GenZero’s Frederick Teo on “limitless” opportunities in climate tech • TechCrunch
2050 is An important year for climate technologyThe Paris Agreement called for emissions to reach net zero by then. In a conversation with GenZero’s Frederic Teo for the SOSV Climate Technology Summit, we talked about realistic paths to achieving this goal and how startups can tackle what Teo described as one of the most existential challenges of our generation.
GenZero is a $3.6 billion investment firm backed by Temasek, already known for its climate investments. Teo talked about how he measures companies before investing, supporting emerging technologies and solutions in the space and what startups can tackle in the next two decades. These questions and answers have been modified for depth, and you can watch the full conversation over here Or at the bottom of the article.
TC: The initial commitment to GenZero is from Temasek, which was already a leader in global investment when it announced GenZero in June. It is a wholly owned subsidiary of Temasek, so why did Temasek decide to start GenZero and what does GenZero do that Temasek has not already done?
Fatah: Temasek, you know, has already taken a lot of steps in the last few years in investing in sustainability, as well as clean energy and climate-related spaces. It’s important for us to think about how we can deploy capital in this space because obviously we’re all familiar with the climate emergency, and the fact that this is actually probably one of the most existential challenges of our generation. It’s important for us to be able to find solutions that can actually address many of these things like global warming, sea level rise, and food production challenges in a sustainable way. So we wanted to be able to have a dedicated capacity to access some of these decarbonization opportunities, and Temasek decided to put a significant amount of capital into being able to develop a team that could focus on issues like carbon markets, and decarbonization. Technologies as well as nature’s solutions. That’s why we created GenZero as a separate investment platform company.
In our work, we have been looking for technical solutions such as low carbon materials and carbon sequestration capabilities, and natural solutions that seek to protect and restore natural ecosystems, often with the goal of generating carbon credits furthermore, as well as investing in ecosystem enablers in the carbon market space. The reason for this is that we believe that in the near term, the energy transition will require some form of participation from carbon markets to allow people to gradually implement this transition. But we need the carbon markets to be credible, efficient, transparent and of high quality, so investments are still needed so that we can improve capabilities, technologies and solutions in this area.
TC: For companies that are curious to try and pitch themselves to you, what are some examples of your existing portfolio companies?
Fattah: In technology, we invested in both funds and companies, so investing in the main fund is decarbonization partnersThis is essentially a climate-focused fund that is a joint venture between Temasek and BlackRock. We’re an LP invested in that, and they’re very focused on early growth opportunities and lagging projects across different regions in the decarbonization space.
We have also invested in a technology company called new light, which seeks to be able to produce bioplastics from captured methane. On the nature side, we’ve been investing in a few forestry projects that generate carbon credits, and then on the carbon market side, we’re crediting between our portfolio companies things like South Polea leading global provider of project consulting, technical advisory and project development solutions to companies seeking to embark on a carbon-neutral journey, in addition to a carbon exchange called Climate Impact XHeadquartered here in Singapore.
TC: For companies curious about the possibility of getting investments from you, what stage of investment does GenZero usually look at?
Fatah: We’re kind of flexible. For very early stage companies, say around Series A or a little earlier, we will be working with different partners to be able to evaluate and deploy capital to support early stage companies, but I think it’s important to understand why we need to do that. If we think about the broader challenge of net zero carbon removal, everyone will be talking about this 2050 timeline for getting to net zero. But the truth is that if we want to make a significant climate impact by 2050, we are looking for new solutions that have to already exist to some extent today or start emerging today, because we will need another 10 to 15 years for the technologies and the solutions to mature and reach a point where they can in which it will be commercialized, and then probably another 10 to 15 years until it can be deployed and make some kind of impact. This basically means that this current cohort of young companies is going to make a difference to Agenda 2050. That is why we are so excited to be involved in this space now, because the action has to happen now in order to make any meaningful difference by 2050.
TC: Given that, with the technology not yet showing fruition, or delivering actionable results by then, in light of that, what kind of metrics or milestones would you like companies to bring to the table before they consider them for you profile?
Fatah: I think it comes down to the way we evaluate our performance at GenZero. We have a double profit, so our shareholder expects us to be able to generate some level of financial returns. This is given. But we also take the idea of measuring climate impact very seriously. We try and understand, for example, what kind of climate impact the solution can have if it is successfully deployed. We also look at the type of carbon production a company or solution can offer. For example, for every dollar invested in capital, how much can we actually get, because it is clear that many solutions can be practical, cost-effective and great.
But for every dollar of capital invested, how much carbon footprint can we actually achieve on an annual or cumulative basis. This is actually one metric that we’re considering because the capital will be limited. We also have a very limited time to be able to make a significant amount of climate impact so that we can meet the challenge of climate change. So it is very important for us to understand how to spread the capital in the areas that will make the most important difference.
TC: One of the questions I would like to ask in terms of working with startups, especially in the 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 a while to bear fruit, so what kind of added value can you bring to a startup?
Fattah: We work with a bunch of different companies, whether they’re very early stage startups or they’re just a little bit ahead. But I do think there are a few things that we hope we’ll be able to provide value to our partners, but the first is a thoughtful look at how carbon markets and carbon related developments are happening around the world. Because at the end of the day, we solve the decarbonization challenge or the climate change challenge, which is understanding how we underwrite investments, how we think about the movement of carbon prices, how people think about the decarbonization strategies and policies, that is being introduced is going to be important, and I think GenZero hopefully will be able to provide a useful perspective on this front.
The second aspect is that GenZero is not alone. We do not admit that we are the only game in town. There are so many other people who are doing a great job in this space and we often want to think about how we can foster a sense of partnership, which is kind of an open architecture kind of ecosystem in a way that we can partner with each other dynamically in order to create new and exciting solutions. Interesting, and most importantly, the ways to actually apply them. It is not good to come up with great ideas. It is very important to think about how these ideas will be disseminated, used, and expanded.
Being a part of the broader Temasek ecosystem here in Singapore, and globally, we have a network of relationships and contacts that can be very useful for startups, either to try out solutions, bounce ideas, get some solutions implemented and also be able to find other sources To fund and support in their own journey of growth. We have a Temasek portfolio in a range of different industries that could certainly use innovative decarbonization solutions, whether it’s, for example, airlines making sustainable fuels for aviation, or some utility company looking into carbon sequestration capabilities, so there’s an opportunity to be able to Post some of these solutions online or make those introductions and get actual practitioners and operators to provide feedback on what is needed to scale up some of these solutions and be effective. Oftentimes, I think we also talk to a broader network of fund managers and other investors, and so through this collective understanding of the issues we hope to be able to add value to some of our partners.
TC: For founders listening to this, what kind of opportunities do you think are for climate tech startups, or what exactly are you excited about?
Fatah: I think it has no limits. The things that we’re really watching in technology include some of the carbon capture and decarbonization technologies, low carbon fuels, low carbon materials, and especially in the near term potentially doing things related to the hydrogen transition that I think will be very meaningful in terms of The ability to push the envelope by 2030 or so. I think there are also plenty of opportunities to support nature’s solutions. It’s a class of investments and opportunities that many investors and companies may be less familiar with, but nature is just as important as technology in trying to solve decarbonization in the near term.
And then finally in the carbon market space, I think we need more capacity in the MRV space. These are the ones who monitor, report and verify the Carbon Project’s rating capabilities, so that they can improve transparency, credibility and quality assurance in the carbon market space. But let me finish by saying just one thing. There is always a tendency for us to think about digital solutions and software solutions so that we can solve this problem and it is of vital importance because it seeks to improve, and if you don’t digitize, you can’t improve energy efficiency and many of these solutions are critical to this decarbonization space. But I will certainly yell and encourage many of our founders in the room to also think about basic engineering, the more rigorous kinds of solution combinations that we need, because at the end of the day, even when we’re optimizing, someone has to do something fundamental about decarbonizing, improving the basic engineering efficiency of some Our solutions. So, this is tricky, I think sometimes it probably depends on your point of view, whether it’s sexy or not. But it is very important, and I think therefore, that there is space for many of us with diverse interests to be able to tackle this climate crisis.