Venture capital firm Eclipse Ventures is calling for an industry-wide open-source project that standardizes ESG ratings and assessments for startups.
Why is this important: It is rare for a venture capital firm to make such a call, which would reveal certain proprietary transaction information in a fiercely competitive landscape.
What is happening: Eclipse publicly released what it calls its ECO framework as a swipe at the front of cleantech venture capital firms.
- The framework is based on Crane, a software analytics tool from climate nonprofit Prime Coalition that models emissions reductions across a company’s lifecycle.
- In addition to subscribing to typical investment criteria, Eclipse uses the software to also subscribe to the long-term emissions reduction potential of the investment as it builds its climate thesis into its broader industrial sector focus.
Enlarge: Eclipse, an industry-focused firm with $2.6 billion in assets under management, ran 11 of its portfolio companies through the model with conservative assumptions – 2% market penetration or a minimum total size of the addressable market – to find that companies have the potential to reduce emissions by 40% in 2030.
- Eclipse has partnered with Rho Impact, an advisory firm that focuses on ESG issues, to better understand the different ways a company could reduce its emissions.
- Eclipse is not a climate investor, but its focus on industrials overlaps with many climate initiatives that seek to decarbonize heavy industry.
The bottom line“The same way you do napkin calculations on TAM, we can do it with emissions reduction potential for each company,” Eclipse Ventures Partner Jay Knafel says Axios.