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The Oil and Gas Climate Initiative's Climate Investments arm is pursuing up to $750 million for a second fund, Alan has learned.

Why it matters: The fund will largely target investments in physical assets instead of software, joining a growing number of hardware-focused climate investment vehicles.

Details: OGCI Climate Investments has received commitments for its new "Decarbonization Acceleration Fund," though it declined to elaborate.

The 10-year fund will consider investments between $25 million and $75 million.

It'll generally target companies across a broad swath of climate tech, including energy, chemicals, metals, cement and concrete, heavy-duty vehicles, aviation, buildings and industrial agriculture.

Fundraising began in December with a focus on corporate and institutional investors. It expects to hold final close by Q1 2024.

Catch up fast: OGCI Climate Investments is the venture arm of a U.K.-based coalition of oil majors, including Aramco, BP, Chevron, Exxon Mobil and Shell.

The group raised over $1 billion for its debut climate fund. It has targeted startups engaged in methane reduction, carbon capture, and emissions reduction for hard-to-abate sectors like aviation and heavy industry.

Zoom out: A growing number of climate investors are focusing on physical assets or "hard tech." They often require more capital, longer timelines and potential higher-risk profiles than software.

Fifth Wall, for example, has raised a new $240 million climate fund partly focused on hardware startups in the real estate space, Axios has learned.

Just Climate, the U.K. investment firm set up by former vice president Al Gore, in February unveiled its first three investments — all in hard assets.

And Energy Impact Partners in November raised $485 million for its Deep Decarbonization Fund — a 15-year supplement to its more traditionally venture-like Flagship Fund.

1 big thing: $750M climate fund

Illustration of cloud dollar sign disappearing into the air

Mike Schroepfer is ready to debut his next act: climate VC firm Gigascale Capital, Megan reports.

Why it's the BFD: Gigascale will back early-stage climate companies with a particular focus on hardware startups.

Driving the news: Former Meta CTO Schroepfer — aka Shrep — founded Gigascale with former Prelude Ventures general partner Victoria Beasley and former Fine Structure Ventures investor Evaline Tsai.

The firm is entirely funded by Schroepfer's family office, and will seek additional LPs down the road, he tells Megan. 

Schroepfer declined to share the firm's initial fund size. Gigascale will invest in pre-seed through Series A stage companies and typically write checks for "a few million" dollars, he says.

Zoom in: As the firm's name implies, Gigascale plans to focus its investments on hardware businesses that have potential to grow.

The team has so far worked in thematic stretches, Schroepfer says. The first focus area was building decarbonization and industrial electrification, but the firm has not yet announced any investments publicly.

Tsai is interested in companies working on sustainable aviation fuels, and Beasley is interested in grid interconnectivity.

Though the firm's initial focus is on hardware, the founding team isn't writing off software or consumer-facing investments entirely, as long as there is a tangible climate impact.

Of note: Schroepfer is part of a broader trend of Big Tech executives launching climate investment firms.

Most notably is Chris Sacca's Lowercarbon Capital, which has cemented itself as an active investor for early-stage climate companies. Before starting Lowercarbon, Sacca was an executive at Google.

What they're saying: "As I was doing philanthropic work, I realized that if we want to solve a climate crisis, we need to sort of reengineer almost every industrial and consumer system on the planet, and that's going to require capital," Schroepfer says of his decision to spin up Gigascale independent of his existing philanthropic activities.

What we're watching: Gigascale's first investments as indication of where it plans to place its biggest bets.

2. The BFD: Ex-Meta CTO unveils Gigascale Capital

Illustration of a paper airplane made of out of a dollar flying on a looping path

Exxon CEO Darren Woods said his company is working to develop technology to reduce emissions and that so-called direct air capture (DAC) is among the most promising developments, Axios Pro editor Michael Flaherty writes.

Why it matters: Exxon's role in climate tech advancement has huge impacts across the sector and on the ability of energy companies to lower emissions.

Details: Woods appeared with Sen. Joe Manchin (D–W.Va.) on a Milken Institute panel on Monday to discuss energy policy and climate tech costs.

"We think carbon capture is going to play a really critical role" in reducing emissions, Woods said. "We capture more Co2 than any other company in the world. The technology is real. It happens, it works. The issue is the cost. That issue exists on all the alternatives."

The Exxon CEO was deliberate in both advocating for climate tech and also stressing that oil and gas remains a critical part of global energy infrastructure.

"It's an energy dense, very affordable, and extremely reliable source of energy. We're trying to find something that competes with that on availability, on affordability, and that's a challenge," he said.

Zoom in: Manchin said trying to eliminate fossil fuels is a mistake.

"You can't eliminate your way to a cleaner environment. You need to innovate," he said.

Of note: Manchin said he would push to repeal parts of the Inflation Reduction Act that could raise the national debt.

“I’m going to repeal sections of what they’re trying to expand on,” Manchin said. “They’re trying to expand the bill beyond what we wanted.”

Meanwhile: Woods said he was particularly excited about developments with DAC, a technology that removes heat-trapping carbon from the ambient air.

"We're doing a lot of work in direct air capture. For me, direct air capture is the holy grail. There's a lot of potential there," he said.

Between the lines: Exxon has been perhaps the most outspoken oil major in declaring its continued commitment to oil and gas. Carbon capture and carbon removal effectively give it the license — or fig leaf — to stick with that core business.

Exxon last month laid out an ambitious energy transition strategy focused on carbon capture, hydrogen and biofuels.

3. Exxon's quest for its "holy grail"

Sen. Joe Manchin and Exxon CEO Darren Woods

Sen. Joe Manchin (D–W.Va.) and Exxon CEO Darren Woods at the Milken Global Conference. Photo: Michael Flaherty

😕 Deal doldrums: Dealmakers don't know what to do, paralyzed by macro and market flux, so they aren't doing much of anything at all, Dan Primack writes from the Milken Global Conference in LA.

The macro concerns are mostly around rates, with the Fed beginning its two-day meeting today. There’s also the debt ceiling fight, slowing U.S. economic growth, and ongoing efforts to decouple from China.

The market concerns are mostly around pricing, with wide gaps remaining between buyer and seller expectations.

🫠 De-risking heat: Bloomberg Green lists five ways that finance is trying to offer insulation from heat waves.

They encompass heatstroke insurance, wage-loss recovery, crop insurance, weather futures, and a monitoring service for dairy farmers whose livestock might produce less milk due to heat stress.

⚖️ Study up on Chevron deference: The Supreme Court may indirectly impose fresh limits on how federal regulators can address climate change without explicit congressional blessing, Axios' Ben Geman writes in Generate.

The court said Monday it will hear litigation about "Chevron deference" — the longstanding doctrine that agencies deserve leeway in writing regulations when statutes are either vague or silent on a topic.

4. Temperature check

Illustration of an earth emoji combined with a sick face emoji.

• Energy Impact Partners closed its Elevate Future Fund I with $111.9m in LP commitments. The fund will target underrepresented founders. Investors include Fortis, Southern Company, Xcel Energy, PPL, Amazon, Microsoft, CenterPoint Energy and General Electric. https://axios.link/40X6wKt

• Polymateria, a UK-based biodegradable plastics manufacturer, closed a £20m Series B led by ABC Impact and Indorama Ventures. Milltrust Ventures participated. https://axios.link/42g0cPf

• Above Food, a Canadian provider of plant-based food products, agreed to go public at an implied US$319m enterprise value via Bite Acquisition Corp., a SPAC led by Mera Corp. founder Rafael Aguirre. https://axios.link/3Nr0vTf

• GM nixed several hundred full-time contract positions as part of a $2b cost-cutting program, per the Detroit Free Press. Most of the cuts were in the company’s product-development division in suburban Detroit. https://axios.link/3HxXpZQ

• Essential Utilities announced that subsidiary Aqua Pennsylvania signed a purchase agreement to acquire a wastewater system in Greenville, Pa., for $18m. https://axios.link/3VlKLml

• Verbio North America Holdings, the U.S. subsidiary of German biofuels company Verbio AG, acquired South Bend Ethanol, an operating ethanol plant in Indiana. Verbio plans to invest $230m over the next three years to expand the plant. https://axios.link/41YRpSa

• Blue Whale Materials, a D.C.- and South Korea-based lithium-ion battery recycler that’s a portfolio company of Ara Partners, acquired Eclipse Energy, a Greenfield, Ind.-based battery testing and evaluation lab. https://axios.link/3VrsIeI

• Alaska Airlines and ZeroAvia, a Hollister, Calif.-based developer of electric powertrains for commercial aviation, are retrofitting a Bombardier Q400 with a hydrogen propulsion system, which they say will make the aircraft the largest zero-emissions plane. https://axios.link/3LshYbh

• Fisker, the LA-based EV developer, entered an agreement with SF-based Ample to incorporate swappable batteries into its Ocean electric SUV. https://axios.link/3Nwf2gy

• BAE Systems and Eaton are collaborating to develop drive systems for electric trucks. https://axios.link/3NuFxCM

• Seurat Technologies, a Wilmington, Mass.-based additive metals manufacturer, entered an agreement to print metal components for Siemens Energy gas turbines. https://axios.link/3ndit0U

• California Resources entered a  storage-only carbon dioxide management agreement with subsidiary Carbon TerraVault Holdings and Yosemite Clean Energy. https://axios.link/3LnUqEk

• Glenfarne Energy Transition, an NYC- and Houston-based energy and infrastructure firm, executed a collaboration agreement with Samsung Engineering to complete feasibility studies for green hydrogen and ammonia projects in Chile. https://axios.link/41XfTev

• Gradiant, a Boston-based wastewater treatment technology developer, announced partnerships with SLB and Rio Tinto to reduce carbon and water impacts of mining operations. https://axios.link/3p2j0mV

• Anaergia, an Ontario-based RNG producer, announced that subsidiary SoCal Biomethane will supply RNG for Toyota Motor North America at the Port of Long Beach in California. https://axios.link/40QStWR

• Electra Battery Materials, a Toronto-based battery materials supplier with a cobalt-copper project in Idaho, signed an MOU with Three Fires Group, a First Nations-owned investment group, to form a lithium-ion battery recycling joint venture in Ontario. https://axios.link/3Lx92BA

• NW Natural, a Portland, Ore.-based RNG developer, started production of a second RNG facility at a Tyson Foods plant in Dakota City, Neb. https://axios.link/41UrhaX

5. Hot deals

• XGS Energy, a Palo Alto, Calif.-based geothermal energy company, hired Josh Prueher as CEO. Prueher was previously founder and CFO of Broad Reach Power. https://axios.link/3NvCiv5

• SunPower, the Richmond, Calif.-based residential solar and storage company, hired Jennifer Johnston as EVP and COO. https://axios.link/44xYwmj

• Hyzon Motors, a Rochester, N.Y.-based manufacturer of heavy-duty fuel cell electric vehicles, hired Sue Sun-LaSovage as chief human resources officer. Sun-LaSovage was previously chief people officer at Via Motors. https://axios.link/3NwuyZM

• Sepion Technologies, an Emeryville, Calif.-based lithium-metal battery technology developer, hired Brian Sisk as CTO. Sisk was previously senior director of energy storage systems at Rivian. https://axios.link/3Lpatls

• Rivian hired Anthony Sanger as VP of facilities for its planned manufacturing facility at Stanton Springs North in Georgia. https://axios.link/3VlUxoA

• H2U Technologies, a Chatsworth, Calif.-based developer of proton exchange membrane electrolyzers for green hydrogen production, hired Liviu Cosacescu as VP of engineering. Cosacescu was previously VP of electrolysis and fuel cell technologies at ZEV Station. https://axios.link/3LqZwQ5

6. It's personnel

🥂 Join Axios Pro Deals and business editor Dan Primack for an exclusive happy hour event in San Francisco on Tuesday, May 9! Register here.

🥘 Megan is going on a trip next week, so her all her meals have one goal — use up all the food in the house before Saturday.

🏠 It's much quieter in the suburbs. More birds — and spookier trips into the basement to do laundry.

Thanks to Michael Flaherty and Phoebe Neidl for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and trip planners.

May 02, 2023

1 big thing: $750M climate fund