Frederick teo of Genzero discusses limitless prospects in climate technology. 2050 is a significant year for climate technology since the Paris Agreement mandates that emissions achieve net zero by that year. In a meeting with GenZero’s Frederick Teo for SOSV’s Climate Tech Summit, we discussed feasible routes to achieving this objective and how entrepreneurs might tackle what Teo termed one of our generation’s most grave concerns.
Genero is a $3.6 billion investment firm funded by Temasek, well-known for climate investments. Teo discussed how the firm evaluates firms before investing, supports emerging technology and solutions in the field, and the challenges entrepreneurs can address over the next two decades. This Q&A has been condensed; the complete dialogue may be seen here or at the bottom of the post.
The first investment in GenZero came from Temasek, already a worldwide leader in investing, when it unveiled GenZero in June. Why did Temasek decide to launch GenZero, and what is GenZero doing that Temasek is not currently doing?
As you know, Temasek has significantly invested in sustainability, renewable energy, and climate-related areas over the last several years. We must consider how to deploy money in this domain since we are all aware of the climate emergency and the likelihood that this will be one of the gravest concerns of our time. We must be able to discover sustainable solutions to many of these issues, such as global warming, sea level rise, and the problems of food production. Temasek set aside substantial resources to establish a team that could concentrate on carbon markets, decarbonization technology, and environmental solutions. Thus, we founded GenZero as a distinct investment platform firm for this purpose.
In our work, we’ve examined technology solutions such as low-carbon materials and carbon capture capabilities, natural solutions that aim to protect and restore natural ecosystems, frequently generate carbon credits, and ecosystem enablers in the carbon market space. This is because we believe that shortly, the energy transition will need involvement from carbon markets for individuals to execute this change progressively. Carbon markets must be credible, effective, transparent, and of high quality; hence, investments are still required to increase skills, technologies, and solutions in this field.
What are some examples of your existing portfolio firms you may provide to companies interested in pitching themselves to you?
We have invested in both funds and businesses in the technology sector. Decarbonization Partners, a climate-focused fund joint venture between Temasek and BlackRock, is a substantial fund investment. We are a limited partner involved in this, and they are very focused on late-stage and early-stage development potential in various decarbonization-related fields.
We have also invested in the Newlight technology firm, which aims to make bioplastics from trapped methane. On the nature side, we have invested in a few forestry projects that generate carbon credits. On the carbon market side, we include the South Pole, a global leader in providing project advisory, technical advisory solutions, and project development for companies seeking to embark on a net zero decarbonization journey, as well as Climate Impact X, a carbon exchange headquartered in Singapore, among our portfolio companies.
What investment stage does GenZero normally consider for startups interested in receiving an investment from your firm?
We are somewhat adaptable. For extremely early-stage startups, say around Series A or just before, we will engage with diverse partners to analyze and deploy money to help early-stage companies. Still, I believe it is essential to understand why we must do so. When considering the larger net zero decarbonization problem, everyone mentions the year 2050 as the target year for reaching net zero. But the reality is that if we want to have a significant impact on the climate by 2050, we must consider new solutions that must already exist or be in the process of emerging today because it will take another 10 to 15 years for the technologies and solutions to mature and reach a stage where they could be commercialized, and then another 10 to 15 years for it to be deployed and have an impact. This implies that the present generation of emerging enterprises will impact the 2050 schedule. This is why we are so happy to be a part of this area right now since the action must be taken now for 2050 to have any real impact.
Given that technology won’t reach maturity or provide concrete outcomes until then, what indicators or milestones do you look for in a company before you contemplate adding it to your portfolio?
I believe it concerns how GenZero evaluates employee performance. Because we have a double bottom line, our shareholders expect us to generate financial returns. That is obvious. However, we also take the concept of evaluating climate effects rather seriously. We attempt to comprehend, for instance, the kind of climatic effect a remedy might have if successfully implemented.
Additionally, we consider the carbon yield that the firm or solution might be able to provide. For instance, how much carbon bang for the buck can we genuinely get for every dollar spent in the capital? Numerous viable, cost-effective, and excellent options exist.
However, how much carbon effect can we accomplish annually or cumulatively for each dollar of committed capital? Due to capital’s limited nature, this is one of the metrics we consider. We also have a minimal amount of time to accomplish a considerable climatic impact to solve the problem of climate change. Consequently, we must comprehend how to allocate cash to the regions where it will have the most impact.
One of the topics I’d want to ask is to work with companies, particularly on a long-term basis, since I believe it’s accurate to characterize GenZero as an active investor that works closely with entrepreneurs. How can you give value to startups even though some effort may take time to bear fruit?
We deal with various firms, ranging from very early-stage startups to those a little farther down the path. But I believe there are a few areas in which we expect to be able to provide value for our partners, the first of which is a more global perspective on the carbon markets and carbon-related trends. Understanding how we are underwriting investments, how we are thinking about the movement of the carbon price, and how people are thinking about decarbonization strategies and policies will be necessary. I believe GenZero will hopefully be able to provide a helpful perspective on this front.
The second characteristic is that GenZ is not alone. We do not claim to be the only game in town. Many others are doing great work in this space. We often consider how we can foster a sense of partnership, a kind of open architecture-based ecosystem in which we can dynamically partner to find new and exciting solutions and, more importantly, ways to apply them. It is not sufficient for us to generate brilliant ideas. Considering how we can implement, use, and grow these concepts is crucial. As part of the larger Temasek ecosystem in Singapore and around the world, we have a network of relationships and contacts that startups may find helpful in testing solutions, bouncing ideas, implementing some of the answers, and finding other funding sources and support on their growth journey. We have a Temasek portfolio in a variety of industries that could use innovative decarbonization solutions, such as airlines making sustainable aviation fuel or utility companies looking at carbon capture capabilities, so there is an opportunity to deploy some of these solutions across the network or to make introductions and get feedback from actual practitioners and operating companies. Frequently, I believe we are also communicating with a more extensive network of fund managers and other investors; consequently, we aim to be able to give value to some of our partners via our combined awareness of concerns.
For entrepreneurs listening in, what potential do you see for climate technology firms, and what are you most enthusiastic about?
I believe it is endless. Carbon capture and carbon removal technologies, low carbon fuels, low carbon materials, and, incredibly shortly, probably things related to a hydrogen transition that I believe would be pretty significant in terms of being able to push the envelope by 2030 or so are among the technologies we are closely monitoring. I think there is much potential in promoting nature-based solutions. It is a class of assets and possibilities that may be unfamiliar to many investors and corporations. Still, nature is just as crucial as technology to solving near-term decarbonization.
Lastly, we need much more capabilities in the MRV domain in the carbon market arena. These entities monitor, report, and verify carbon project rating capabilities to enhance the carbon market’s transparency, credibility, and quality assurance. Allow me to conclude by mentioning one thing. We always consider digital and software solutions as potential solutions, which are vitally important because they seek to optimize; if you do not digitalize, you cannot maximize energy efficiency, and many of these are essential to this decarbonization space. But I will certainly call out and encourage many of our founders in the room also to consider the core engineering, the stricter kinds of the solution set that we need, because at the end of the day, even as we optimize, someone has to fundamentally do something about removing carbon and improving the engineering efficiency of the core underlying engineering of some of our solutions. Therefore, I believe this is more difficult to achieve, depending on your perspective, as sexy or not as attractive. But it is critically necessary. Therefore I think there is room for many of us with diverse interests to address the climate catastrophe.
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