Yahoo Finance Fake filet mignon, wood credit cards: Inside Europe's largest climate tech VC fund
Climate science has spoken, and it's hungry for plant-based filet mignon with a cocoa-free chocolate alternative for dessert.
These extreme-niche products belong to World Fund's portfolio of emission-cutting companies. The Berlin-based venture capital firm says it lets science determine which businesses to back. The result has been an eclectic mix of investments, which also include a credit card made of wood, and a company focused on manufacturing in space.
Billing itself as Europe's biggest climate tech venture capital fund, World Fund launched last October with the goal of raising €350 million ($472 million) to back startups that can cut emissions. The companies it funds are chiefly determined by what it calls Climate Performance Potential (CPP), a score developed by a top mathematician from the University of California at Berkeley and the University of Bonn in Germany.
World Fund has a target of saving two gigatonnes of emissions by 2040 — equivalent to four per cent of all global emissions. Each business must prove to the fund's partners that it's capable of eliminating 100 megatonnes of greenhouse gas emissions per year.
Co-founder and partner Danijel Visevic says this helped filter out up to 90 per cent of the more than 1,600 applications World Fund received since launching, mostly from energy and battery-related startups. The fund writes initial investment cheques of between €1 million and €10 million ($1.35 million - $13.5 million).
The handful of companies in the portfolio may seem like an odd mix at first glance, but each serves a climate-friendly purpose. Munich-based QOA, maker of a 100 per cent cocoa-free chocolate product, aims to slow the chocolate industry's deforestation of West African rainforests by offering consumers a tasty alternative. Treecard is a Mastercard-backed debit card issued by Ohio-based Sutton Bank made from sustainably-sourced cherry tree wood and recycled plastic bottles. Eighty per cent of the company's profits go to planting trees and climate initiatives. U.K.-based Space Forge is focused on orbital manufacturing technology, which is essentially automated production of things like semiconductors in space.
"When I first saw it, I thought, that's crazy," Visevic told Yahoo Finance Canada on the sidelines of the Collision technology conference in Toronto. He figured the fuel and emissions required to launch satellites couldn't possibly be climate-friendly. However, chip manufacturers use a lot of energy to create space-like conditions on earth to build top-quality, energy-saving semiconductors.
World Fund's climate science-based approach to investing is a much narrower version of environmental, social, and corporate governance (ESG) scores, which have come under fire since the height of ESG's popularity in 2020. Visevic says many investors often mistake ESG for impact investing.
"Some oil and gas companies have high ESG ratings because they have strong standards within their sector, strong regulations, and they may treat their people well, and use renewable energy for some of their operations," he said. "But their impact is a catastrophe."
Last month, World Fund received a major endorsement from PwC Germany. The German arm of the global auditing and consulting giant invested an undisclosed sum in the fund as a new "anchor" limited partner. Other partners include Trivago co-founder Rolf Schrömgens, and German soccer star Mario Götze.
With World Fund about halfway to its €350 million funding goal, Visevic says the vote of confidence from audit-expert PwC will help lure more big investors. That level of due diligence, he says, could be critical as looming recession fears threaten the appeal of riskier, early-stage investments.
"We are a first-time fund, and we need institutional investors," Visevic said. "We see this recession [risk] and inflation of course. But our impression so far is that still the climate crisis is stronger in terms of helping investors decide whether or not to invest in climate tech."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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