Our investment in Sylvera
Sam and Allister, who started Sylvera in early 2020, met each other a few months before in our Phoenix Court office, during the first climate-focused event we hosted. At the time, the carbon markets were a long-established but small cottage industry, and carbon offsets an opaque mechanism that many in the room, despite an interest in climate, were unfamiliar with.
A lot has changed in the past three years: the voluntary carbon markets have scaled past $2bn in annual traded volumes; world bankers like Mark Carney and politicians like John Kerry have championed them; most corporations and many consumers have purchased or at least heard of a carbon credit. But with scale and fame, scrutiny has also increased, and the market now stands at a critical crossroads between dysfunction and value.
No two carbon credits are created equal, and there are indeed too many instances of projects failing to deliver the carbon savings they promised to, or that are outright fraudulent. Verification of the project’s results is complicated by the fact that projects most often happen far away from credit buyers (usually in developing countries within the tropical rain belt), and by the fact that our gold standard measurement methodologies — such as allometric equations — have very high error rates (30–50%). The carbon markets’ traditional infrastructure players, such as certifier Verra, have been slow to react and too lenient on “subprime” carbon credits. As a result, the growth of the market is now in peril, with some players such as Nestle, withdrawing altogether.
Sam and Allister were pioneers in calling out these issues, and founded Sylvera on the belief that technology could provide a real time, thorough assessment of carbon projects. With a deep technical moat and an incredible team, they have since built the reference agency for carbon credit ratings. Corporate buyers can now purchase carbon credits with confidence, and access up to date information behind the individual project’s quality rating. Project developers and certification standards are taking note, and we believe that this is driving a new supply stream of high quality projects to the market.
But is the reputational damage too grave to fix? Will the issues that Sylvera set out to address kill the market before quality wins? Whilst abatement of carbon emissions should be the first step of any net zero strategy, the inescapable truth is that there is currently no credible global pathway to net zero without a huge quantity of carbon offsets (or as they are now more and more often called, climate contributions). This is why we believe that carbon markets deserve a second chance.
We’re not alone in this belief: Sylvera’s customer logo and revenue growth demonstrates buyers are committed to high quality projects. Investors across asset classes have designed enormous mandates for the climate transition, with climate contributions playing a big role. Recently, the Commodity Futures Trading Commission said it would make policing carbon offsets a priority. In this push towards high-integrity carbon markets, Sylvera is best positioned to lead.
Finally, Sylvera’s vision goes well beyond carbon credits, and makes it one of the most ambitious software investments we’ve made. As carbon is financialised, the cost of emissions and value of credits become a factor in every business and investment decision. Sylvera can thus provide a climate-informed view of any business or transaction.
With this series B financing, the team will further develop Sylvera’s platform to provide more data that helps organisations better benchmark, measure, invest in, and deliver real climate impact toward societal net zero. The fresh capital will also go towards growth in new markets, starting with the US.
We first invested in Sylvera from LocalGlobe, and we’re excited to double down in their Series B from our sister fund Latitude, as we continue to support Sam and Allister in driving climate-positive decisions through unique, reliable data.
