Major investors create climate alliance to speed net zero efforts

Some of the world’s biggest venture capital investors have created a new alliance aimed as support early stage investments in their net zero journeys.

The  Venture Climate Alliance (VCA) consists of 23 venture capital (VC) firms across the US and Europe, VCA mall of which have committed to supporting a rapid, global transition to net zero or negative carbon emissions by 2050 or sooner, and will take specific, near-term steps to achieve this goal, both within their respective firms and in their roles as investors and advisors to their portfolio companies.

In a statement the VCA said over the past few years, momentum across venture-backed climate tech innovation has been accelerated by entrepreneurial ambition, world-class innovation and more recently, increasing tailwinds driven by the U.S. Inflation Reduction Act, the EU Green Deal Industrial Plan, and other supportive policies. As one of the first institutional touchpoints between capital markets and early-stage innovation, venture capital investors have helped thousands of new companies from initial development to commercialization and scale. The VCA provides a forum through which member firms will develop best practices for collecting, interpreting and reporting carbon emissions, and climate impact data, as well as tools and guidance to help to overcome barriers associated with aligning early-stage investments with net zero goals.

The VCA’s founding members are Prelude Ventures, Capricorn Investment Group, DCVC, Energy Impact Partners, Galvanize Climate Solutions, S2G Ventures, Union Square Ventures, Tiger Global, World Fund and 2150; along with Obvious Ventures, Congruent Ventures, Volo Ventures, Clean Energy Ventures, Fifth Wall, Overture Ventures, Blackhorn Ventures, Spring Lane Capital, Azolla Ventures, Systemiq Capital, The Westly Group, Innovation Endeavors, and ReGen Ventures. It is supported by Great Circle Capital Advisors, a climate finance advisory firm.

“Our goal is to bridge the gap between what’s happening in public markets, where hundreds of companies have made bold forward-looking net zero commitments–and early stage innovation, which has the potential to decarbonize legacy industries through a combination of better products, more efficient processes, and lower costs,” said Alexandra Harbour, founder & chair of the VCA and a principal at Prelude Ventures.

In joining the VCA, member firms have committed to support the goal of achieving a global transition to net zero emissions. To start, venture firms pledge to inventory their direct Scope 1-3 carbon footprint and to reach net zero or negative emissions for their own firm’s operations by 2030 or sooner. Members will encourage and assist their portfolio companies in setting their own targets to achieve net zero alignment by 2050 or sooner and will report transparently on their progress over time using best practice methodologies and disclosure guidance to be developed over the coming year. These commitments will establish stage-dependent climate-aligned goals as a part of startups’ growth strategies, rather than as a late stage add-on to business-as-usual operations.

“We invest in climate tech companies that are transforming multi-billion dollar industries. As public markets, asset managers, and policymakers implement 2050 decarbonization goals, disclosure of climate-related risks, carbon emissions, and impact will matter for everyone– including those at the earliest stages of business building. As investors, it’s our role to prepare our teams for the realities of the markets that they’re operating in,” said Gabriel Kra, managing director at Prelude Ventures and founding member of the VCA.

“It’s critical that the venture capital industry support technologies that accelerate the climate transition,” added Samson Mesele, partner at Union Square Ventures and founding member of the VCA.

The VCA has been approved by the Race to Zero under the leadership of the UN Climate Change High-Level Champions and constitutes a new sector-specific alliance under the Glasgow Financial Alliance for Net Zero (GFANZ). The VCA said it will work alongside other sector-specific alliances within GFANZ to develop methodologies and tools appropriate for early-stage investments, and to share expertise on climate solutions across the broader financial sector.

“Net zero for thee but not for me is no longer a workable solution,” said Daniel Firger, co-founder and lead advisor of the VCA and managing director of Great Circle Capital Advisors. “If we’re serious about moving the entire world economy into alignment with a pathway to net zero emissions, we must consider the critical role that private markets play in that journey.”