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  • Writer's pictureKartik Verma

Corporate climate disclosures and investment in climate-tech

Updated: May 26, 2022

In today’s edition, we round up with an overview of investment in climate-tech by corporations in 2021 and break down the recent proposal by US SEC for mandating climate disclosures.

What to expect today:

Corporate investment in climate-tech in 2021

Image Source: Jan Kopriva, Pexels

Companies are increasingly using their venture-capital arms to pour money into startups that could help them profit from the energy transition. Most big corporations have internal VC arms that operate like traditional VC firms but invest in startups that are more aligned to the company’s internal goals. ABinBev for example has ZX ventures, Google has Google Ventures etc.

How much funding are we talking about?

Last year, corporate venture funds invested $23.2 billion in businesses in the climate-technology sector—a broad category spanning renewable energy, energy storage, electric vehicles and more—according to PitchBook Data Inc. The amount invested more than doubled from 2020, outpacing growth of 85% for all corporate venture deals. The climate-technology funding was spread across 210 deals, up from 165 a year earlier. For comparison, in H2 2020 and H1 2021, total climate tech funding hit $87.5bn; corporate venture funding representing a quarter of all investments.

What are some of the initiatives companies are investing in?

  • GM Ventures targets software and hardware companies that could bring GM closer to three goals—“zero emissions, zero crashes, zero congestion.” Last month GM Ventures participated in an $11 million funding round for Soelect Inc., a developer of solid-state electric batteries that could be used in next-generation electric cars. (Check out the climate optimist’s profile for GM here)

  • United Airlines Holdings Inc. announced the launch of its venture arm in June, targeting startups that could help it meet its goal of eliminating its carbon emissions by 2050. The venture arm has made five investments since its inception. (We covered one such invest by United in Electric plane startup ‘Heart Aerospace’ in the climate optimist - check it out here)

  • Companies such as cement maker Cemex SAB de CV and shipping giant AP Moeller-Maersk A/S are among the carbon-intensive businesses that use venture investments as a tool to get nascent technologies off the ground.

US SEC's proposal for climate disclosures

Image Source: Jonathan Ernst, Reuters

The U.S. Securities and Exchange Commission issued a 500-plus-page proposed rule Monday that would mandate corporate disclosure of greenhouse gas emissions. For the first time ever, the agency plans to require businesses to outline the risks a warming planet poses to their operations when they file registration statements, annual reports or other documents. Some large companies will have to provide information on emissions they don’t make themselves, but come from other firms in their supply chain.

What’s in the proposed rule?

Companies would be required to include climate related information in their periodic disclosures, such as 10-Ks, with information about:

  • Climate related risks and impact to business

  • Company’s climate risk governance and risk management process

  • Company’s greenhouse gas emissions (Scope 1, 2 for all companies; Scope 3 for large companies) - unclear about what Scope 1,2 and 3 emissions mean? Check out our short blurb here

  • Climate related goals and transition plan, if any

You can check out the exact wording in the summary document here or if you are feeling adventurous - check out the entire 500 page draft here.

What are some of the objections?

The proposal released sets up a major clash with industry lobbyists and Republican politicians who argue the regulations are outside the SEC’s jurisdiction. Liberal lawmakers, environmental advocates and the SEC, however, say investors are increasingly using climate disclosures to make investments in “green stocks” and this is a step to enable them to make informed decisions.

What happens next?

The SEC will review comments from the public during the next 60 days, and may revise its proposal before holding a vote to finalize the rule. 13,000 companies already disclose their climate related information to the non-profit CDP.

Our take

We absolutely love the move by the SEC to include climate disclosure as part of 10-Ks. This not only formalizes the carbon disclosure and tracking industry but brings all companies on a similar comparison KPI. While some may argue that focusing simply on GHG emissions does not accurately reflect the entire scope of impact to the environment - which we agree - we think it's a good start and a KPI which all companies largely are aligned with and is important to the fight against climate change. This puts the US at par with countries such as the UK, New Zealand, Switzerland and the EU as whole (currently in draft) which mandate companies to disclose their climate related information.

Recommendations from the team

  • Wordle - Wordle for today! (I got it in the 4th try)

  • Youtube - Inside $4million electric plane (5 min video)

  • Youtube - SEC chief Gary Gensler on proposed climate disclosures (5 min video)

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