Giant Leap's carbon revenue multiple for climate tech

Climate tech is one of our most powerful levers to address the climate crisis. We’ve analysed Giant Leap’s data to show it, and hope this data will inspire more climate-interested investors to enter the growing space with a target in mind.
April 6, 2022
Giant Leap

The 23 billion tonne gorilla in the room

The gauntlet has been thrown: To stay under the 1.5-degree level of global warming, we need to cut global emissions 23 billion tonnes of CO2-e emissions from the global economic system by 2030. 

Climate tech, or technologies that are explicitly focused on reducing CO2e emissions and addressing the impacts of global warming, are one of our most powerful levers to achieve this goal. We’ve analysed Giant Leap’s data to show it, and hope this data will inspire more climate-interested investors to enter the growing space with a target in mind.

A carbon revenue multiple target for climate tech

One of Giant Leap’s impact tests to make an investment is that impact is embedded into the business model, meaning every dollar of revenue is linked to a unit of impact.

For the purposes of tackling the gorilla in the room, we’ve analysed our portfolio data after investing in climate tech businesses since 2016 and found that on average, our climate tech portfolio avoids 1kg of CO2-e emissions per $1 of revenue generated (methodology notes below)

We intend to use this as our minimum target for future climate tech investments that have a direct carbon impact.

We believe this benchmark is extremely achievable as several of our climate tech startups are already avoiding up to 10kg of carbon emissions per $1 of revenue and other companies have roadmaps to deepening their climate impact as they grow.

The implications of achieving this direct impact are substantial. We see the potential for these companies to reach $100m in revenue, which would mean 100,000 tonnes of CO2-e emissions avoided per company per year, equivalent to 22,000 cars off the road or 1.7 million trees planted (source: EPA). 

And we’re just one fund - there was $40b of new climate tech focussed capital raised in just the last year. This backs up Blackrock CEO, Larry Fink’s, prediction that the next 1,000 unicorns - companies reaching billion dollar valuations - will be climate innovators. If this comes to fruition, this translates to 100 million tonnes of CO2-e cut from global emissions every year, or 22 million cars off the road and 1.7 billion trees planted (source: EPA).

The direct CO2-e avoidance is of high value in the scheme of addressing climate change because, unlike carbon offsets, these companies are stopping the emission from ever occurring. Take the example of Goterra, which manages organic waste sustainably with automated insect farms. When it captures market share, it takes away from waste companies that are paid to put that waste into landfill where it emits methane and CO2, avoiding those emissions before they ever happen.

The indirect multiplier effect

While the direct impact here is important, it only tells part of the story. Climate tech investments bring innovations to market that often have indirect system-wide impacts that dramatically amplify their emissions reduction potential. 

For example, Amber Electric is an energy retailer that shifts energy consumption to renewable power by providing access to the wholesale price. In addition to directly shifting consumption to renewables, this also creates a strong incentive for consumers to adopt renewable rooftop solar and battery systems where they can profit from storing and selling power when prices are high. Further, by levelling out the wholesale price at times when renewables are generating, they increase revenue going to large scale renewable infrastructure and make investment into the space more attractive. 

Take Change Foods as another example, who will produce animal-free cheese in a manufacturing environment, using 5x less energy, 10x less water, and 100x less land. This massively reduces pressure on global land reserves so they might be used for regenerative farming or nature-based carbon projects. 

None of this is captured in their direct impact and is incredibly difficult to measure, but it could be a multiplier of 2x, 20x, 200x, or more in some cases.

Examples of indirect impact in Giant Leap's climate tech portfolio

The path forward

The IPCC has forecast that if we can scale solutions that curb emissions in key areas like energy, food, waste, and transport, we could limit emissions by 40-70% by 2050.

Startups are the fastest path to commercialise and scale new climate solutions, which we believe can bring this forecast forward with the right applications of capital and talent.

Taking our baseline carbon revenue multiple and 1000 new climate tech unicorns with a multiplier effect of 20x by 2030, this could represent almost 10% of the 23 billion tonne target to avoid 1.5 degrees of warming alone (to put this into perspective, this is roughly the same impact as the entire pledges of the COP26 climate summit). But with an increase in carbon revenue multiple ambitions powered by government and corporate support to fund risky (but highly impactful) R&D, the gorilla is in sight.

There is an ocean of opportunity in climate tech and we encourage every climate-interested investor to get involved, targeting investments with high carbon revenue multiples with an aim to help them achieve the system-wide impact they can unlock.

If you're interested in hearing more about the journey, subscribe to our Small Steps newsletter. If you're interested in investing with us, check out our investor page.

Methodology and notes

  • Direct emissions are those that are avoided as a result of the business generating value for its customers, not counting any of their carbon offsetting or indirect impacts they have on their industries. For example, Amber Electric is an energy retailer that offers carbon neutral power and shifts energy consumption to renewable power by providing access to the wholesale price. When we measure their carbon impact, we only count the emissions avoided from the additional proportion of renewables consumed compared to the average Australian consumer. This means we do not count any of the carbon offsets purchased to make non-renewable power consumed carbon neutral.
  • Giant Leap’s dataset includes companies in the Giant Leap I portfolio that are generating meaningful, operational revenues (i.e. not including companies that are still at the R&D phase). 
  • The CO2-e and revenue metrics used to calculate the average carbon impact per $1 of revenue were taken from FY21 data. 
  • Giant Leap anticipates that these metrics will change over time as the dataset grows and companies deepen their impact.

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