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Balderton leads $57m investment in Sylvera to drive climate action

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Carbon data and ratings provider Sylvera has raised $57 million in its Series B funding round. The investment will be used to develop its data products and fuel expansion in the US market.

  • Carbon intelligence platform Sylvera has raised $57 million from existing and new investors to expand its product range and grow into the US market.  
  • The global carbon markets were estimated to be worth around $2 billion in 2020, with Morgan Stanley predicting they will reach $250 billion by 2050.
  • In order to achieve such growth, robust data, measurement and verification according to independent analysis must be provided.

Balderton Capital led the round with participation from existing investors Index Ventures, Insight Partners, Bain & Company, Salesforce Ventures, Speedinvest, Seedcamp, and LocalGlobe, alongside new investors Fidelity Strategic Ventures and 9Yards Capital.

Their investment into Sylvera, which combines a range of analytics and technology with carbon measurement methodologies, is intended to drive the development of the market in providing ratings and data assessing climate action investments, including carbon credits. What the company is providing is a means of reliably testing whether a removal, avoidance or reduction instrument is delivering the projected outcome and how long for.

Carbon credits, at the moment specifically voluntary carbon credits, are a means of funnelling private finance towards climate impact projects that might not get off the ground without additional revenue streams. The assessment that Sylvera provides is intended to ensure that funding from carbon credits goes to the “projects, companies and countries with the maximum climate impact”, in order to encourage the world to get on track for a net zero future.

Allister Furey, chief executive and co-founder of Sylvera said: “There is a serious lack of data to demonstrate progress against net zero targets and to prove that carbon emissions are actually being reduced or removed from the atmosphere. This uncertainty has created inaction–Sylvera is changing that… In time, this data will create much-needed financial incentives, such as higher share prices and cheaper borrowing, for organisations taking serious net zero action.”

Driving interest in climate data

Much of the world recognises the importance of meeting net zero by 2050, but nearly all companies with net zero targets will fail to achieve their goals if they don’t at least double the pace of emissions reduction by 2030. Net zero goals have been set by many countries but there is still a lack of action in deploying enabling frameworks. As those targets turn into action, however, it will put further pressure on corporates to address their net zero and sustainability strategies.

It has been projected that it will take an estimated capital investment of $3.5 trillion annually over the next 30 years, from both the public and private sectors, into the technology and infrastructure required to deliver a zero-carbon economy.

Some predictions of the amount of investment required are even higher. According to the International Energy Agency, annual investment in clean energy alone needs to triple to more than $4 trillion by 2030 and, given the trade-offs that governments are having to make to manage different and complex crises over different timelines,  that money is not going to come from the public sector. That means it must come from the private sector, but private sector investment needs robust decision-useful data in order to assess levels of investment risk.

At the moment, the pace of action and investment lags far behind what is required, and many see a lack of data as the core problem. Such a lack has made it nearly impossible to measure and benchmark progress against net zero targets and the effectiveness of climate action investments.

UK Minister for Investment Lord Johnson said:  “Voluntary carbon markets have an important role to play in progressing our transition to a net zero economy, and we want the UK to be a leader for innovation in this industry, which means inward investment is crucial. With the significant sums being raised in investment, homegrown companies like Sylvera are helping to achieve this.”

The role of carbon credits in reaching net zero

Carbon credits can be used to offset a company’s emissions, on the grounds that emissions affect the atmosphere (and global temperature increase) no matter where they are emitted. By avoiding emissions elsewhere, it’s argued that this ‘offsets’ specific emissions.

Historically there have been arguments about the extent to which this is true. Today, however, it is widely accepted, under frameworks such as the Science-based Targets Initiative (SBTI) that if the majority of a company’s emissions have already been addressed, it is acceptable to offset between 5-10% of total emissions on the journey to net zero.

That makes the purchase of carbon credits, which fund projects around the world such as protecting rainforests from deforestation or providing clean cooking stoves, one of the most established and scalable ways to channel finance to effective climate outcomes.

The challenge for companies, and investors, is that in order to have a robust offset approach, credits need to be high quality, additional and have an impact – but there remains a lack of robust, unconflicted information and accurate impact assessment of these carbon credits. That is the market gap that Sylvera is addressing.

To help organisations ensure they’re making the most effective investments, Sylvera builds software that independently and accurately automates the evaluation of carbon projects that capture, remove, or avoid emissions. According to the company, its approach develops and tests rigorous, holistic methodologies to rate projects and produce data, leveraging the latest technology and climate science.

The new funding will enable Sylvera to further build its platform to include new data and information about carbon credits and how that sheds light on the companies’ plans and genuine progress against their net zero targets. It will also support the company as it scales its technical capabilities and grows the engineering and product teams.

Credibility in the voluntary carbon markets

Demand for disclosure is being driven by a raft of regulation in the UK and Europe, and the SEC is expected to publish its own guidelines for addressing climate risk in Autumn 2023. The growth in regulation combined with stakeholder expectations means that pressure for robust data is only set to increase. Given that Morgan Stanley analysis says that over 80% of all available carbon credits are focused on the avoidance or reduction of GHG emissions, it is imperative that there is a credible way to assess and understand the impact of particular projects.

Daniel Waterhouse, a partner at Balderton Capital, said: “There is an urgent need to provide the most accurate and transparent views on the multitude of carbon projects around the world in order for corporations, governments and markets to trust in the carbon credits they are buying and effectively scale their climate contributions and head towards net zero.”

The issue of what constitutes a ‘quality’ carbon credit lies at the heart of the challenge.  One of the issues facing the carbon markets is the public perception that they are being used as greenwash, or simply a low-cost way to give the appearance of action being taken. Scandals over poor performance data of avoidance credits have hit the market and there is a reputational need for robust data to counteract that messaging and that reality if it’s the case.

Furey explains that in Sylvera’s view quality is defined by the assessment of a number of things: the physical instrument (does the claim match the underlying activity); has the activity actually happened; whether or not the activity is additional; and whether or not the accounting has been done correctly, meaning robustly.

There are still challenges to overcome, especially when trying to reconcile corporate, project or country-level targets. There are complexities around restoration projects amongst others. But the stage is being set for rapid market growth post-2030 and Sylvera is positioning itself to play a major role in that growth.

SGV Take

The funding from a respected group of investors highlights the importance of good data on the voluntary carbon markets, as does the scale of investment needed. More than anything, though, it highlights that, if the carbon markets are to grow and generate investment from the private sector, they will be required to provide more robust, reliable and comparable information.

To an extent, the ability to assess quality needs to sit alongside price and performance in order to enable credit buyers to understand what they’re doing. To be effective, the markets have got provide purchasers with a greater degree of comfort. Today there is no standardised and comparable data infrastructure to measure whether companies or countries are really on track to meet the targets they’ve set. That needs to change and this funding will help Sylvera contribute to the growth of that infrastructure.

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