Climate Equation: The Growing Role of Green SaaS
Entrepreneurship in climate tech is experiencing unparalleled growth, spanning a vast array of sectors—from renewable energy technologies and supply chain management to carbon sequestration and innovative food models.
The sheer breadth of the climate tech space might seem overwhelming at first glance.
However, when distilled, every solution being developed shares a common purpose: to tackle one of these three crucial challenges of the Climate Equation: 1
Innovating to curtail ongoing environmental harm,
Crafting solutions to reverse existing damage, and
Aiding in adaptation to the residual impacts of climate change.
In our prior blog, we delved deep into the defining metrics of green SaaS startups and how they operate differently from their general SaaS counterparts. Shifting our lens, we now turn to the foundational principles driving climate tech ventures, providing an in-depth look at the various components of the Climate Equation. Additionally, we'll underscore the pivotal role of SaaS within each of these segments.
I. The Damage Already Done
Efforts to mitigate climate risk today acknowledge the damage already caused by human activities. While we can't fully reverse this legacy, it's imperative to recognize the extent of emissions and halt their progression.
Since 1970, carbon emissions have risen by nearly 90%, with 78% of these from industrial processes and fossil fuel combustion.2 This surge has accelerated climate change, with average land and ocean temperatures increasing by 0.18 ºC every decade since 1981—more than double the rate since the late 19th century.3
These figures underscore the urgency for action. Climate tech startups, armed with innovative solutions, are crucial in our quest to limit global warming to a 1.5 ºC increase, steering us towards a sustainable future.4
II. Reducing the Ongoing Damage
Economic progress and maintaining our standard of living mean we can't eliminate carbon emissions overnight. However, a wave of innovative startups is making significant inroads in reducing our carbon footprint, i.e. mitigating the adverse effects of human-induced environmental changes.
In the pursuit of mitigating the carbon footprint of human activities, several significant contributors warrant closer examination, and we will now explore a few of them.
1. Electricity
With a staggering 42% of greenhouse gas (GHG) emissions stemming from electricity generation, the urgency to curtail this statistic cannot be overstated. Effectively addressing this challenge entails a multifaceted strategy, encompassing the transition to cleaner energy sources, bolstering energy storage capabilities, and fine-tuning energy efficiency throughout various processes.5
Pioneering this transformation are innovative startups such as Kitepower, reshaping the clean energy landscape through advancements in wind energy technology. Concurrently, companies like Phelas are spearheading energy storage innovation, providing safer, more cost-effective, and highly efficient solutions for electricity storage.
Yet, the trajectory of progress extends beyond disruptive hardware, with software serving as a catalyst for exponential impact. Consider Rebase Energy, for instance; they're at the forefront of revolutionizing energy modelling. Similarly, Clir Renewables champions renewable energy adoption by leveraging AI tools to optimize the performance of clean energy facilities.
2. Industry
Approximately 30% of emissions in the United States can be traced back to industrial activities, either directly or indirectly. While maintaining industrial progress remains crucial, the imperative to reduce carbon intensity within this sector cannot be overemphasized. 6
Given that a significant portion of indirect emissions originates from electricity generation, the strategies discussed in the previous section play a pivotal role in mitigating industrial emissions. However, the pressing need to address the direct environmental impact stemming from industrial processes cannot be underestimated. In this regard, pioneering ventures like Kanin Energy are making significant strides by assisting heavy industries in converting their waste heat into carbon-free power.
Green SaaS plays an unmatched role in cutting industrial emissions. We have seen a surge in carbon footprint, accounting, and emissions reduction software, which help businesses measure, track, and mitigate their environmental impact. Key players like Persefoni, Sweep, and Watershed are prominent in this field. CarbonBright, a portfolio company, leads in innovative software for product-level emission reduction in enterprises.
3. Food
Estimates of the carbon footprint associated with food-related activities vary, encompassing anywhere from one third to one fourth of total global greenhouse gas (GHG) emissions. This alarming magnitude demands immediate attention.7
In this realm, numerous startups are emerging to address challenges. For instance, in response to the high carbon footprint of meat production, Air Protein is working on achieving carbon negativity by converting captured carbon dioxide into alternative meat products. Similar efforts are underway in various facets of alternative food production (think Lab-Grown meat, Insect farming etc.), with companies like Vly and Jiminy striving for sustainability.8
SaaS plays its own unique role here too, for example, a French startup named Carbon Maps specializes in calculating the environmental footprint of food products, contributing to the broader effort to promote sustainable and environmentally responsible food choices.
4. Transport
With approximately a quarter of emissions originating from the transportation sector, taking decisive action in this domain is imperative. Fortunately, the transport sector has been a focal point of attention in recent years, offering promising avenues for carbon reduction. 9
Electric vehicles (EVs) have seen significant growth, with companies like Tesla leading the charge, and established manufacturers like Volkswagen and General Motors venturing into the sector. Simultaneously, ventures like Remora are dedicated to capturing carbon emissions from vehicles, contributing to emissions reduction efforts.
Once again, software plays a pivotal role in reducing emissions from transportation-related activities. Coulomb AI, a company in the FortyTwo portfolio, is making significant progress in battery analytics and optimization, actively supporting the transition towards electric vehicles. Similarly, Hive Power is championing the widespread adoption of electric vehicles by facilitating charging infrastructure through energy aggregation and optimising local consumption.
Each emission source, thus, presents a golden opportunity for both hardware and software innovations to tackle environmental hurdles.
Role of Green SaaS
III. Reversing Past Damage
Although complete elimination of existing greenhouse gases is not currently feasible, scientists and innovators are actively working to significantly reduce their presence.
This facet of climate technology focuses on deep technological advancements, chemical and biological research, as well as natural strategies such as tree restoration, agricultural carbon sequestration, some of which we take a closer look at.10
1. Nature Based Solutions
Although natural measures alone cannot fully resolve the issue of climate change, they do play a significant role in its mitigation, potentially contributing up to approximately 20% of the necessary efforts to curb global warming and maintain the temperature increase below the critical threshold of 2°C. 11
This substantial contribution from natural solutions is being supported by global initiatives focused on activities like reforestation, the restoration of grasslands, wetland conservation, and the management of ecosystems on a large scale. These actions enhance nature's capacity to capture and store atmospheric carbon.
Furthermore, these solutions are not solely reliant on physical efforts; they are complemented by software ventures dedicated to optimizing and magnifying the impact of natural solutions. For instance, CarbonSpace leverages satellite tools to estimate biospheric emissions and the sequestration potential of carbon sinks, enhancing the efficiency and effectiveness of these vital environmental efforts.
2. Technology Based Solutions
Technology-driven Carbon Capture and Storage (CCS) primarily focuses on large point sources of emissions like power generation plants and industrial facilities. Advancements in CCS enable the capture and repurposing of carbon dioxide at the point of origin for these high-emission-density sources.12
Although CCS is still in its early stages, its potential appears boundless, with startups leading the way. For example, Svante is developing infrastructure to capture carbon from industrial flue gas streams, while Carbon Clean is assisting some of the largest emitters, including cement factories and refineries, in transitioning to cleaner processes.
3. Emissions Offsetting
Carbon offsetting offers a means to counteract environmental damage by enabling both companies and individuals to balance their carbon emissions through investments in environmental projects.13
While SaaS may not have been the focus in previous discussions, its role in addressing historical environmental harm is undeniable. It serves as the crucial link that facilitates pioneering innovations and brings them into mainstream adoption, whether it's enabling carbon credit-based sequestration through rating platforms or serving as a financial intermediary in carbon offset marketplaces.
For instance, during carbon sequestration and capture processes, platforms like Sylvera play a vital role in evaluating and rating the carbon credits generated. Subsequently, startups like Patch and GoodCarbon serve as marketplaces for carbon offsetting, allowing stakeholders to reduce their carbon footprint and channel funds into green projects. In fact, platforms such as CarbonX are leveraging decentralization and blockchain technology to democratize carbon offsetting, making it accessible to individuals rather than solely catering to large corporations. Evidently, while it may not be in the spotlight, software continues to be the linchpin enabling emissions offsetting initiatives.
Role of Green SaaS
IV. Adapting to the residual damage
While there's a concentrated drive to curb climate change and temper global warming, equally pressing is the need to adapt to the changing climate realities—rising temperatures and altered natural patterns.
Although mitigation is usually interpreted as the action needed against climate change, it must go in tandem with adaptation to the consequences of global warming, a few arenas of which are highlighted below.
1. Climate Resilient Infrastructure
Climate change continues to exert its influence on every aspect of our lives, leading to various consequences such as rising temperatures, more frequent and severe extreme weather events, and shifting rainfall patterns. One significant area of concern is the vulnerability of built infrastructure, which faces increasing levels of stress and the risk of failure. As a response to this, there is a growing emphasis on constructing infrastructure capable of withstanding greater strains, along with the development of tools to assess and manage the climate risks that the built environment faces.14
This transition encompasses two key aspects. Firstly, companies like Arcadis are at the forefront of pioneering highly resilient and durable construction practices, ensuring that infrastructure is built to endure the challenges posed by climate change.
Secondly, startups such as Climate Alpha specialize in leveraging AI analytics for real estate, utilizing scenario analysis and infrastructure risk forecasting to assess and mitigate climate-related risks. Regardless of the specific approach, the goal is to establish infrastructure that can withstand extreme weather events and the impacts of climate change, a vital necessity in our changing world.
2. Resilient Food and Water Solutions
The global population is steadily increasing, placing greater demands on essential resources such as nutritious food and clean drinking water. However, these vital food and water systems face mounting pressure, exacerbated by declining crop yields stemming from the depletion of natural resources and unpredictable weather patterns resulting from global warming.15
To address these challenges, there is a global wave of innovation aimed at ensuring the security of these fundamental human needs. Organizations like Climate Farmers are actively promoting innovative regenerative agricultural practices that not only boost crop yields but also contribute to the economic well-being of farmers. In a similar vein, Kilimo is working to enhance resilience against unpredictable rainfall patterns by implementing smart irrigation systems. Additionally, software plays a crucial role in this transformation, with startups like AgroScount offering intelligent monitoring and tracking solutions for fields to optimize agricultural production and preserve yields.
Recognizing the imminent threat to clean water sources posed by global warming, innovation is also underway in the water sector. For instance, Epic Cleantec is pioneering water recycling and reuse solutions designed for use in built environments. Through these diverse efforts, start-ups are paving the way to ensure that the very basic human needs will not be disregarded by climate change.
3. Climate Catastrophe Insurance
As the specter of climate change looms, its potential to wreak havoc on both financial and physical stability through extreme weather events and other disasters cannot be underestimated. Consequently, climate insurance has emerged as a crucial consideration at all levels, serving to safeguard individuals, businesses, and even entire nations from the perils of climate-related risks.
The solutions in the realm of climate insurance are highly diverse, tailored to the specific needs of various entities. These solutions encompass offerings by entities as substantial as the World Bank, aimed at providing financial protection to nations facing climate-related disasters, to startups like Plover Parametrics, which empower smaller insurance carriers to offer climate event assurances to their clientele. Irrespective of the mode or volume, it is apparent that insurance is a necessary part of the adaptation to climate change.
4. Climate Risk Monitoring and Data Analysis
Computation and predictive analytics are vital tools in humanity's fight against climate change. They predict business risks, manage resources, protect infrastructure, and assess natural disaster probabilities.
Software, reliant on sophisticated data modeling, is an indispensable ally in climate adaptation. With AI and advanced algorithms, numerous SaaS ventures lead these efforts. For instance, Climavision specializes in accurate weather forecasting and radar analysis, aiding businesses and communities. MistEO helps address climate change's financial implications, and Overstory proactively prevents wildfires and outages using global vegetation analysis. The scope of risk monitoring and data analytics is of paramount importance in our efforts to combat the challenges posed by climate change.
Role of Green SaaS
As seen from these few illustrations, this part of the Climate Equation has seemingly limitless potential for Green SaaS development and growth.
Now that we've explored the composition of Green Tech, the opportunities for software in these sectors become even more evident. In the upcoming discussions, we will take a closer look at specific sub-sections of Green SaaS and highlight the emerging startups within them. Stay tuned for more insights!
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If you're building in the Cloud Software or B2B SaaS space, don't hesitate to connect with us at deepthought@fortytwo.vc. Let's explore exciting opportunities together!