It is no secret that Environmental, Social, and Governance (ESG) investing keeps grabbing a bigger chunk of overall investment dollars. According to a recent article on the Stanford Social Innovation Review (SSIR) more than $100 trillion in assets under management now adhering to ESG principles. However, not every part of the financial world has fully embraced it.
Venture capital funds have largely remained on the sidelines. SSIR found that only five of the 50 largest VC funds mention ESG or sustainability on their websites, and only a dozen more have made firm public commitments to ESG.
One company looking to change that is Energy Capital Ventures (ECV), which bills itself as the first and only venture fund focusing on ESG imperatives and the digital transformation of the natural gas industry.
ECV is eyeing early-stage investment in companies that work on solutions pertaining to decarbonization, renewable natural gas, hydrogen, and other clean energy challenges. Its investments primarily focus on Series A companies, with financial commitments ranging from $2 million to $5 million.
The Chicago-based firm gained notice in August when it raised $45 million in a funding round that included five publicly traded natural gas utilities to act as limited partners: Avista Utilities, Black Hills Corporation, NiSource, Southwest Gas, and Spire.
That round represented the first tranche of capital toward a larger fund that will target additional natural gas and diversified utilities, as well as companies participating in and along the natural gas value chain. Because ECV is partnering with some of the nation’s leading natural gas utilities, it can provide entrepreneurs with immediate access to commercial opportunities and first-hand industry insight.
“The opportunity to provide a platform to foster innovation and collaboration for our strategic partners who play such a critical role in our country’s energy transformation is truly amazing,” ECV managing general partner Vic Pascucci III said in a press release.
Pascucci has plenty of experience raising capital. He previously worked as a managing partner at Lightbank, another Chicago VC firm, and has led numerous investments in both multibillion-dollar companies and startups. Those investments include the publicly traded companies TRUECar, Care.com, and Coinbase. Pascucci’s general partners at ECV are Jeff Yingling, Ray O’Connor, and Rick Viton.
ECV is quick to point out that as fossil fuels go, natural gas has a comparatively low environmental impact. At current capacities, natural gas yields 50% fewer carbon emissions than coal, according to the Center for Climate and Energy Solutions, and 30% less carbon than petroleum.
“Natural gas is the cleanest and most readily available source of energy in the United States today – so much so that the recent reduction of carbon emissions in the U.S. is primarily attributed to the country’s shift from coal to natural gas,” ECV noted on its website.
One big priority for ECV’s limited partners is to help foster innovation in the energy industry, which Avista President and CEO Dennis Vermillion said is “essential to achieving a clean energy future. New technologies must emerge and evolve to propel us forward.”
Linn Evans, President, and CEO of Black Hills Corp., had a similar take, saying that “continually innovating to deliver leading technologies is critical to being ready to serve the future energy needs of our customers and communities. This collaborative investment in Energy Capital Ventures in a cleaner energy future through safe and reliable natural gas technologies aligns with our ambition to make tomorrow even better than today.”
To help drive natural gas ESG innovation and digital transformation, Energy Capital Ventures has assembled a diverse Strategic Board of Advisors from across the natural gas industry. The Board includes both active and retired corporate executives, regulators, global energy consultants, and civic leaders from companies and organizations such as First Energy Corp., Frontenac, Exelon, the U.S. Department of Energy, California Resources Corporation, Edison International, and the California African American Chamber of Commerce.
ECV looks to leverage its various relationships to grow both its portfolio and industry impact. The firm’s general areas of investment include the following:
The firm’s ESG strategy will center on investing in companies and technologies that can lower carbon emissions and make natural gas even more sustainable. Here are some of the main focus areas:
- Reducing pipeline leaks
- Capturing and managing methane
- Hydrogen energy
- Gas infrastructure
- Fuel switching in buildings
The main focus here is on investing in innovative companies and technologies that can create a safer and more efficient enterprise, including in these areas:
- Machine learning and artificial intelligence implementation
- Logistics and supply chain innovation for local distribution companies (LDCs)
- Predictive analytics
- Drone/UAV maintenance
- Enterprise SaaS