Hunting The Climate GigaCorn: The Next Big Winners In The Decarbonization Economy

“Clouds, Rays & Waves (Green, Violet & Blue)” | AMY LINCOLN

Written By Afdhel Aziz

The transformation to a decarbonized economy means everything we produce, how we produce it and how we use it will need to be reinvented. This has set the stage for the greatest period of innovation in human history – and the companies that seize these transformation opportunities will drive outstanding job creation, growth and profitability.

Nelson Switzer calls these companies ‘Gigacorns’. “A gigacorn is a company that can mitigate or remove at least a billion tonnes of GHG emissions with an enterprise value greater than one billion dollars. We find, fund and help grow companies that we believe have the potential to become gigacorns,” says Switzer.

As the Managing Partner and Co-Founder of Climate Innovation Capital, Switzer knows what he is taking about. He is one of the world’s leading thinkers on the topic of sustainability, decarbonization and the restoration economy. He believes that if we can grow 58 gigacorns, where 58 billion tonnes of GHG emissions is the current annual emissions caused by human activity, we will close the GHG emissions gap.

Nelson Switzer, Managing Partner and Co-Founder of Climate Innovation Capital | PHOTO BY BUSINESSPORTRAITS.CA

His company Climate Innovation Capital is a pure-play venture growth fund focused on finding, funding and growing gigacorns. “We look for solutions that have the potential to deliver the greatest amount of decarbonization and the highest potential rate of financial return – in the shortest period of time. We do this to accelerate the pace of economic decarbonization, to beat the ticking climate clock, and to influence conventional capital off the sidelines and into the transformation economy,” he shared.

Switzer is writing about this idea in his forthcoming book, tentatively entitled, “The Seven Principles of the Gigacorn Hunter: How to Invest in the Climate.” The ambition of the book is to empower investors and the broader community to accelerate investment in the decarbonization of the economy. He said, “In the book I explore the rise of the gigacorn hunter, the why now; and use practical examples of companies seeking investment to become the next gigacorn to walk through the seven principles. More than twenty companies are explored including what makes them candidates for investments and why some fail, and some succeed.” 

He shared one of his frameworks - the 3 R’s of Decarbonization. “One of my favorite parts of the book is exploring how to measure what I refer to as the Carbon Reduction Potential, the forecasted carbon reductions we calculate an investment can deliver within ten years of our initial investment.  We classify each carbon reduction pathway according to what we refer to as the “three R’s of Decarbonization”: Reduction, Replacement, and Removal.”

He elaborated on the framework. “A Reduction pathway represents an increase in the efficiency of an existing solution like the replacement of incandescent light with LED. A Replacement pathway represents the wholesale exchange of a fossil fuel system with a zero-emission alternative. This might be the replacement of a natural gas-fired power plant with a solar power plant. Finally, a Removal pathway captures previously emitted GHGs from the atmosphere. This is the world of carbon capture and sequestration.”

Switzer applies this thinking in the investment thesis at his fund, and shared examples of recent investments.

1. Mysa is a smart thermostat for high-voltage HVAC systems like baseboard heaters, window-mounted air conditioners and heat pumps that can be integrated with the demand response programs of local utilities. “A little more than 60% of households in North America, and even more in the EU, do not have central HVAC. They rely on baseboard heaters and, more and more as the climate continues to pelt us with extreme heat, window-mounted air conditioners and heat pumps,” he shared. With Mysa’s solution, this segment can now experience the benefits of smart thermostats, while also having the ability to actively participate in demand response programs, helping utilities smooth the grid demand curve and even, possibly, retire peaking plants, which are often coal and natural gas-fired.  

2. Another company is Manifest Climate - the leading AI-based climate risk management SaaS platform that enables corporations and asset managers to decode climate disclosure and management quality. More than 40,000 publicly-traded corporations around the world are under pressure to disclosure how they are managing climate risks per existing and emerging regulations and the framework known as the Task Force for Climate-Related Financial Disclosure (TCFD). “Manifest’s platform allows corporations to understand their conformance to these frameworks and regulations and benchmark themselves relatives to their peer groups and assess the quality of their management of climate risk. This insight drives enhanced climate and carbon risk disclosure and management for these companies. Asset managers also benefit from this platform as they are able to discern which companies are better managing their climate risk,” said Switzer.

3. Groundwork BioAg is a mycorrhizal (aka fungal) seed inoculant company that increases crop yields, decreases fertilizer use and permanently sequesters carbon in soil. When seeds are inoculated with Groundwork’s mycorrhizal spores, Rootella™, a symbiotic relationship gears into action. The seed germinates and emerges from the soil while the mycorrhizal spore grows below the soil. Intertwining their root systems, the plant converts light into sugar through photosynthesis and passes the sugars down to the mycorrhiza. In exchange, the mycorrhiza passes phosphorous and other inert minerals and nutrients that fuel more productive growth and resilient plants. The sugar is converted by the mycorrhiza depositing solid organic carbon permanently in the soil. Switzer said, “This is regenerative and restorative, while also increasing food security. Considering that over 150 billion tonnes of carbon have been released from the soil since the advent of industrial agriculture, the use of Rootella™ can reverse this, permanently sequestering carbon in soil and enhancing the health and productivity of soil.”

4. LineVision deploys a contactless electricity transmission and distribution Dynamic Line Monitoring platform. LineVision’s technology allows utilities to increase the capacity, resilience and safety of the grid while accelerating the decarbonization of the grid and electrification of the economy. LineVision’s technology allows utilities to monitor the condition of the grid in real time and unlock up to 40% more capacity. This means renewable electricity generation can come online more quickly and the electrification-of-everything transition can happen more swiftly. Moreover, it means a significant reduction in anthropogenic (human induced) forest fires. “When we consider that the largest source of carbon emission in the state of California is forest fires, reducing them has exceptional carbon mitigation potential,” pointed out Switzer.

6. Kuva Systems deploys a fully automated, image-based continuous methane monitoring IoT platform. The system uses low-cost multispectral cameras to pinpoint methane release locations and quantify flow rates based on minute-by-minute measurements. “As a greenhouse gas, methane has a Global Warming Potential (GWP) 30 times that of carbon dioxide. So, eliminating methane releases has a significant impact on decarbonization.” Current technologies include aerial monitoring with drones and satellites, which can only provide point-in-time assessments. Kuva is the price-point leader in continuous monitoring able to pin-point and quantify the emission. 

As the investing world wakes up to the enormous economic opportunity that solving climate change represents, the question is what future Gigacorns will emerge.