VC Giant Leap pioneers linking carbon reduction to startup company revenue 

Giant Leap has become the first VC fund in Australia to set a minimum emissions reduction target for climate technology investments.

The Melbourne impact investor has set a benchmark of 1 kilogram of carbon emissions avoided per $1 of revenue generated.

Giant Leap Associate Charlie Macdonald said the minimum target was developed using data from the fund’s investments into climate technology since 2016. The fund has calculated that, on average, its current climate technology portfolio companies already directly avoid 1kg of carbon dioxide equivalent (CO2-e) for every $1 of revenue generated.

That calculation only includes CO2-e emissions avoided that are directly attributable to the company’s product or service, and does not include any carbon offsetting or indirect impacts.

High performing climate technology companies in the portfolio are avoiding up to 10kg of CO2-e per $1 of revenue.

Startups in Giant Leap’s Climate Tech portfolio include Amber Electric, Change Foods and Goterra.

Macdonald said  that if just one of these companies is a success, it would deliver the equivalent to 215,000 cars off the road or 16.5 million trees planted.

“One of the global challenges with climate change is measuring the impact of the companies tackling the problem,” he said.

“Climate technology startups bringing decarbonisation solutions to market present one of the fastest and most scalable ways to address the climate crisis. As impact investors, it is our responsibility to measure the impact and allocate capital where it can be most effective in addressing the challenge.”

Macdonald said target is a first step towards Giant Leap increasing the rigour of its climate-focussed investment decisions, although doing so does create additional challenges.

“We acknowledge that it comes from a small dataset of companies and is limited to only measuring direct impact, not the indirect CO2-e reduction potential that often substantially magnifies their reduction potential, but is very difficult to measure,” he said.

“We also recognise that emissions reduction is a narrow view of impact, and we always consider the human impacts of climate technology companies, such as how they affect people and supply chains adapting to our changing climate.”

Over time he expects the growing dataset to create a clearer picture and as a consequence, the reduction target will become more ambitious.

“We believe that it’s crucial for investors to consider the depth of climate impact when allocating capital to address the climate crisis,” he said.

“We hope our peers will see this target and be inspired tolerate and improve on the approach, leading to deeper climate impact for people and planet.”

Giant Leap launched in 2016 and is the first local VC fund to invest solely into impact startups, having made more than 20 investments.