Why we’re excited to be part of the Venture Climate Alliance

Getting to net zero is a team sport

We’re thrilled to announce that Innovation Endeavors came together with 20+ leading funds to create the Venture Climate Alliance under GFANZ earlier this year, and we want to take a moment to share our personal view on why this work matters.

We believe that the financial sector can — and must — drive positive change in the world.

Or, put another way, we believe that by investing in the future we want to build, we can help make that future a reality. Every company in the world is accountable to its shareholders, and as we decarbonize the entirety of our economy, every company will need to become a climate company. Where business leaders’ responsibilities to shareholders align with responsibilities to the planet, good things will happen. In contrast, where responsibilities to shareholders are in tension with responsibilities to the planet, the planet tends to lose — and we only have one habitable planet (so far)!

Shareholder support has been a large driver of net-zero commitments across public markets; we need this to be true for private companies and for the public companies of tomorrow. As venture capitalists — whether explicitly climate-focused or not — our job is to back brilliant founders building the future giants of our economy. It is our responsibility and privilege to support these founders as they build and scale in a planet-positive way.

Venture is a unique animal. We need standards that fit the reality of building and scaling transformative companies.

Uniform standards are the best way to drive transparency and accountability. SBTi has been an incredible example how unified standards can drive ambition and accountability in the climate fight: Companies representing $38T in market cap have committed to reducing 53 million tons of CO2-eq. However, there simply has been no uniform framework or guidance on what net-zero alignment should look like in VC and no external framework that makes sense for venture capitalists to adopt. This is because our corner of the financial sector is unique in a couple of ways:

• First, most startups fail → “Power law” returns dictate that only those companies who scale matter, both financially and in terms of climate impact. And early teams often have little to no capacity to spare for accounting and reporting.
• Second, the bulk of startups’ impact often sits outside of their own individual footprint → Consider the classic example of Tesla; the majority of its impact sits not in its own scope 1–3 emissions but rather in pushing the entire automotive industry towards electrification.

As a result, we need guidelines that:

• Minimize administrative overhead for early teams → If you’re a team of two trying to get an idea off the ground, with each person already doing four jobs, your long-term climate impact is much better served by hiring a great team and finding PMF than by publishing long climate reports.
• Prepare companies to build and scale technology responsibly → At the same time, by the time a company goes public; this company needs to be ready for SEC-mandated climate disclosures and, more generally, have a clear plan to continue to grow in a net-zero aligned world. We believe that, for a new generation of net-zero-native companies, this work needs to be integrated with a company’s core business early on.
• Consider the bigger picture → Many companies that touch the physical economy drive massive climate impact beyond their own footprint, often referred to as “scope 4 emissions.” For example, consider our portfolio company Plotlogic, which uses hyperspectral imaging to characterize ores in mines. Plotlogic has the potential to drive massive climate impact — to the tune of millions of tons of CO2-eq — by 1) reducing operational emissions and waste from mining today and 2) increasing the supply of critical minerals that fuel the energy transition with fewer externalities. None of this would be captured if Plotlogic only reported on its own footprint.

We believe that net-zero alignment is best done as a team.

While many of us have been thinking about and developing our own frameworks for measuring climate impact and progress towards net zero, we believe a uniform framework that provides guidance for the industry will be more powerful than anything that individual members might create in a vacuum.

As we’ve written previously, we believe tackling climate change means re-imagining our relationship with the physical world that sustains us and all life: how we feed a growing population, how we power the world with clean energy, how we travel, how we build our homes and machines, how we protect and manage natural resources, and so much more.

Doing these things in a zero-carbon way requires a new cohort of generational companies, and we’ve been backing companies like this — under our thesis — for more than a decade. But we know this work is bigger than us or any one company or venture firm. We’re excited to do our part to push the industry forward.