Addressing the Climate Crisis Via Venture Capital
Michael Basch
During my recent trip to the Oklahoma panhandle, I directly witnessed climate change’s direct and existential impact on a region. Guymon, a city with a deep energy, agriculture, and livestock roots, is amidst a multi-year mega-drought. Ranchers I met are relocating in desperate search of rainier pastures. We drove past dried-out field after dried-out field and wondered how long this region could be sustained on the aquifers that currently quench the community’s human and agricultural thirst. From a farm in Guymon that housed 40,000 cows to Seaboard’s processing plant that 20,000 pigs churn through daily, astronomical amounts of corn for feed are needed. Corn requires a great deal of water, which without, given there has been hardly any rain for 2 years now, the sustainability of these projects is impossible.
As I approach the 40th year of my life, I find myself increasingly preoccupied with the urgency of the climate crisis and its impact on the world we leave for our children and grandchildren. The recurring theme weighs heavily on my mind. Before meeting my wife, Romi, I had a somewhat dystopian outlook toward having kids given the climate crisis. As I reflect on being a father of two, I attribute my mind shift to creating more humans who will fight for humanity, advocate for justice, and, hopefully, contribute positively to the change our planet desperately needs.
I spend time exploring where we can positively contribute as a household (beyond the basics of reducing single-use plastics, prioritizing energy consumption, and driving an electric vehicle), and I have been thinking about what we at Atento Capital can do to maximize our positive impact on the broader climate effort. We who devote much of our time working, investing, and mentoring start-ups and VCs must spend equal focus and efforts solving our generation’s existential challenges.
On March 1–3rd, Atento Capital co-hosted Third Sphere’s annual LP meeting in Tulsa, OK (once considered the world’s oil capital). In attendance were 13 founders, 40 VCs, and 24 LPs with energy, technology, and executive leadership backgrounds. This gathering of 77 leaders was held to bridge the gap between the rich history of the oil and gas industry and the new wave of energy innovation, all with the purpose of addressing the escalating climate crisis. Our role as venture capital leaders was highlighted through intimate meetings, discussions, and debates. A significant takeaway from these exceptional conversations was the abundance of opportunities available to collaborate and work towards a desired outcome through ventures to mitigate carbon emissions across the value chain. It is crucial to note that carbon emissions are projected to become the primary environmental cause of premature mortality worldwide by 2050, as stated in the Consequences of Inaction report. Therefore, the venture industry must find ways to address this directly. (Read the Consequences of Inaction by 2050).
During the Third Sphere Summit, my team and I experienced a surge in optimism thanks to the peer-driven climate education. Third Sphere, a fund that invests in innovative climate solutions, provided attendees with the opportunity to connect with a range of exciting companies, such as Wasted, which offers solutions for porta-potty management, Gradient, which produces electric heat pumps, and Brace, a company that uses Greece as a testing ground for unique climate solutions, backed by VC Spyros Poulios. Witnessing the dedication and effort of such talented individuals working to tackle our energy crisis across various fronts was truly inspiring and impressive.
The Climate Crisis is not a subsequent issue of the future; its boundless impact is present. My home state, California, has been stricken with droughts, floods, recent hail, and a looming energy crisis due to inadequate water (Climate Crisis in CA). Globally, the Syrian Civil War prompted a mass migration to Europe, arguably driven by a drought that soon led to famine. This triggered protests, which ensued in government violence (explained here). The crisis is expanding expeditiously from flooding across Pakistan and a rise in hurricanes repeatedly devastating the US gulf coast. Fiscally, the economic impacts are devastating to our societal progress. By 2050, up to $106 billion worth of coastal property is expected to be below sea level due to the U.S. coastline projection to rise 10 to 12 inches in the next 25 years. Factoring in potential changes in hurricane activity, the likely increase in average annual losses will grow by $7.3 billion, bringing the yearly price tag for hurricanes and other coastal storms to $35 billion(Climate Change Fiscal Impacts by 2050).
Ultimately, as the urgency of addressing the climate crisis increasingly roars, it is unacceptable nor necessary to sacrifice positive impact for returns, as the return profile of multiple climate funds has proven there is plenty of Alpha in investing in climate. Climate is vast, and there is no shortage of problems within it. So when we look at our next generation, what do we want to be able to tell them we were doing about it when it was still early enough in the process to do so? For my peers in generalist VC or angel investors thinking about incorporating an intentional climate lens towards your thesis, here are pathways in making the first steps in doing so:
- Learn the Current Science and Solutions Landscape: The world is moving on climate. Whether you are an associate, an angel, or a GP, this is the place to dive into the latest science on climate change and its impacts and evaluate new opportunities in mitigation, sequestration, adaptation, and resilience.
- Expand your Climate Venture Network: Join a community composed of climate scientists, investors, entrepreneurs, and experts. Discussions, debates, or roundtables can introduce a broad range of perspectives and strategies that will work to mitigate climate change. As your network expands, your knowledge and ideas will do the same.
- Construct a Climate Portfolio Thesis: Bring a nuanced climate lens to your new and existing investments. This lens will aid in constructing your climate investment thesis and access to continued learning covering emerging sectors and trends.
It may be too late to solve the water situation for the folks in the Panhandle of Oklahoma–though hopefully not. However, there is still time for other places, and why should the ablest of minds–founders and venture capitalists–exert their best efforts to be part of the solution, as humanity is the root cause of the problem?
