🌍 “ESG” is out. Energy pragmatism is in. #191

Happy Tuesday!

Hope you made it through April Fool’s. Our favorite prank so far? Just Stop Oil’s sponsorship deal with Gorilla Glue.

Last week, Larry Fink, CEO of Blackrock, released his annual letter to investors and signaled a new direction for finance’s climate ambitions. Instead of full throttle on decarbonization, he’s slowing the pace — talking up “energy pragmatism,” code for, we’re not done with fossil fuels yet.

In other news, the EU is shelving its landmark biodiversity and restoration law, while the Biden administration awarded billions to new climate tech projects to clean up heavy manufacturing industries, and also finalized the strongest emissions standards for heavy-duty vehicles yet.

In deals this week, a $400m carbon capture acquisition, $100m for utility-scale energy storage, and $36m for AI-driven protein design.

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Larry Fink’s pragmatic energy transition

As CEO of the world’s largest asset manager Blackrock, Larry Fink and his annual letters chart the course for investors, companies, and sometimes, their climate ambitions. His 2024 letter dropped last week, and it reveals a new direction for climate — instead of full pedal to the metal on decarbonization, he’s easing off the gas.

Fink, who previously wrote about how “climate risk is investment risk” in 2021, came out this year in favor of what he called “energy pragmatism”, aka energy transition and security under one joint banner.

“Energy pragmatism” is a new one, but in the climate conversation, it’s similar to the phrase “all of the above” — code for, we’re not done with oil and gas. At the same time, Fink also spotlights BlackRock’s investments in emerging climate technologies, like Blackrock and Temasek’s $150 million infusion in thermal battery maker Antora. He’s showing that investors aren’t ready to give up their fossil fuel investments (yet), but they still see climate tech on the path to profitability.

Finance push and pull(back)

Over the last four years, investment banks, asset managers, and corporates alike were racing to set lofty decarbonization goals. But now they’re realizing that putting in the hard miles is, well, hard:

Leaving money on the table. For financiers, carbon-intensive sectors and assets are big (and already profitable) businesses. “Ditching clients off track from 1.5C means losing major lines of revenue,” James Vaccaro from the Climate Safe Lending Network told Bloomberg last week.
Regulation is confusing – and at times contradicting. In the US, federal regulators implemented new SEC climate reporting requirements, while at the state level, there’s a rise in “anti-ESG” legislation. Earlier this month, a Texas school fund pulled out of a BlackRock contract because of a state law that prohibits investing with companies accused of boycotting fossil fuel companies.
It’s often an uphill battle. Making good on these ambitious goals involves getting out of ongoing projects and getting rid of existing clients in geographies that still rely on fossil fuels. Meanwhile, in the backdrop, US power demand is on the rise for the first time in nearly two decades, while demand is also growing in the Global South. Renewable capacity will only meet 35% of global power generation by 2025, per the IEA.

As a result, financial players have been backtracking on their commitments. In February, JPMorgan Asset Management, PIMCO, Invesco, and several others left Climate Action 100+, the biggest climate-focused investor network focused on reducing emissions. The US-based BlackRock transferred its participation in the initiative to its non-US entity, BlackRock International. The climate goal-certifying Science Based Targets initiative (SBTi) delisted more than 200 companies for failing to submit concrete net-zero plans, although four major banks, including HSBC, already left at the end of 2023.

What’s next?

It’s easy to wonder if this “both sides” approach lets fund managers the hook — if BlackRock isn't serious about decarbonization, why should others be?

But this outlook, with a priority for profitability, isn’t unique — climate tech solutions, more than anything, need to demonstrate real financial returns to appeal to most private funds and infrastructure funds. Investors in climate tech projects, especially First-of-a-Kind (FOAK) ones, are looking at a checklist: Is there reliable supply? Guaranteed offtake? Trusted partners? Investors are still building up confidence that projects can make good on their commitments in ten years.

As Fink lays out, the climate tech transition isn’t always “a hard split between oil & gas producers on one side and new clean power and climate tech firms on the other”. He highlighted BlackRock's investment in STRATOS, soon to be the world’s largest direct air capture facility, via a joint venture with 1PointFive, a subsidiary of Occidental that acquired Carbon Engineering. The generous view is that this is the next step in an important industry. The cynical view is that the CO2 captured appears likely to be used for enhanced oil recovery. O&G companies have the resources to invest — and what looks like the interest to do so. CERAweek last month showed off O&G’s budding foray into climate tech areas where their existing skillsets can shine, from geothermal to carbon capture to (blue) hydrogen.

Plus, zooming out of the US, net-zero is still a growing movement in European markets, as evidenced by Blackrock International staying in the Climate Action 100+. European regulations like CBAM and CSRD are still driving multinationals operating in Europe to follow much more stringent emissions standards. Even though the US may be slowing the pace for “energy pragmatism,” globally, momentum is still revving up.

Deals of the Week (3/25 - 3/31)

Late-Stage / Growth

⚡Lightshift Energy, an Arlington, VA-based utility-scale energy storage developer, raised $100m in PE Expansion funding from Greenbacker Capital Management.

📦 Watttron, a Freital, Germany-based sustainable packaging materials platform, raised $13m in Series B funding from Circular Innovation Fund, Cycle Capital, Demeter, and European Circular Bioeconomy Fund.

Early-Stage

🥩 Profluent, a Berkeley, CA-based AI-driven protein design platform, raised $35m in Series A funding from Spark Capital, Air Street Capital, and Insight Partners.

📦 900.care, a Paris, France-based refillable personal care products provider, raised $23m in Series A funding from Blue Oceans Partners, Founders Future, Lombard Odier, and White Star Capital.

⚡ EvolOH, a San Carlos, CA-based aEM hydrogen electrolyzers manufacturer, raised $20m in Series A funding from Engine Ventures, 3M New Ventures, and NextEra Energy Resources.

✈️ TCab Tech, a Shanghai, China-based urban air mobility technology developer company, raised $20m in Series A funding.

🚗 Ember, an Edinburgh, Scotland-based electric intercity mobility provider, raised $14m in Series A funding from 2150, AENU, Inven Capital, Pale Blue Dot, and SkyScanner.

⚡Oriole Networks, a London, England-based algorithm-optimizing platform that aims to reduce data-center energy demand, raised $10.7m in Seed funding, led by the UCL Technology Fund, Clean Growth Fund, XTX Ventures and Dorilton Ventures.

⚡ WASE, a Bristol, England-based waste-to-energy technology provider, raised $10.6m in Series A funding from Extantia Capital, ENGIE New Ventures, Elbow Beach Capital, Empirical Ventures, and others.

📦 Circular, a San Francisco, CA-based circular economy digital tools platform, raised $10m in Seed funding from Eclipse Ventures, Maniv Mobility, and Oxygea.

💨 Oka, a Park City, UT-based insurance provider for voluntary carbon markets, raised $10m led by Aquiline Capital Partners, Firstminute Capital, and Overview Capital.

🏠 Evari, a Peterborough, NH-based maker of heat pump compressors, raised $8m in Seed funding from Clean Energy Ventures and Farvatn Venture.

⚡Terragia Biofuel, a Hanover, NH-based maker of ethanol from waste biomass, raised $6m in Seed funding co-led from Engine Ventures and Energy Impact Partners.

🔋 LiNa Energy, a Lancaster, England-based solid-state sodium battery company, raised $4.3m in Seed funding from Jacob Wolff-Petersen.

🔋 ionobell, a San Jose, CA-based silicon-based batteries maker, raised $4m in Seed funding from Dynamo and Trucks Venture Capital.

🏠 Airthium, a Paris, France-based high-temperature heat pump developer, raised $3.2m in Seed funding from Daphni, EREN Groupe, and Polytechnique Ventures.

🥩 Innocent Meat, a Rostock, Germany-based cultured meat production company, raised $3.2m in Seed funding from Venture Capital Fonds MV.

🥩 Clean Food Group, a London, England-based sustainable oils and fats company, raised $3.2m in Seed funding from Clean Growth Fund.

🥩 Agteria, a Stolkhom, Sweden-based biotech additive focused on reducing livestock methane emissions, raised $1.5m, led by Norrsken Launcher.

⚡ Cotierra, a Zürich, Switzerland-based decentralized biochar producer, raised $1m in pre-Seed funding from Carbon Drawdown Initiative, Carbon Removal Partners, Climate Founders GmbH, Partners in Clime, and S2S Ventures.

⚡Ecolectro, an Ithaca, NY-based green hydrogen electrolysis startup, raised an undisclosed amount in Series A funding, led by Toyota Ventures.

Exits

Oilfield services giant SLB (fka Schlumberger) agreed to pay close to $400m to acquire 80% of Norwegian carbon capture company, Aker Carbon Capture.

New Funds

Satgana, a Luxembourg City, Luxembourg-based investment firm, held a $9m final close of their first fund that invests in early-stage climate tech companies.

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In the News

EU’s landmark restoration law has been shelved after eight member states withdrew their support. The laws, meant to protect biodiversity and reverse damage to wildlife on land and waterways, came under scrutiny by farmers’ protests. Meanwhile, France and Brazil announced a $1.1 bn green investment plan for the Amazon Rainforest ahead of COP30.

The Biden administration awarded $6bn to clean up heavy manufacturing industries that account for a quarter of the US emissions, in other major climate finance legislation news. The funding will be distributed to 33 projects, including big climate tech startup demonstrations like building plants for Sublime Systems’ and Brimstone’s decarbonized cement technologies.

Biden also finalized the strongest emissions standards for heavy-duty vehicles yet, covering everything from school buses to freight trucks for model years 2027-2032, with the potential to avoid 1 billion tons of emissions. In more US federal emissions standards news, the Interior Department’s Bureau of Land Management finalized methane emission requirements for oil and gas wells on federal land, mandating more O&G detection and mitigation of methane leaks.

The DOE Loan Program Office made a conditional commitment of $1.5bn to help recommission Michigan’s Palisades nuclear plant. The 800 MW plant could be restarted alongside a pair of small modular nuclear reactors, marking the first recommissioning of a nuclear plant in the US, following a similar trend in the EU and Japan.

Exxon secured exclusive rights to CO2 storage in Indonesia and Malaysia, amid a supermajor carbon capture acquisition spree and subsequent race for storage sites. These two countries are two of the only places in Asia where CO2 can be viably stored underground. Shell has also signed an agreement to scope sites in Malaysia with Petronas, and Chevron is studying a similar project in Indonesia pointing to a growing trend by the supermajors.

Vesta received the first federal permit to conduct CDR trials in US waters, as the tides shift for ocean CDR. The permit lets Vesta install crushed olivine along the coast of North Carolina, as other ocean CDR startups, Banyu and Captura, raised big rounds, and the UK’s Environment Agency released a encouraging new review of CDR plans.

The City of Berkeley voted to repeal its groundbreaking 2019 ban on natural gas in new homes after a legal challenge. This repeal could signal a pullback on other natural gas bans, as Berkeley’s law inspired more than a hundred other cities to adopt similar measures.

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Opportunities & Events

💡ClimateTech Innovation Challenge: Apply to the 2024 Venture for ClimateTech Global Innovation Challenge by April 3rd for a chance to win up to a $10,000 prize and receive tailored one-on-one feedback from experts for your equitable early-stage climate tech startup.

📅 Scope 3 Challenge Meetup: Register to join The Scope 3 Challenge: Finance, Sustainability, and Procurement Teams Unite meetup hosted by Canva on April 11th to hear from GHG accountants and discuss the future of scope 3 GHG accounting.

💡 World Nuclear Fuel Cycle: Register to join the 2024 World Nuclear Fuel Cycle conference in Kazakhstan from April 16-18th for an opportunity to learn from and network with leading industry professionals in the commercial nuclear energy sector.

📅 Female Founders & Funders Happy Hour: RSVP to join Sophie for conversations and libations with a few hundred women working in climate on April 24th during SF Climate Week.

💡 Venture Development Program: Apply to the Uptake Alliance’s Venture Development Program by April 26th for an opportunity to receive support for scaling your startup in the Grid, Transportation, Buildings, and Industry sectors.

💡 Green Incubator: Apply to the Bethesda Green’s Incubator program to join a community of sustainability-minded founders and workshops to support your early-growth stage startup focused on the Environment or Sustainable Food Cycles.