Eclipse Ventures calls for open-source analysis
Venture capital firm Eclipse Ventures is calling for an industry-wide open-source project that standardizes ESG ratings and evaluations for startups.
Why it matters: It's rare for a VC firm to make such a call, which would reveal certain proprietary deal-making information in a cut-throat, competitive landscape.
What's happening: Eclipse publicly released what it calls its ECO Framework as a shot across the bow of clean tech VC firms.
- The framework relies on Crane, a software analytics tool from climate nonprofit group Prime Coalition that models emissions reductions throughout a company's life cycle.
- In addition to underwriting typical investment criteria, Eclipse is using the software to also underwrite the investment's long-term emissions reduction potential as it builds its climate thesis within its broader industrial-sector focus.
Zoom in: Eclipse, an industrials-focused firm with $2.6 billion AUM, ran 11 of its portfolio companies through the model with conservative assumptions — 2% market penetration or minimal total addressable market size — to find that the companies have the potential to reduce emissions 40% by 2030.
- Eclipse partnered with Rho Impact, an advisory firm that focuses on ESG issues, to best understand the different ways a company could reduce emissions.
- Eclipse isn't a climate investor, but its focus on industrials does overlap with many climate initiatives that look to decarbonize heavy industry.
The bottom line: "The same way you do napkin math on TAM, we can do that with emissions reduction potential for each company," Eclipse Ventures partner Jay Knafel tells Axios.