The Venture Climate Alliance (VCA), an organization of 23 global venture capital (VC) firms, officially launched this week. VCA aims to support early-stage climate tech startups cut emissions from Scopes 1, 2 and 3 and sustainably scale at a pace that engenders net zero emissions. Once a member of the alliance, VCs can share common best practices for collecting, interpreting and reporting climate impact data. Collectively, the VCs involved represent $62.3 billion in assets.
"We invest in climate tech companies that are transforming multi-billion dollar industries," said Gabriel Kra, managing director at Prelude Ventures and founding member of VCA in a statement announcing the alliance’s launch. "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."
VCA is officially a part of the U.N.’s Race to Zero campaign, an initiative aiming to rally leadership in business for a zero-carbon recovery, housed within the U.N. High Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities. Some founding members include Prelude Ventures, Capricorn Investment Group, Galvanize Climate Solutions and S2G Ventures.
VCA’s operations are guided by its four commitments: commit; recruit; assist; and track. To commit to the VCA, a VC must first conduct an internal greenhouse gas inventory of its Scope 1-3 emissions, and pledge to achieve net zero or negative emissions by 2030.
Recruited portfolio companies are given a goal of reaching net zero by 2050 or earlier. VCA provides tools and support to each company, allowing it to set specific science-based targets. The specific tools and methodology are not yet available to the public, although VCA states on its website’s FAQ page that its methodology "will leverage and align with existing methodologies and guidance — such as those of the Glasgow Financial Alliance for Net Zero, the [previously mentioned] UNFCCC Race to Zero Campaign and other sector-specific net zero alliances."
And although never explicitly stated on its website or the press release, it is fair to assume that VCA’s strategic partner, nonprofit Project Frame, will contribute to the formation of the emissions calculating and mitigating procedure.
Project Frame builds emissions-impact methodologies and reporting standards for climate-driven investors. An example of its work is how its Pre-Investment Considerations methodology differentiates between potential and planned impact. A potential impact is defined as a top-down approach that estimates what the overall solution of the company could achieve, while a planned impact is a bottom-up approach of what the company’s solution is calculated to achieve based upon a realistic analysis of its business model.
Once a portfolio company sets a net zero target, VCA assists in achieving those goals. This step appears to scale up the support from the previous commitment and manifest in a number of ways — from VCA’s role as adviser or shareholder to providing support in anticipating and responding to external impacts, such as policy developments.
Last, VCA will track and share its, and its portfolio’s, progress toward net-zero targets. VCA clarifies that "detailed company-by-company emissions data" may not always be provided, but ends its statement claiming that a third-party entity will determine how the firm’s goal is progressing.
"Our goal is to bridge the gap between what’s happening in public markets," said VCA founder and chair Alexandra Harbour in a statement, "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." Harbour is also a principal at VCA member firm Prelude Ventures.
