Many promises were made by both public and private actors during last year’s United Nations Climate Change Conference (COP26), but significantly more work needs to be done to deliver them, according to Laurent Guengant, vice-president of strategy and operation for industrial and electronics conglomerate Hitachi, in a keynote speech during the second day of Global Corporate Venturing’s 11th Symposium.
Countries such as the US, Germany, Canada and others have made multibillion-dollar commitments to bring down emissions, while companies – including Hitachi – also made pledges to carbon neutrality.
Not all sectors were all in, however. Automotive manufacturers, for example, did not end up agreeing to end car emissions by 2040.
Venture capital investments in sustainable and climate technologies over the past decade have exploded, not just in terms of deal count but also in deal size, with CVCs accounting for 50% of investments.
Despite this growth, a sizeable gap remains between what has been done and what still needs doing. An urgent takeaway from COP26 was that things need to get done faster, even though some may believe that we should let market forces play out on their own timescales. Guengant cited the United Nations Environmental Programme’s Adaptation Gap 2021 report, which states that we need a significant step-change in investment to reach our objectives.
Barriers to implementation are still important to keep an eye on. In the automotive industry, for example, the fact that electric vehicles tend to be heavier, more expensive and require fewer engineers to manufacture all act as dampeners to growth.
Private sector actors take up the majority of climate mitigation investments, such as low carbon transport, renewable energy, energy efficiency and waste reduction, while the public sector investors put capital behind climate adaptation investments such as building infrastructure that is resilient to climate change and natural disasters.
Guengant explained how large the market opportunity is in sustainable investment, some $12tn by 2030, and VC investors, governments and corporates are all important stakeholders.
CVCs play a crucial role in this ecosystem, as in addition to the investment itself, they can leverage the influence, brand, talents, capital and channels of their parent companies.
ESG principles are permeating corporate strategy, with CVCs being in lockstep or further ahead of them – this is what the next panel focused on.
Alex Smout, a principal at automotive manufacturer Jaguar Land Rover’s corporate venturing unit, InMotion Ventures, explained how carmakers have typically followed what regulators put to them, but there has been a shift where now there is an advantage to being an ESG leader and understanding the future of the market through that prism.
Cars, he said, are no longer isolated pieces of equipment, but part of a larger ecosystem that includes charging networks, batteries and a circular economy.
Developing an ESG focus is not an overnight process and should not be rushed, argued Gen Tsuchikawa, chief executive and chief investment officer of Sony Ventures Corporation, the corporate venturing arm of electronics manufacturer Sony. It should come as a result of conversations with the corporate to determine what you should be trying to do.
For Sony, pivoting to ESG was a multi-year process – the corporate got back into CVC in 2016, began its environmental and impact fund two years ago and then last year put ESG principles into all its investments.
Suzanna Chiu, head of Amadeus Ventures, the corporate venturing subsidiary of travel technology provider Amadeus, talked about how the pandemic allowed the company to pause and think of how to recover in a better way once traveller volume rose again.
For a sector like travel, particularly air travel that is notoriously difficult to decarbonise, initiatives such as sustainable aviation fuel, innovative ways of getting airports to reduce emissions – such as not having both engines on an aircraft powered on during taxiing – and how to best offset existing emissions.
Making the booking process transparent so that travellers are empowered to make conscious choices about their end-to-end travel emissions is an important avenue to explore, as is how to better work with offsetting partners.
Sustainability is no longer just about Earth-bound investors, either. James Bruegger, chief investment officer of Seraphim Space Fund, a multicorporate-backed vehicle for venture capital firm Seraphim Capital, explained how every investment the unit has made has been aligned with the United Nations’ Sustainable Development Goals (SDGs).
One of its portfolio companies, Astroscale, specialises in servicing satellites in orbit and removing space debris to safeguard vehicles and equipment that operate outside the atmosphere. Satellites and other space-faring gear can also make huge contributions to sustainability on the ground – another of Seraphim’s investments is in Iceye, which provides constant satellite imaging even when there is cloud cover.
One hurdle for young startups is in measuring and reporting on their ESG impact – which sometimes is put down the priority list. From an investor’s perspective, young portfolio companies not currently having clear metrics is not as important as having the values in place and the willingness to develop that capability.
The final sustainability panel at the symposium looked at how CVCs, part of whose function is to advance strategic objectives for the parents, help corporates achieve their green goals.
Rinat Yogev, a partner at GM Ventures, the venture capital unit of automotive manufacturer General Motors, said GM Ventures is fundamentally supporting General Motors’ “Three Zeroes” strategy – zero emissions, zero congestion and zero crashes.
To this end, it is looking to invest in a wide array of electrification, autonomous driving and connected products and services to help the parent achieve its emissions-related milestones over the next couple of decades.
Likewise, insurance provider Aviva, whose chief innovation officer Ben Luckett spoke on the panel, has sustainability as one of its four strategic pillars. Aviva Ventures, the company’s strategic venturing arm, helps the parent in gaining strategic insight, accelerating its sustainable strategy and educating on technology that will help it achieve its agenda.
With an emphasis on the strategic part of the CVC investment proposition, Aviva Ventures looks for insights, partnership opportunities and investments that the core business can benefit from down the line. These include mobility, alternate energy and a range of technologies that aim to prevent climate events from affecting potential customers.
MS&AD Ventures’ managing partner Jon Soberg described how each investment is evaluated based on how they perform on the SDGs. This may be difficult to assess early-stage companies but the question is still asked – how will investees help position their companies on these goals.
The panellists agreed on the importance of investing in technology that is accessible by everyone and goes beyond just climatetech, focusing also on financial inclusion and other broadly available societal benefits.
