CVCA Member Profiles

How A Canadian VC Is Turning A Global Challenge Into Opportunity

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The Market Opportunity Is Substantial”

Last week, Science Magazine published a terrifying report describing how oxygen in the global ocean and coastal waters is disappearing at an accelerated rate. According to the researchers behind the report, half of Earth’s oxygen originates from the ocean; the chemical element required for human life.

Not only is oxygen critical for humans to survive; deoxygenation” directly results in devastation for people’s livelihoods including impacting the international fishing industry, according to the scientists who contributed to the report.

Investors are noting the transformation of the global climate. One Canadian venture capital firm is making a commitment to sustainability while generating new opportunities. In a win-win, Vancouver-based Pangaea Ventures has announced it will begin to track the material impact their portfolio companies have in four integral categories. The tracking will include carbon dioxide reduction, fresh water produced or saved, increase in food production and number of lives impacted.

Chris Erickson, General Partner, Pangaea Partners, explains the investor viewpoint on sustainability.

Investors care about how their money is being deployed, and they want it to not only have a good financial return but to have a positive impact. In many cases, those are symbiotic because we’re seeing that companies are, for example, reducing CO2, and reducing climate change having a good financial return. The market opportunity is substantial.”

Panagea Ventures was established in 2000 and, since then, has built a portfolio that is addressing multi-billion-dollar markets in energy, electronics, health, and sustainability. Panagea’s materials network spans multiple industry verticals, and includes twenty-one major multinationals as strategic limited partners.

The tracking is more than just a reporting exercise, explains Andrew Haughian, General Partner, Pangaea Ventures.

It is sort of a new lens of looking at things,” says Haughian. Through that new lens, there’s further opportunities available. The reporting aspect is really looking and quantifying the impact that technology, or a company, will have in the marketplace over time.”

In September 2015, the United Nations adopted a 2030 Agenda that includes 17 sustainable development goals. Pangaea’s four targets were selected using the UN framework and will see Pangaea leading the pack as one of the first in Canadian venture capital identifying opportunities through a commitment to sustainability

CarbonCure Technologies customer’s concrete plant in Fresno, California. CarbonCure Technologies is a Halifax-based portfolio company of Pangaea Ventures.

The Build Up of Sustainability Reporting

This kind of reporting is picking up steam. In an article released by The Globe and Mail earlier this month, it was noted that there’s been an increase of promotion of specific environmental, social and governance (ESG) considerations. According to the Globe’s article, these considerations have a direct impact on the returns an asset can offer, and protect – or harm – the credibility and reputation of the investors that back them.

Haughian explains how these considerations also act as an opportunity.

(With impact reporting) stakeholders can actually visualize what the potential impact of a solution is, and be able to track progress against targets. It also helps inform stakeholders, including investors, on the magnitude of the opportunity. If a company, or a technology, can impact, let’s say, a billion people over time, then, you know that’s something that’s scalable and suitable for venture-type returns.”

The reporting, which began Jan. 1, 2018, is expected to be largely guided by earnings.

We have a model in terms of how our portfolio companies can have impact in four different areas,” notes Haughian. In a lot of cases, that model is revenue-driven. If we use a widget as an example; we look at how many widgets are sold per unit of revenue, and we can make assumptions based on knowing data that’s been published. In analyzing the impact that each widget can have, we can extrapolate what the impact is. In some cases, it would be tracking revenue or actual production levels from our portfolio companies.”

Pangaea expects to publish an annual report on their portfolio’s material impact, with the first report capturing 2017. You can view a detailed explanation of how the impact reporting will benefit investors in comprehensive case studies available on its website.

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