Stripe’s first carbon negative emissions purchase #8

Happy Memorial Day Monday!

Thanks for making our newsletter part of your weekend, below is a picture of the pure joy of a dog in a bandana on a beach. Grateful you’re here with us relaxing and rebooting!

This week we dive deep into carbon offsets - first debriefing Stripe’s announcement of its 4 first emissions reductions projects and then spotlighting the CEO of Climate Neutral, the ever-thoughtful Austin Whitman.

Of course, we round things out with fresh deals (a surprising amount of African and ag fundraising this week!) and pop-ups including the launch of Third Derivative incubator from RMI.

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Stripe makes first carbon negative emissions purchase

Last year, Stripe announced its carbon negative emissions commitment to spend at least $1M per year on carbon sequestration technologies. This week, after evaluating 24 applications, Stripe announced its first purchases across 4 projects:

Climeworks (323 tons @ $774 / ton): captures and stores CO₂ via direct air capture by using renewable geothermal energy and waste heat to sequester carbon in rock formations with Carbfix
Project Vesta (3,333 tons @ $75 / ton): captures and stores CO₂ using an Enhanced Weathering technique and ocean waves to create (gorgeous green) Olivine beaches
CarbonCure (2,500 tons @ $100 / ton): stores CO₂ in mineral form (calcium carbonate) that can be up-recycled as concrete
Charm Industrial (416 tons @ $600/ ton): stores CO₂ as bio-oil which can be re-injected into rock formations that typically store crude oil

What does this mean?

Designates Stripe as one of the leading early adopters of the true net zero approach (undoing unavoidable CO₂ emissions via permanent removals). In 3 out of the 4 projects, Stripe is the first customer at commercial scale.
In addition to purchasing carbon offsets which fully offset Stripe’s GHG emissions, Stripe helps create a market for carbon removal by purchasing from early stage sequestration projects in an explicit effort to bring down the cost curve. The company has published its process and project database on Github to equip other potential purchases with better information, as well as partnered with CarbonPlan, an open source database of carbon removal projects.

Why does this matter?

In order to stay below the 2°C scenario, we must deploy carbon capture and sequestration technologies to suck up all the emissions we’ve already produced (in addition to mitigating current carbon emissions). However, permanent CO₂ removal solutions (~$200 / ton) have been considerably more expensive than carbon offsets (~$10 / ton) or nature-based temporary removals (~$40 / ton). The prime (and necessary) candidates for the permanent CO₂ removal pathway are high-margin and relatively low-emissions intensity companies ie. Stripe and other technology companies. (This positioning of tech cos is well described by BCG here.)
As discussed in last week’s issue, there are three key pillars which allow for CCS to scale: 1) mature carbon offset markets 2) carbon removal products pegged to an inelastic need and 3) more players purchasing and financing carbon sequestration projects. So far, Stripe’s announcement plays to #1 and #3 (hopefully inspiring follow on purchases), but #2 will rely on government regulation driving new demand.

What is likely to happen?

Stripe’s estimated $1M purchase commitment amounts to ~0.05% of it’s annual revenue. There’s still more than enough room for Stripe and its peers to boost their investments in carbon negative emissions projects. Microsoft is hot on Stripe’s heels with their carbon negative by 2030 announcement - who do you think will be next?
Similar to renewables, the “learning curve” of carbon removal technologies will no doubt accelerate as more negative emissions projects scale up and drive down prices as technology deploys. This creates a virtuous feedback loop; as the purchasers of carbon removal projects scale, the lower the cost/ ton, which incentivizes further adoption, and so on.
Yet, many questions still remain about Stripe and other early adopters’ ability to actually drive down the cost of carbon removal technologies (oof, $775 / ton) vs their overall carbon removal impact.

Deals of the Week (5/18-5/24)

💸 Aspiration, a Los Angeles-based socially- and environmentally-conscious fintech startup, raised $135m in Series C funding from Alpha Edison, UBS O’Connor, DNS Capital, Radicle Impact, Sutter Rock, and Social Impact Finance. A certified B Corp, the company focuses on conscious consumerism through services such as a debit card that offsets the carbon emissions of every mile driven. TechCrunch has more here.

🍎 Imperfect Foods, a San Francisco-based online food marketplace focused on reducing food waste, raised $72m in Series C funding from Insight Partners and Norwest Venture Partners. The funding will be used to expand delivery of “ugly” food which would have otherwise been thrown away. More here.

🧬 Checkerspot, a Berkeley, CA-based high-performance materials company that designs materials at a molecular level raised $32.9m from Breakout Ventures, Illumina, and KdT Ventures. The company optimizes microbes to biomanufacture sustainable polyurethanes and textiles coatings which improve the performance of consumer products.

🔋 Nanotech Energy, a Los Angeles-based supplier of graphene batteries, raised $27.5m in Series C funding. The company has produced non-flammable batteries with higher performance levels and is working on developing a battery for Daimler Mercedes hybrid and electric automobiles. More here.

🌾 Sound Agriculture, an Emeryville, CA-based developer of innovative plant-breeding solutions, raised $22m in Series C funding led by S2GVentures, Cultivian Sandbox, Fall Line Capital, Cavallo Ventures and Syngenta Ventures. The company’s first commercial product Source™ helps growers improve crop yields without requiring more fertilizer. More here.

🐜 NextProtein, a Paris-based insect protein producer, raised $11m in Series A funding from Blue Oceans Partners, Telos Impact, and RAISE Impact. The company produces insect-based animal feed and fertilizer which require less land and capital than the widely-used alternative, soy protein.

🌾 Apollo Agriculture, a Kenya-based creator of a mobile-based product suite for farmers, raised $6m in Series A funding from Anthemis, Leaps by Bayer, Accion Venture Lab, and Flourish Ventures. The platform provides Kenyan smallholder farmers with working capital, data analysis for higher crop yields, and options to purchase key inputs and equipment. TechCrunch has more here.

🍅 Tomato Jos, a Nigeria-based agro-processing venture focused on the local production of high-quality tomato paste for the African market, raised $4.2m in Series A funding from Goodwell Investments, Acumen Capital Partners and VestedWorld. Roughly 45% of Nigeria’s harvested tomatoes go to waste, requiring Africa’s second largest producer to import half of its tomatoes. More here.

🌾 MicroGen Biotech, an Ireland-based ag-tech developer focused on reducing heavy metals in food and increasing soil health, raised $3.8m in Series A funding from Fulcrum Global Capital and The Yield Lab Europe. More here.

❄️ InspiraFarms, a London-based developer of off-grid solar-powered food refrigeration, raised Series B funding from KawiSafi Ventures and Untapped, joining repeat investors Energy Access Ventures and PYMWYMIC (Put Your Money Where Your Meaning Is Community). The startup provides energy-efficient cold rooms to agribusinesses in Africa, helping to reduce energy costs and post-harvest waste. More here.

In the Spotlight: Climate Neutral

This past week we interviewed Austin Whitman, founding CEO of Climate Neutral, an independent non-profit organization working to accelerate the transition to a low-carbon world. The Climate Neutral Certified label is a clear symbol that a company has measured and offset its carbon footprint, and implemented plans to drive carbon emissions out of its supply chain. Our chat has been edited lightly for length and clarity, so check out our website for the full interview.

Alright, let’s take it from the top. How did Climate Neutral come up?

It started with two successful entrepreneurs who wanted to do more about climate change. The founders of Peak Design and BioLite each had a nagging feeling that despite baking positive climate impact into the core of their operations since inception, they could still be doing more about climate change. They were missing a playbook for how to take operationally achievable, yet environmentally meaningful action that they could then communicate to their customers.

I came into the conversation after basically being out of the carbon market for 10 years; I worked at a clean tech software company (FirstFuel Software) and prior to that was deep in the sustainable investing world (Cambridge Associates, Climate Change Capital). After riding the hype rollercoaster of the first wave of carbon offsets, it was intriguing to me that these entrepreneurs were now thinking about offsets as a mechanism for attacking the consumer market. I was excited to build something and, in the fall of 2018, decided to set up a nonprofit to help companies through their carbon offsetting journeys.

How do you get the flywheel of carbon offsets investment turning? What comes first?

I think the basic thing that has been left out of the equation is a simple, clear, and hopeful message that consumers can grab onto. This is increasingly important when 2/3rds of Americans think the government should be doing more about climate change, 3/4ths of Americans think climate change is a real problem, and yet 0 have a meaningful climate policy they benefit from.

We think there’s an opportunity to engage consumers in a clearer way and mobilize a significant chunk of the US economy to direct it towards companies and brands that are measuring and doing something about their carbon footprint. So, consumers come first in this equation.

Once the consumers want the label, what comes next?

We’ve benefited from early adopters who were willing to jump into this before anyone knew what Climate Neutral was. We now have 105 certified companies.

To get to the next level, we have to jump to the second step; the companies have to want it. Many companies want to do something about climate change abstractly but they don't have the resources to do it comprehensively. We come to them with a clear process of outlined steps, time expectations, and an approachable budget. We’ve built a piece of software designed to accurately and quickly get companies some basic fluency in carbon emissions and pin down their carbon footprint.

Tell us more about the criteria that Climate Neutral uses during assessment?

We take this seriously and actually have two advisory committees that guide our assessment standards. Even though the voluntary market is tiny in overall demand today, we want to be an arbiter of what should and shouldn’t be done with carbon credits in the future marketplace when this inevitably scales. Recognizing that the market today isn’t perfect, we’re working to improve quality through buying credits with the following 6 characteristics:

Additionality: the carbon reduction must not have happened in the absence of the carbon offset itself
Verifiability: the reduction can be observed and verified
Permanence: the carbon reduction must be forever (or meet the duration of the carbon offset commitment)
Real: basically, the offset was actually generated and retired
Leakage: the project did not lead to some other reaction which undoes the offset benefits
Do no harm: the project must not harm another party in course of being set-up (e.g. preserving forest but indigenous people are harmed)

Carbon offsets vary widely in price. What price are you paying? How does this compare to Stripe’s recent announcement?

We target $5 / ton which is reflective of where most of the market is to date. We stay away from credits priced at $.60 to $0.70 / ton which have been on the shelf for a while from the UN Clean Development Mechanism. Many argue that carbon should have a higher price per ton. There’s a tradeoff between public policy price and market price – public policy often takes a much narrower approach to coverage. So, a company could pay $4 or $5 / ton using our broad boundaries, but that may be equivalent to paying $60 to $70 / ton using the narrow boundaries that a policy considers a company to be subjected to.

First off, I commend Stripe for thinking about creative ways to deal with climate change. We tell our companies to expect to spend 0.3% to 0.4% of revenues to offset their entire carbon footprint. By that measure, the companies that we are working with are doing 10x what Stripe has done with that million dollar commitment. We try to impress upon companies that this is an incredibly affordable undertaking. And even in difficult economic times, companies have said that the benefits far outweigh the costs.

What’s the plan for growth?

We are raising, which as a nonprofit means that we’re looking for foundation funding. We’re kicking off a fellowship with the Mulago Foundation, and have also been talking to large financial institutions which see a lot of synergy between our work and their belief in market-based solutions.

Another interesting lever is the venture capital community’s ability to push footprinting and offsetting across their portfolio. We‘ve talked to some folks in Europe (Leaders for Climate Action) who have started to rethink the basic contract between VCs and their portfolio companies. These folks have written into their term sheets a requirement that companies fully disclose climate impacts each year (or quarter). We hope that we can be a resource to venture firms who have portfolio companies that are looking to operationalize carbon offsetting – one dream scenario would be that an investor’s entire portfolio gets Climate Neutral certified.

If folks are interested in learning more, how can they reach out?

We actively respond to all inquiries to our general contact and encourage interested companies to get in the certification queue through the join us form on our website.

Our core success metric is volume of offset carbon. We’ve had a great group of startups, and are also expanding with larger footprint companies. Companies that are thinking about how this can become a core part of their brand and are excited to engage with their customers about this are especially interesting to us.

Continue reading the full interview here.

In the News

NYTimes: Despite the coronavirus pandemic and economic crisis, Americans accept the reality of global warming at record highs according to a new national survey.
Nature: The first peer-reviewed study shows that the amount of daily CO2 fell by as much as 17% during the height of the COVID-19 pandemic in early April.
Forbes: Google has announced it will stop selling new oil & gas contracts for their AI tools (note that its legacy contracts will remain). Back in January, Vox released a highly produced video explaining how these AI O&G contracts work. Peers Amazon and Microsoft have not made similar commitments.
Slate: Harvard Kennedy School’s David Zipper proposes that cities have a window of opportunity to shift commuters away from driving cars towards greener options. American cities including Oakland and New York have allocated new street space to pedestrians but trail behind European cities such as London who are permanently overhauling their streets in favor of more sustainable travel.
Bloomberg/ European Commission: While the US rolls back environmental rules, the EU is slated to unveil the world’s “greenest recovery package” on May 27th by transforming its Green Deal strategy to reach net zero GHG emissions by 2050 into a coronavirus economic rescue plan.
Axios: Climate change is at the top of the agenda of a meeting of global leaders (led by Prince Charles?) who are gathering to discuss how to achieve a “Great Reset” in a post-COVID world.
Greentech Media: The Trump administration announced final approval Monday of the largest solar energy project in the U.S. The $1 billion Gemini solar and battery storage project is expected to produce 690 megawatts of electricity and annually offset greenhouse emissions of about 83,000 cars.
LA Times: A city in Southern California is planning for the first-of-its-kind green hydrogen plant using recycled mixed paper waste to fuel the conversion process to make hydrogen. Hydrogen is a clean fuel because it does not produce carbon emissions when burned in gas turbines or used in transportation and industrial processes.

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Third Derivative climate tech accelerator promo

Third Derivative: A unique new climate tech accelerator program called Third Derivative launched last week. A joint venture of the world's leading clean energy think-and-do tank Rocky Mountain Institute and the global entrepreneur support organization New Energy Nexus, D3 was built to "accelerate the rate of climate innovation" by combining a next-generation accelerator, committed venture capital, and a curated ecosystem of global corporations. The goal? To find, fund, hone, and scale the most-promising technologies to achieve larger, faster reductions in global carbon emissions. They’re currently seeking startups doing promising work in the areas of hard science, hardware, software, and business model innovation to apply before June 30th for their virtual 16-month-long program.

Yale: Tune in for what should be a lively and informative discussion with Jigar Shah and fellow climate tech investors on our favorite topic: “the unique challenges and opportunities of investing in nascent climate technologies that could critically reduce emissions.” See you there, this Wednesday @4pm ET!

Stanford: The plans to design a school focused on climate and sustainability include a “sustainability neighborhood”, which would serve as a living lab accelerating scalable sustainability solutions through external partnerships with government, industry, and NGOs.

Beam Project: Want to help cleantech startups build faster? Beam Project collects donations to give grants to startups with transformative climate solutions. Round up and donate your Amazon purchases to this nonprofit using their Chrome extension.

NYTimes: With coronavirus stressing our inability to protect against pandemics while continuing to eat meat regularly, is a rise in vegetarianism inevitable?

Axios: A new study shows that hungry bees bite plants to spur faster flowering and fruiting. We tried nibbling our refrigerator, but no verifiable repeat results to report on yet…