This past July was the hottest month on record globally; sea ice reached its lowest levels; and for the fourth consecutive month, the temperature of the ocean’s surface rose to new highs, according to the World Meteorological Organization. The effects of an evolving climate are being felt, seen, and experienced around the globe. This is especially the case for emerging countries and economically vulnerable people, who tend to bear the brunt of the negative impacts of climate change (OECD).
The need for action has become apparent—and urgent—which is why Valor is doubling down on our climate investing efforts. For more than a decade, we have invested in companies across energy, agriculture, carbon credit, and mobility, with a particular focus on innovation coming out of Brazil. With the importance of decarbonization and sustainability as evident as ever, we intend to continue to dedicate our people, capital, and network toward championing technologies that are solving the climate challenges of today and tomorrow. The new investment scenario that Climate is going through is positioning consumers toward greener assets while simultaneously offering a positive return on investment and simplifying their access to financing is exceptionally potent. For example, energy transition is being proved to not only be solely altruistic, but also could have a genuine financial sense, creating a significant breakthrough that can elevate a Climate business from a niche market to mass-market success.
The confluence of several factors is contributing to both the increased demand for and supply of decarbonization solutions today.
- To begin with, the public sector has changed its tune. The regulatory landscape is more favorable to climate tech, and recent legislation, including the S. Inflation Reduction Act, has created new incentives for climate-focused businesses. The IRA will direct $1B to grants and loans for improving energy efficiency, water efficiency, and climate resilience in affordable housing. Europe has also positioned itself launching at the beginning of the year the Green Deal Industrial Plan, with the aim of creating a favorable regulatory and financial environment across the entire value chain of clean technologies. Its ultimate goal is to reach climate neutrality by 2050
- Climate change has gained social momentum and gripped the popular imagination, and younger generations have become increasingly aware of the dangers of global warming. Climate tech companies raised +$40B across ~1,000 venture and growth deals in 2022, 17% of VC deployment
- Perhaps most importantly, the cost of developing and deploying decarbonization solutions at scale has decreased significantly.
Together, this creates a set of advantageous conditions for the growth of climate technologies. One country, in particular, presents fertile ground for climate innovation and investing: Brazil.
While developing climate solutions should be a global interest, in a number of important ways, Brazil is leading—or has the potential to lead—the global transition to net-zero emissions. Already, approximately 85% of the country’s power matrix is renewable. By contrast, the rest of the world derives only 26% of its power from renewable sources. Approximately 75% of Brazil’s car fleet adheres to biofuels. Further, more than any other country, Brazil has the potential to be the largest carbon sink on the planet, thanks to its reforestation and afforestation capacities (BCG). And as the demand for food grows, Brazil has the ability to serve as a sustainable food provider. Increasingly, the country is turning to regenerative agriculture to export food products like soy, orange juice, sugar, meat, and corn (BCG).
Moreover, Brazil’s size, in terms of population, GDP, and geographic area, combined with a burgeoning tech ecosystem, a supportive and active public sector, as evidenced by the Ministry of Environment’s National Adaptation Plan to Climate Change, and widespread consumer awareness, place the country in a position to continue to serve as a catalyst for decarbonization.
The world is beginning to take notice. In recent years, investors have deployed substantial capital toward climate innovation, especially renewable energy, in the country, according to data from the Brazilian Ministry of Mines and Energy. However, Brazil’s climate sector remains undercapitalized. This August, The World Economic Forum issued a report that found that Brazil will need an estimated $200 billion in order to reach its 2030 climate goals. The report further argued that while Brazil has the potential to become “a global hub of green solutions,” it needs to establish new financing structures and mobilize private sector investments.
Our Climate Commitments
At Valor, we recognize this opportunity, and have been supporting companies tackling climate change for more than a decade. Our deep expertise and relationships in the region allows us to find, support and scale the best homegrown clean tech in Brazil, and also help pioneers around the world tap into Brazil’s rich ecosystem.
Our support goes much deeper than just financial capital, and extends to sharing our intellectual and relationship capital, applying our longevity, investment expertise, robust boots-on-the-ground presence in Latin America, and network to help advance our portfolio companies’ missions.
Our investments span the range of climate solutions, including:
- Energy – Solfácil, the first solar investment platform in Brazil, and Nextron Energia, an “energy-as-a-service” clean-tech platform that simplifies access to renewable energy
- Agriculture – Agrolend, a fintech focused on credit concession for Brazilian agribusiness, and Arado, a provider of supply chain and business solutions to small and mid-sized farmers
- Mobility – Tembici, the largest bike-sharing company in Latin America.
- Carbon credits – Open Forest Protocol (OFP), a Switzerland-based Web3 protocol designed to improve the speed, scalability, quality, and economics of carbon verification.
Decarbonizing the global economy is one of the biggest challenges our population currently faces—but also one of the greatest opportunities for innovation. At Valor, we have the strengths and capabilities to pursue and execute on these opportunities and support founders that are on the front lines of the climate battle. By investing in a more sustainable future for Brazil, we can contribute to a more sustainable Latin America, and a greener, more sustainable world.