Sebastian Lindner-Liaw

Quantifying the climate impact of early-stage ventures

The 2023 International Energy Agency Net Zero update estimates that 35% of the emissions reductions required to achieve net zero by 2050 will come from technologies not yet commercially available (IEA, 2023). This necessitates dedicated funding for climate-focused startups that can develop and scale the novel technologies the world needs to reduce future emissions. Climate-specific venture capital (VC) firms are emerging across Europe to help fill this funding gap. The question becomes: with thousands of climate startups emerging every year, and a limited amount of capital to fund them, how can those with the greatest emissions reduction potential be identified? As no standardized methodology exists to answer this question, this thesis reviews the academic, gray, and VC-specific literature on avoided emissions calculations. This review illuminates the growing activity in this field of study and the discrepancies between academic best practices and current practical applications. Qualitative data analysis techniques are then used to synthesize the key concepts relating to methodological design from the reviewed literature. Nine concepts are identified which are used as the foundation for an avoided emissions calculation methodology suitable for a climate venture capital firm. The proposed methodology takes 11 data inputs and outputs three avoided emissions pathways that cover the probable range of the startup’s future avoided emissions. Three case studies are conducted to validate the proposed methodology and an industry expert is interviewed for feedback. The end result is a proposed avoided emissions calculation methodology that has been theoretically validated and is ready for deployment in a venture capital environment.