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GenZero’s Frederick Teo on “unlimited” opportunities in climate technology • londonbusinessblog.com

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2050 is a important year for climate technology, with the Paris Agreement calling for emissions to reach net zero by then. Speaking to Frederick Teo of GenZero for SOSV’s Climate Tech Summit, we talked about realistic paths to achieving that goal and how startups can tackle what Teo called one of the most existentialist challenges of our generation.

GenZero is a $3.6 billion investment company backed by Temasek, which is already known for its climate investments. Teo spoke about how it measures companies before investing, supports emerging technologies and solutions in the space, and what startups can tackle over the next two decades. This Q&A has been edited for a long time and you can watch the full conversation here or at the bottom of the article.

TC: GenZero’s first commitment is from Temasek, which was already a leader in global investment when it announced GenZero in June. It is wholly owned by Temasek, so why did Temasek decide to start GenZero and what does GenZero do that Temasek doesn’t already do?

FT: As you know, Temasek has already taken many steps in recent years to invest in sustainability, but also in clean energy and climate-related spaces. It is important for us to think about how we can deploy capital in this space because of course we are all aware of the climate emergency, the fact that this is probably one of the most existentialist challenges of our generation. It is important for us to find solutions that can sustainably address many of these issues, such as global warming, sea level rise, the challenges of food production. So we wanted to have a dedicated opportunity to access some of these decarbonisation opportunities, and Temasek decided to set aside a significant amount of capital to be able to develop a team that could focus on things like carbon markets, decarbonization technologies and natural solutions. That’s why we founded GenZero as a separate investment platform company.

In our work, we have looked at technological solutions such as low-carbon materials and carbon capture options, nature solutions that seek to protect and restore natural ecosystems, often for the purpose of generating carbon credits, and also to invest in ecosystem enablers in the carbon market space. The reason for that is because we believe that the short-term energy transition will require some form of participation from carbon markets to enable people to gradually implement this transition. But we need carbon markets to be credible, effective, transparent and of high quality, so investment is still needed to improve capabilities and technologies and solutions in that area.

TC: For companies curious to introduce themselves to you, what are some examples of your current portfolio companies?

FT: In terms of technology, we have invested in both funds and companies, so a big fund investment is: Decarbonization partners, which is basically a climate-focused fund that is a joint venture between Temasek and BlackRock. We’re an LP that’s invested in that, and they’re very focused on late venture, early growth opportunities in different areas in the decarbonization space.

We also invested in a technology company called New light, which wants to make bioplastics from captured methane. On the wildlife side, we’ve invested in a few forestry projects that generate carbon credits, and on the carbon market side, our portfolio companies include things like South Polewhich is a global leader in providing project consulting, engineering consulting solutions and project development for companies seeking a net zero decarbonization journey, as well as a carbon exchange called Climate impact Xwhich is headquartered here in Singapore.

TC: For companies curious about potential investments from you, what stage of investment does GenZero typically look at?

FT: We are quite flexible. For very early stage companies, say around Series A or just before that, we will work with several partners to evaluate and deploy capital to support early stage companies, but I think it’s important to understand why we have to do this . When we think about the broader challenge of net-zero decarbonisation, everyone’s talking about this 2050 timeline of getting to net-zero. But the reality is that if we want to create a significant climate impact by 2050, we are looking at new solutions that should already be around a bit today or are starting to emerge today, because we need another 10 to 15 years for the technologies and solutions to to mature and reach a stage where they can be brought to market, and then probably another 10 to 15 years before it can actually be deployed and create some kind of impact. That basically means that this current cohort of young companies is going to make a difference to the 2050 agenda. That’s why we’re really excited to be a part of this space now, because the action needs to happen now to create a meaningful 2050 to have a difference.

TC: Given that, with technology not maturing by them until then, or yielding actionable results by then, in light of that, what kind of metrics or milestones would you like companies to bring to the table before you are considering them for your portfolio?

FT: I think it goes back to the way we evaluate our performance at GenZero. We have a double bottom line, so our shareholder expects that we will be able to make some financial returns. That’s a given. But we also take the idea of ​​measuring climate impact quite seriously. For example, we are trying to understand what kind of climate impact a solution could achieve if it is successfully implemented. We also look at the type of CO2 yield that the company or solution could provide. For example, for every dollar invested in capital, how much carbon value for money can we actually get, because of course many solutions can be practical, cost effective and great.

But for every dollar of capital invested, how much carbon impact can we actually achieve on an annualized or cumulative basis. So that’s actually a statistic that we think about because capital is going to be finite. We also have a very limited time to achieve a significant amount of climate impact to meet the challenge of climate change. So it’s vital for us to understand how to put capital into the areas that will make the most meaningful difference.

TC: One of the questions I want to ask about working with startups, especially long-term, because I think it’s fair to describe GenZero as an active investor who works closely with startups. Some of their work may take time to blossom, so what value can you bring to startups?

FT: We work with a range of different companies, whether they are very, very young startups or are a little further down the road. But I think there are a few things that we hope to bring value to our partners, but the first is a more considered look at how carbon markets and developments around carbon are taking place around the world. Because eventually we solve a decarbonization challenge or climate change challenge, that understanding how we insure investment, how we think about the carbon price movement and how people think about decarbonization strategies, policies, are introduced will be important, and I think GenZero will hopefully a useful perspective on that front.

The second aspect is that GenZero is not alone. We don’t claim to be the only game in town. There are many others who are doing great work in this space and we often want to think about how we can foster a sense of partnership, kind of an open architecture type ecosystem in a way where we can dynamically collaborate with each other to create new and interesting solutions. and, most importantly, ways to actually apply them. It’s not good enough for us to come up with great ideas. It’s much more important to think about how we can actually implement, use and scale those ideas.

As part of a wider Temasek ecosystem here in Singapore, and globally, we have a network of relationships and contacts that can be very helpful for startups, to either try out solutions, bounce ideas, get some of the solutions implemented and also be able to find other sources of funding and support on their own growth journey. We have a Temasek portfolio across a range of different industries that can certainly take advantage of innovative decarbonisation solutions, whether it’s airlines making sustainable jet fuel, for example, or some of our utilities looking at carbon capture opportunities, so there’s is that opportunity to be able to implement some of these solutions across the network or make those introductions and have real practitioners and operating companies provide feedback on what would be needed to scale some of these solutions and operate them effectively to be. Often I think we also talk to a wider network of fund managers and fellow investors, and so we hope that through that collective understanding of issues we can add value to some of our partners.

TC: For founders listening to this, what opportunities do you think there are for climate technology startups, or what are you particularly excited about?

FT: I think it’s limitless. The ones that we’re really looking forward to in the tech space are some of the carbon capture and removal technologies, low-carbon fuels, low-carbon materials and, especially in the short term, probably things related to a hydrogen transition that I think they make quite a bit of sense in terms of being able to push the boundaries around 2030 or so. I think there are also many opportunities in supporting nature solutions. It’s a category of investment and opportunity that many investors and companies may be less familiar with, but nature is just as important as technology when trying to solve for short-term decarbonization.

Then finally in the carbon market space, I think we need a lot more capabilities in the MRV space. These are the ones who monitor, report and verify the assessment capabilities of carbon projects to improve transparency, credibility and quality assurance in the carbon market space. But let me end with just one thing to say. We always tend to think about digital solutions and software solutions to solve this and they are vital because they try to optimize, and if you don’t digitize you can’t optimize energy efficiency and a lot of them are from crucial importance to this decarbonization space. But I’ll definitely have a shout out and encourage a lot of our founders in the room to also think about the core engineering, the more difficult kinds of solution sets that we need, because at the end of the day, even if we optimize, someone has to fundamentally do something about removing the carbon, improving the core of the underlying technical efficiency of some of our solutions. So that’s harder to do, I think sometimes, depending on your point of view, so sexy or not so sexy. But it’s vital, and I think that’s why there’s room for many of us with diverse interests to tackle this climate crisis.

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