By: Jay Knafel
I could tell you about the surge in fire, air pollution, and famine, and the ever-increasing severity of each due to climate change. But this you already know. I could tell you that ESG, specifically the “environmental” component, has lost focus: the preoccupation with paper straws and myopic thinking has effectively skewed perspective, focusing on details rather than the big picture. Yet, this too, you already know. To that end, I, along with the Eclipse Ventures Team and our partners, Rho Impact and Prime Coalition, have decided to show – rather than tell you — how we can make a meaningful impact on the state of our planet today.
As hands-on investors, we understand the difference between sharing our expertise and knowledge and acting on it. We had heard anecdotally from our founders about the potential environmental impact their technologies offered, so we asked ourselves: can we quantify it, and if so, how will this impact our environment? We weren’t interested in creating yet another doomsday perspective — we know things are bad. Instead we wanted to produce something actionable.
Driven by this north star, we set out to build what is now the Eclipse Carbon Optimization report, or simply ECO. We searched for a method that felt true to Eclipse Ventures. We found Prime Coalition, Project Frame, and CRANE, a methodology that measures carbon reduction potential, publicizes the methodology, and standardizes the outcome across the industry and our portfolio. Throughout this process, we were continuously impressed and heartened by what we found. After assessing eleven portfolio companies (more to come each year), we discovered that our portfolio has the potential to reduce carbon emissions by ~200 MMtCO2 (or 4% of total U.S. emissions) annually by 2040, the equivalent of removing ~44 million internal combustion engine passenger vehicles from the road.
Since our inception in 2015, Eclipse Ventures has invested in companies modernizing our physical world. By partnering with founders that are creating technologies to digitally transform agriculture, industrial manufacturing, supply chain, transportation, and energy — industries that combined are responsible for three-quarters of the global GDP, we are endeavoring to create a social and economic shift. These technologies dramatically improve energy efficiency and reduce waste, which ultimately lowers carbon emissions. Digitization allows for these industries to become more agile and precise. And, of course, precision — by definition — has little waste.
The ECO Framework
According to the U.S. Environmental Protection Agency, physical industries account for 75% of global greenhouse gas (GHG) emissions. As such, net-zero goals are contingent upon investments in the decarbonization of these industries. While there are tools available to measure past and present environmental efficiency of new technologies, until now, investors, founders, and customers have lacked a comparable methodology that quantifies a technology’s future sustainability and carbon reduction potential — information that is critical (and powerful!) for investors weighing opportunities in carbon-intensive industries, such as manufacturing, supply chain, logistics, and many more. Simply put, ECO standardizes the way Eclipse Ventures measures an innovative technology’s future potential to reduce greenhouse gas emissions — analogous to how customers and investors measure the economic value proposition of implementing new technologies.
Our society desperately needs investments to reverse climate change, improve economic resiliency, and accelerate growth to drive the next massive wave of transformation. In sharing our approach and research, we hope to spark a deeper cross-industry debate among investors, founders, and customers about the importance of quantifying future sustainability for technology and measuring its impact on our planet.
The ECO framework is based on CRANE, an open platform — soon to be open-source — methodology used to calculate future emissions reduction. In partnership with Rho Impact, a climate advisory firm, we applied this methodology to eleven of our portfolio companies to better understand the carbon reduction potential of our overall portfolio, looking at three primary components:
- The estimated total GHG emissions in the market addressed by our portfolio technology
- The estimated GHG emissions reduction potential of our portfolio technology
- The estimated market penetration rate of our portfolio technology
ECO uses conservative assumptions for achievable market penetration, while also assessing both optimistic and pessimistic scenarios. By combining the total market with carbon reduction potential and market penetration, we arrive at an estimated figure for GHG emissions, which we can then contrast with the emissions of long-established technologies.
To learn more about the ECO Framework, read our inaugural ECO Annual Report where we detail the carbon reduction potential of 11 of our portfolio companies, while also highlighting each company’s technological advancements. For example:
- Bright Machines, which automates electronics manufacturing with flexible software-defined automation, reduces per unit carbon intensity by ~50% and has the potential to reduce more than 5 MMtCO2 annually by 2040.
- Arc, which has developed the first purpose-built electric boat designed to house a >200kwh battery pack, is replacing a fossil fuel alternative and will reduce the carbon intensity of the recreational boating industry by 85%, resulting in 27 MMtCO2 in emissions reduction by 2040, assuming 9% market penetration.
- Augury, which offers ‘machine health,’ a physical and digital service that ensures higher uptime, more efficient energy use, and higher yield from machinery, cuts emissions by ~12%, resulting in 3 MMtCO2 reduced annually by 2040.
Sustainability is not at odds with economic growth and resiliency
Physical industries are decades behind in modernization, an imperative step toward decarbonization. Eclipse Ventures has remained committed to building companies that bring new approaches to physical industries in a way that benefits people, the planet, and productivity. We believe ECO is another step towards delivering on our mission. Ultimately, we hope to signal to the venture ecosystem that physical industries are not only ripe for technological transformation, but brimming with potential.
We’re just getting started, and welcome investors, companies, and stakeholders to explore our process and consider adopting CRANE alongside us, in order to standardize emissions reduction potential, and ultimately, help the planet achieve the main mission: reaching net-zero.
To learn more about the ECO Framework, read our inaugural ECO Annual Report
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