environmental impact investing hero

Environmental Impact Investing and GGV

Devastating wildfires. Blistering heat waves. Major flooding. These are just a few extreme weather effects triggered by climate change and global warming. Natural disasters have recently been occurring at an alarming frequency, sparking widespread concern over what they portend for our planet's future.

Ultimately, it all boils down to what we choose to do to save our homes. And this is where environmental impact investing comes in as a critical vehicle to drive this change. Also known as sustainable investing, environmental impact investing is how we funnel our investor dollars towards a better future for the world.  

Here’s an overview of what we will cover in this article:

  • What is environmental impact investing?
  • The state of the planet today
  • GGV and sustainable investing 
  • Case Study: Bowery Farming
  • Case Study: Next Gen Foods

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What is environmental impact investing?

In a nutshell, environmental impact investing is an investment strategy that aims to generate environmental benefits alongside financial gains. Environmental impact investing utilises money and investment capital to effect positive environmental results.

Forming the “Environment” pillar of Environment, Social, and Governance (ESG) investing, environmental impact investing prioritises the environment as a key consideration factor in the analysis process to identify material risks and growth opportunities.

Below is a list of environmental factors that inform the investment process:

  • Climate change and carbon emissions
  • Air and water pollution
  • Biodiversity
  • Deforestation
  • Energy efficiency
  • Waste management
  • Water scarcity

With this understanding of environmental impact investing, let’s review the core problem it aims to address: climate change.

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The state of the planet today

Climate change has become especially ferocious in recent years. As of May 2022, the United Nations (UN) reported a 50:50 chance of the average global temperature reaching 1.5 degrees Celsius above pre-industrial levels in the next five years.

The 1.5 °C threshold was established during the Paris Agreement, indicating the point at which climate impacts will begin to be harmful to people and the rest of planet Earth. Since 2015, the chance of temporarily exceeding this threshold has been increasing yearly – 10% in the past five years and nearly 50% from 2022 to 2026.

The culprit behind this steady increase? The global emission of greenhouse gases by many countries worldwide. According to World Meteorological Organisation (WMO) Secretary-General Petteri Taalas, the increase in global temperatures triggers a snowball effect:

“Our oceans will continue to become warmer and more acidic, sea ice and glaciers will continue to melt, sea level will continue to rise and our weather will become more extreme. Arctic warming is disproportionately high and what happens in the Arctic affects all of us.”

Over in Australia, the country’s environment is in a “poor and deteriorating state”, its land and water ailing from increased land clearing, urban expansion, and invasive species. 

India recorded its hottest March in 2022, which sparked a series of heatwaves that plagued the country until May. 

Europe has also been experiencing extreme heatwaves, which have evolved into huge wildfires in Spain, Greece, and France.

You get the drift. The world is collectively experiencing the gruesome impact of climate change. But all hope is not lost. We can prevent the world from spiralling out of control. And this begins with investors like us – we must devote our investor dollars towards causes that promise to safeguard the environment and our home.

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GGV and sustainable investing 

Over at GGV, we believe that a better world is something worth investing in. That’s why combating climate change has long been a top priority for us, as reflected through our investments in companies that use technology to better the environment.

Let’s take a closer look at what two of our portfolio companies, Bowery Farming and Next Gen Foods, are doing for the environment.

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Case Study: Bowery Farming

Bowery Farming reinvents the farming wheel with its proprietary operating system BoweryOS. BoweryOS powers the company’s New York-based smart vertical farms, which supply more than 1,000 grocery stores and several ecommerce platforms.

The inspiration for Bowery Farming came from founder Irving Fain’s concern over how modern agricultural systems have eroded the world’s climate and resources. As he shared in his podcast episode,

“Agriculture is the largest consumer of resources globally. 70% of the world’s water goes to agriculture yearly. We use about six billion pounds of pesticides annually across the world. 

And because of the way we farm, we’ve lost 30% of our arable farmland in just the last 40 years. You’ve got a system that’s stretching and straining under today’s reality. With the climate crisis, things are only gonna get more difficult.”

Given that the global urban population will only continue to increase in the foreseeable future, Irving thus began researching ways to deliver fresh food to cities efficiently and sustainably.

Eventually, he devised a “seed to store” method that harnesses robotics and automation to power smart indoor farms near cities. To ensure the feasibility of setting up operations near land-scarce cities, growers plant crops vertically from floor to ceiling, fuelled by lights that mimic the sun’s full spectrum. 

Under Bowery’s direction, crops are grown at 100x more productivity per square foot of farmland, with less water used for their cultivation. Furthermore, no pesticides, herbicides or fungicides are required to buffer the immunity of the crops.

Couple this with the AI-fuelled BoweryOS, which learns on the job to continually optimise the management of Bowery’s farm network. This enables Bowery to build a distributed network of farms, where every farm interchanges data to improve each other’s work processes. 

Aside from its farm management system, Bowery also spearheads initiatives that aim to tackle the climate change problem further. Rewild the Land is its most recent initiative in 2022, where it partnered with environmental nonprofit The Nature Conservancy to support the restoration of degraded farmland and forests.

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Case Study: Next Gen Foods

Plant-based meat startup Next Gen Foods began with a simple mission: to serve as a lasting solution to animal agriculture, which produces 65% of the world’s nitrous oxide emissions, which have a 296x global warming impact compared to carbon dioxide. 

In producing viable plant-based meat alternatives, founders Timo Recker and Andre Menezes hope to encourage consumers to turn away from meat. This will, in turn, reduce the damaging impact that animal agriculture will have on the planet.

According to the Good Food Institute, the argument for plant-based meat holds true, as studies found that it emits 30-90% less greenhouse gases than conventional meat. Plant-based meat also utilises 72-99% less water than conventional meat. 

The first step to achieving this is to create a product that is not just plant-based but also considers key factors that consumers look out for: taste, texture, experience, nutrition, and benefits. 

These factors combined to form TiNDLE, a plant-based chicken that blends soy protein, wheat gluten, and other protein-packed ingredients. Dubbed “ridiculously good chicken made from plants”, TiNDLE paves the way for more plant-based meat alternatives to hit the global markets and reduce the impact of animal agriculture on the climate.

Looking ahead, Next Gen Foods has collaborated with Singapore’s Food Tech Innovation Centre to open a new research centre to develop plant-based alternatives for seafood, dairy, and other kinds of meat. It will then continue to expand to the US and other parts of the world.

As our managing partner, Jenny Lee, said,

“Next Gen Foods’ growth in less than a year has been remarkable, as is their ongoing commitment to being part of the solution for how global food production will play a significant role in addressing the impact of climate change.”

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Environmental impact investing will save the world

Climate change is a longstanding problem with no easy, quick-fix solution. Yet it’s still possible to mitigate some of its more damaging effects, and this is where investors like GGV play an essential role in identifying the drivers of change.

As Bowery Farming and Next Gen Foods show, reframing how we approach food production is a crucial step in combating climate change. And there’s no doubt that technology can lead us to many more innovative solutions to address one of the most pressing issues of our time.

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