ownership state might be low, founders still approach us for these topics. So we rather see us as an on-demand sparing partner and a partner in this impact journey together to then help prep exits or whatever considerations rather than setting expectations from the very early beginning, but rather scaling all of these measurement thoughts as the company grows and being a true partner in this.
- Speaker #0
Yeah, Agnes, go.
- Speaker #3
Yeah, I mean, I'm not sure I have all that much more to add, but it's, I think if we find ourselves in conversation with someone who's definitely thought about both the kind of impact in ESG topics, I mean, it puts them in good light. It doesn't mean that it's a requirement from us that they need to have perfect answers to that. But we definitely see that if we can help equip our portfolio companies to have those conversations with other funders. when they go out to do their next rounds, we do think that that is going to be really value adding. So that's why we help to equip our companies to have those conversations, to have at least minimum answers to, to every, to, to the most important things for their industry, for their sector. So if the question was whether accelerator programs should focus on preparing companies for this, I mean, we see a lot of capital flowing into article eight and article nine funds, article nine funds, we'll be asking these questions and article eight funds. certain social environmental characteristics that they will ask about so being prepared to answer those questions in my mind can never be a bad thing it's it's usually going to be a good thing at least to be mindful of what questions might come up um and i mean our process is like we don't need to have perfect answers to when we send out a sustained you now it's not we don't have cut off points to say they need to have you know fulfill 70 percent like we don't we don't have that it's just a baseline and then we work with them from there uh but obviously it's great if we can see that more boxes are being ticked so that that helps obviously in conversation so um i think it's just always strategic to have to to think about these topics if you can
- Speaker #0
Yeah, and I think going to Brendan's question that's been longer for a bit, I'm going to pick that up now. Brendan has asked a question, if we can say what information we expect the startup to communicate at pitch and during DD. I can quickly say it's like, tell me if you view different here, but for us, it's super important that you have the problem statement. And like you're like, you can describe that as like a how much impact or whatever. But if a startup just tells us how to solve a problem and we don't understand what problem it is you're solving, it's really, really complicated. So I think that one thing I love is super short saying what the company does, like whatever, optimize and desalinate, come up with a topic or last minute, come up with whatever you want. And then I think second, I think it's really good to say how it's solved today. Because that also really clears the delta of like the potential of both impact, but also how extremely dumb the market is today. It really helps investors just understand, oh, is that how it's done? And then... I think for me, at least, it's really, really important to have the team. I think that for me, that kind of are the most important stuff. After that, there are a lot of questions. And I think that, like, as you also said a bit, Agnes, I think that nothing needs to be perfect because at the end of the day, what happens next is we're going to have a conversation and then we can always fill in the blanks. I would much rather have four or five slides that have at least these three things than I would have a deck of 90 slides that describe every single trinket and zoomed in and different things. And then during DD, of course, there's going to be a lot of different questions. But I would say. if you're not answering who you are and you're not answering what problem you're solving and you're not answering how it's solved today, it becomes really complicated, at least for us to look at you. Does anybody want to add anything to those three bullets for Brendan?
- Speaker #1
No, definitely seconding that. And I think the conversation part is really important. At least if we look at your diligence, most of the time we will do some sort of impact conversation, impact workshop, because necessarily not all questions are already answered. And it's truly coming back to the whole topic of intentionality. We want to see open-mindedness. We want to see some sort of scientific evidence or at least some measurement willingness and curiosity around this whole topic. And then I think if you have a well phrased problem statement, which is backed with some data, then I think you are really good to go from the impact side.
- Speaker #2
I would also just add, if you have numbers framing the problem or why you're different or the solution you're providing. cite where those numbers are coming from. Like have your sources, don't just have numbers on a page. Because I've seen this repeatedly where companies say like, this is the size of the problem. This is how we're solving it. This is why our solution is best. But then we can't just take your word for it and we can have follow-up conversations and whatnot, but it gives you more credibility. If from the beginning there's external verification and we can see, and we can check into that really easily. that makes it much more likely that more conversations will happen.
- Speaker #0
I think that one thing about it, I think it's just also for the founders out there that are thinking about sending anything to anybody here. It's just like, do not get stuck in information paralysis and think about like, is it 8.2 or 8.3? It's more like send it. We had a horrible conversation with one of our founders who was really stressed because we had asked the question and they couldn't figure out how much plastic they use per year. And this is a machine learning startup that does like. design GMO. So they design new crops. And we were really trying to tell the founders that the amount of plastic cups that your pipetteering machine uses is probably lower than a hundred grams per year. And he was like, yes, definitely lower. And I was like, then I think you should just, you know, ignore that question because like now, like this is not going to help you whatsoever. If you sit there and like, it was at 50 or 60, like microscopic plastic cup to use. And I think that's a classical problem. I think for a lot of founders, if they're sending something to a fund that. market and communicate themselves as ESG or impact or climate, they're really worried that they're going to be grilled about real details and all the sources and all the papers. And I think at the end of the day, all the people around the table here want the startups to kind of build big companies. and then we want them to be impactful. But if they're not building big companies, they're not going to impact whatsoever. So don't get stuck on the details to people who are listening. But I want to ask a question about attribution now. This is a conversation we had at Heliodot quite a lot. So what player in the value chain should be, quote unquote, awarded the impact? So let's say, for example, this is the vehicle or it's the delivery company. If Lufthansa or Delta Airlines, they shift to electrical airplanes, who changed the world? Was it the airplane company changed the world? Was it the engine company? Should we divide it by money spent, research? Like, you know, who gets the attribution for the impact in the chain? And here's something I would love, like, everybody to chip in their view on it. And I think PebbleDot's view is, this is one of the reasons we almost stopped measuring. So, like, we are taking, again, we're taking that very lightly.
- Speaker #4
but you people who have a framework what's your view on this yeah happy to kick us off on this one uh i definitely agree that there's some issues i think with attribution it's a tricky subject right because um yeah your example with the planes but also we see it in a lot of things right where there's like um a solar producer, a solar installer, a solar optimizer, and then someone selling the solar energy, and everyone claims that they have 100% of the impact from that solar panel. And then all the funds who gave them a bit of money claim that they also have the impact of that solar panel. And it can be a bit out of hand. So we're very, very conservative on this, actually. And we look at it as horizontal attribution and vertical attribution. So for horizontal attribution, it's more about identifying which technology is actually pivotal there, what's actually making the difference. So, for example, one of our portfolio companies, GA Drilling, provides supercritical drills. Of course, you still need the oil rigs, you still need the off-takers, and you still need the grid infrastructure. But seeing as it's very hard to calculate all of the greenhouse gas emissions from each of those parts, and they're already actually there, whereas we can see that GA Drilling... their drills enable us to get geothermal energy from 90% of the earth's surface, whereas before it was only 40 or so. So then the bulk of emissions can actually be attributed to them. Whereas for vertical attribution, so that's more about... who are behind geo-drilling, for example, is responsible for that. And I know that there's different ways to look at it. So you're taking on a lot of risk early stage, so you're sort of enabling and you can be very supportive to them so you can maybe speed up their scale. And then also, as you said, sometimes the investments that we make don't actually have an impact until they exit. And so then should we calculate that the impact they have after we exit was due to us getting them there? So... but we just sort of took ourselves out of this and very cautious around it because it is yeah it's so hard to say who really uh who really created that so instead we just say that we contribute and support uh but we do not ever attribute that impact to ourselves uh that's the way that we're dealing with it yeah you
- Speaker #2
Okay. I very much agree. I think funds need to be incredibly careful in the language they use. I think using language like we enable this impact is fine because the dollars and the engagement in the work with the portfolio companies are enabling that. I do not think funds should ever be attributing the impact of their portfolio companies to themselves. I mean, there's a reason why funds can't use the impact of their portfolio companies to offset their own emissions. I think that is really clear. In terms of the horizontal attribution or the value chain attribution along different parts of a solution, the example I'd like to use is when you're looking at an EV, I think investing in the battery, it's really clear that that goes directly to the heart and is really pivotal to an EV and how it works and it operating. I think investing in windshield wipers, while important to a car operating, is not pivotal to an EV. So you want to make sure our investments are going into the battery and not the windshield wiper, even though that is an intrinsic part of it.
- Speaker #0
I find it really complicated though sometimes we can feel like and I mean we invested in like an airplane company like we feel like that's great that would never happen without those but the headache is it would never happen unless an airline company buys the the airplanes uh so like it's really uh it's really tricky um and I think that like sorry Agnes do you want to go for attribution as well sorry I already nodded um
- Speaker #3
I mean, I don't, not much more to add in general, but I mean, obviously a huge risk of double counting that everyone's kind of mentioned. This is where the theory of change exercise is so important, pinning down exactly what is the theory of change for this company. If we're not able to really find that there is an outcome related metric that makes sense for this company, because maybe they're not directly. driving it, but more enabling it, then we're going to settle for more output level metrics. So like number of units sold or number of customers or whatever it might be, simply because that's still a good enough measure for us that they are gaining traction, commercial traction. And because impact equals returns, then that's a good enough kind of impact metric for us. Ideally, of course, we'd love to help them kind of develop the methodology to also then look at CO2. But we really try not to aggregate impact for this very reason that it can just be so incredibly misleading. We basically look at what has the company delivered. We publish that, but we don't necessarily say what our role was in it, but it's just a company that we invested in. and what they managed to do. So, but this, I think we will be learning more about in general, what the best way to do this is. It's a challenging one.
- Speaker #0
Yeah, I think what we ended up doing at Pebble. It's like, we try to find a metric, which is aligned to revenue very tightly. Like if you take like, for example, month that we're invested, where the metric is how many charge points are under control or how many kilowatt hours have you charged? And I think that... That's it. But the headache is if you actually drill down to that, you would ask yourself, yeah, but were those kilowatt hours, did they come from a green or black grid? And like, you know, was the person choosing the rebate today when they could have chosen their blah, blah, blah. And I think we're just saying. you know, to the team at Mont that we're saying that metric, you know, anyway, like you will know this metric because that's how you charge your customers. Can you please tell us that metric? But I think that of course there are certain companies, especially deep tech companies then when they don't have a metric, right? So like it becomes really complicated and we're at the hour now. So like, I just figure out if there is any parking words, do you feel like you have a recommendation for the budding climate entrepreneur out there who's sitting, listening and thinking? how much should I, you know, what should I do if I ping any of these people who are on the table here? What should I send them? Do you have a, if you would get a deck today from a founder, what's the area or what's the thing you want to see in it? Do you have a thing you wish you got this afternoon from all the people listening? Do you want to, anybody want to start with an area they love they could see more on? Otherwise I can just start. I think that I can start at an area that I've been looking for a long time and I'm really frustrated and can't see, is I think that the grids, and especially due to a lot of attack records now with, for example, charge points, all the stuff that we put out, thanks to climate, I think the grid is becoming extremely insecure. So I think that for me is like, I wish we saw more overlap between cybersecurity, geopolitical issues and climate, because I think that's, I think, an area where I think... A lot of people who are in climate are not that interested in cybersecurity, and a lot of people who are into climate maybe are not into that, into geopolitics. And I think these three things, I think, are extremely vital right now, both with the world situation, but also I think it's just like enormous opportunity to make sure that our whole world is more resilient. So maybe that's the area where I wish I got more entrepreneurs looking into different kinds of resilience, not only carbon, but like, you know, how to make sure the world is stable. Anyone in an area they'd like that they would see more of.
- Speaker #1
I do. This is putting my energy. my former lifetime as an engineer in the oil industry, I would say I think people underestimate how much every facet of our lives rely on petrochemicals. And so I would say looking into petrochemical alternatives, specifically my technology area in the past was lubricants, which are needed for all wind turbines, all engines with moving parts, and they are heavily much petrochemical products. We don't really have good alternatives that aren't petrochemical.
- Speaker #2
And
- Speaker #1
byproducts. So I would say looking into that space, because I think that's a big area where there's not as much activity as there could be.
- Speaker #0
Interesting. That's a good point. Anyone else?
- Speaker #2
It's not a very hot take, but baseload potential for energy. I know it's Yeah, we've still not cracked it though, so I think it has potential for phenomenal impact and would be my hot topic.
- Speaker #0
It is honestly a fairly hot take because I think right now there's no conversation which is as hot in Europe right now as nuclear or not nuclear or when will fusion happen and how much wind power can we put in and what do you happen like we do an intermittent grid. I think that the If anybody's keen to do a roundtable on can VC invest in nuclear, it's one I would love to have at the drop. I've had that conversation last month with a lot of people and nobody wants to pick the topic for a roundtable. Everybody's like, I'm not sure I want to do that one. Ellen and Agnes, do you have an area you wish you could find today?
- Speaker #3
I think energy transition and grid and everything related, of course, is always very interesting for us as well as carbon removal. But maybe to add an angle that we haven't heard before, we are very interested also in re-and upskilling for climate jobs because we see a big shortage in blue-collar workers. And we can have all these great initiatives in terms of renewable energy, but we need actually people installing it. So it's a topic that we are very curious to. to learn more about and see more deals.
- Speaker #4
And from our perspective, just seconding all the different opportunities I've mentioned here, we're looking a lot into the energy space in general. So energy storage, the grid stabilization, all of that. So I think you'll have to basically have a deep dive conversation with our investment team to know what are the hottest topics that they're looking into right now. But top of mind, that's what comes to me anyway. So that's also where we've done quite a few investments lately and think that we can bring a lot of value as investor.
- Speaker #0
and for like we're wrapping up here but also like for you listening to all these things if you're not now working in energy transition or base load or grid or anything most of us index on amazing people so if you happen to be an expert in something else don't avoid us like please ping us we're mostly after super ambitious people tackling as agnes started out in the beginning tackling the big problems so thank you very much for coming today and thanks to jess elena agnes and morgan for joining me here thank you very much
- Speaker #4
Thank you so much.
- Speaker #2
Thanks everyone.
