Here’s how impact investors are funding climate-tech innovation

Impact investors deploy funds into investments designed to generate a measurable and beneficial environmental or social impact. Startups receiving impact investment must identify the positive impacts of their business models, and then measure and report them alongside financial returns as they work to achieve their goals.

Today we chatted to stand out venture capitalists leading funds dedicated to addressing the climate crisis, with a specific focus on agriculture and food.

Jonathan Green, investment director, Twynam Earth Fund

2024 is carefully contrived chaos. Rolling into the last quarter allows for some introspection and the changes have been big here. Our investments are flowing across sectors and geographies so sometimes the days have felt long but the months short. We have been building our team across Australia and Asia from analysts to those leading new strategies and it is invigorating.

Deal-flow is everything, and we are doing everything for deal-flow.

The team is certainly working hard and have built the foundations of a great brand in the global climate tech scene – thus deal flow is strong. I’m proud of the team for that.

Entry prices are still quite compelling with a ZIRP reference point, particularly in North America. After diving deep on some big emitting sectors, the team has their finger on the pulse of a lot of compelling technologies and founders.

How is your Earth Fund portfolio going? What are you excited about?

It’d be a sin to do anything but to talk positive on our book. Speaking frankly, we are only a year into our investment period of the Earth Fund and living the honeymoon period. Having managed our private book for 20+ years, it is true that there are some exciting and tough times ahead.

The portfolio is moving quickly and iterating as they push product to their respective markets. A

LT Mobility’s demand for EV’s in India has exploded, Hoofprint has unlocked some fundamentally unique approaches to solving methane from cattle in their North Carolina labs and VyCarb has just commissioned a 100-tonne CO2/year removal in East River, NYC.

I’m excited about getting our hands dirty and supporting these great founders in any which way we can, not just with capital.

How does Twynam assess investments in companies focused on driving decarbonisation solutions? What do you look for?

Twynam looks very closely, perhaps too closely, at the team, unit economics and the underlying tech. The Earth Fund is investing at seed, so often we are not backing proven founders and taking an objective view on a team can be difficult. Weighing the variables of skillset, traction, personality and culture takes a lot of context and experience.

Have a well-tuned BS radar is also helpful and this comes back to diving deep on sectors, knowing who’s who in the zoo so to say. On the unit economics, the teams we are backing need to be upending the incumbent, totally game changing on OpEx and CapEx. Twynam is not a fan of green premiums, you can’t be green if you are in the red!

We don’t like to guess on the tech and will lean in with our expert network if need be. All that said, we are simply looking for a screaming reason to say yes with a checked optimism.

Sally Hill, General Manager of Tripple

In 2024, we’re seeing an increasing volume and quality of impact deals, with lots of interesting niches being uncovered at the intersections of areas like climate, regenerative tech, cities, health and wellbeing, gender equality, affordable housing and, of course, generative AI and machine learning. Many of these areas are attracting more mainstream capital as the risks of climate change and social inequality become better understood. We’re also seeing a greater number of later-stage opportunities and private equity funds with a focus on impact, indicating that climate tech companies, for example, are maturing to this later stage.

Why is a 100% impact portfolio the only logical path forward for the future of investing?

When we look at the economy, we see some areas of flourishing, but also see lots of areas of systemic dysfunction and risk. These risks are catching up with us as we see growing inequality impacting community cohesion, resource constraints causing supply chain volatility and, of course, climate stability being a huge area of concern.

None of these factors are adequately priced into markets (yet) and our belief is that they will be, and that the companies solving these challenges and creating net positive outcomes are going to come out as the winners. In our minds there is not only an urgency about this change, but an inevitability, and this has created the core of our investment thesis and logic — the only one that makes sense to us!

How do you assess and invest in companies doing business exclusively for good?

We put all deals through our impact calculator as the very first hurdle. This calculator was developed to suit our needs and allow us to compare vastly different impact deals on criteria such as the scale, speed, breadth and depth of impact, as well as weigh up the risk of potential negative consequences. The tool is purpose-built for us and our thesis but is based on the IMP+ and SDG frameworks. We look for impact first but are ultimately investing in businesses, so we look for companies that show a tight ‘impact-revenue lock’. That is, the better they do as a company, the more positive impact they have on people and/or the planet.

How is your portfolio going? 

We have had a great start to the financial year with a number of investments made, including into energy transition and electrification, decarbonisation, biodiversity tech, mental health tech and carbon-aware retirement savings.

Sarah Nolet, co-founder and managing partner, Tenacious Ventures

2024 if feeling really good for Tenacious, we announced our first close target and are working towards scheduling a second close before the end of the year.

It’s been pretty active on the pipeline front, I think March 2024 was our biggest top of the funnel month ever, so still continuing to see lots of opportunities.

In terms of how we drive change, we think about that through our investment work, and our advisory and ecosystem work, helping to learn about the system of agriculture to be as much Ag as we are about tech.

Our impact lenses are really big for us, when we think about systems change, decarbonisation, adaptation and resilience and ecological sustainability, we positively screen for opportunities in those three categories.

We are passionate about agriculture’s role in addressing climate change because agriculture really uniquely both contributes to climate change and is impacted by climate change.  Hence that adaptation and resilience theme for us. The tools that Australian farmers are going to need are continually going to change, and so backing those innovators building those tools is a real opportunity to do good and do well.

And because Australia is so good at agriculture and has been so resilient largely without subsidies and amidst poor soils and a very volatile climate, so it’s really an area where Australia punches above its weight, and commercialising that innovation and research is a huge impact opportunity.

In out portfolio we are really excited about a number of things.  SwarmFarm continues to be a leader globally in agricultural autonomy saving farmers on labour and inputs, with a huge environmental impact around soil compaction and reduced herbicide usage. GoTerra had some big customer announcements including the Hyatt Regency in Sydney. And we’re really excited to make some new announcements soon.

Philippe Ceulen, partner at Mandalay Venture Partners

2024 has been a standout year for Mandalay Venture Partners, marked by significant milestones including the admission of a number of key investors, notably the Queensland Investment Corporation via the Queensland government’s Venture Capital Development Fund (VCDF).

Our deal flow remains robust, with recent investment in transformative companies such as Cropify, Nbryo and Restoke which have revolutionary technologies in grain grading, livestock genetics and restaurant operations respectively.

Our agrifood tech mandate continues to identify an abundance of startups across the entire value chain from upstream to midstream and downstream. These companies demonstrate the breadth and depth of the investment opportunities within the agrifood tech sector reflecting a growing demand across the value chain including biotech and farm inputs, smart farming, supply chain, novel foods and downstream opportunities across restaurant and
hospitality tech.

Internationally we are seeing similar demand for startups across the food security, AI, supply chain logistics and point of sale (POS) categories which bodes well for a healthy portfolio moving into 2025 and beyond.

How do you partner with founders building sustainable agriculture and food tech ventures? What are the biggest challenges and opportunities?

As an investor at the intersection of agrifood tech and sustainability, it is our aim to support our investee companies to fully grasp and leverage the opportunities presented by sustainability, environmental, social, and governance (ESG) principles, and impactful initiatives. We are seeing an increasing demand from limited partners (LPs) globally to have a strong focus on these important attributes while continuing to drive profitability.

In 2024 Mandalay became an inaugural member of the Australian chapter of ESG_VC, an ESG assessment and reporting framework originating in the UK and now including over 300 VCs across Europe. ESG_VC provides a measurement framework resulting in a tangible ESG score and a list of key areas to address to improve ESG performance. This is an important initiative as many startups lack clarity on where to begin when mapping and assessing their ESG attributes. As investors, it is our role to support their understanding and engagement
across the sustainability landscape.

Our entrepreneurs are acutely aware of the pressing challenges within their respective sectors. Our role at Mandalay is to offer a sophisticated view into the commercialisation roadmap, business and financial modeling and navigating the funding landscape. We leverage our extensive venture partner network to bolster the commercial and technical expertise we can provide.

We have continued to strengthen our relationship across Singapore and Southeast Asia, showcasing the incredible opportunities that exist between our countries. Australian innovators have a significant role to play in addressing food security in the region. A key aspect of our philosophy is to open the channels to Southeast Asian markets which represent not only the largest growing middle-class in the world but also a region ripe for impactful changes in agrifood systems. Our recently announced co-investment partnership with Hatcher+ exemplifies how we build those bridges.

At a macro level, challenges persist across most venture capital markets driven by high global interest rates, inflation and extended lock up periods that complicate fundraising efforts. Coupled with limited liquidity in the form of initial public offerings (IPOs) and mergers and acquisitions (M&A), many companies are finding it necessary to secure additional capital with longer runways to weather the current liquidity winter. For those funds with capital available, it means favorable valuations however it underscores the critical importance for Australian funds to build lasting international relationships with corporate partners, larger funds and private equity (PE).

How is your portfolio going? What are you excited about?

With seven companies in the portfolio as of now, we are seeing the exciting transition of our first cohort of Seed stage investments to Series A-ready businesses. We are thrilled to see these companies grow and attract significant overseas customers and investors. We are particularly excited to support Naturo, Restoke and Agscent’s US expansion plans, Cropify’s growing number of customers across the grains and pulses supply chain and Harvest B’s world-leading advances in redesigning our protein systems with both plant-based and animal
proteins existing side-by-side.

Mandalay’s portfolio focuses on food security, efficient food production, supply chain logistics and ESG, positioning Australian startups as potential global leaders in these sectors. With Australian food systems feeding approximately 70 million people globally, we are uniquely positioned to become the food-bowl for the ASEAN region and beyond.

Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on LinkedIn.