The BwB Talk Series gives our network around the world the opportunity to engage with and learn from innovative leaders in impact, finance, and the environment. The deep knowledge and experience shared across the series provides new perspectives, strengthens our market intelligence, and fuels the generation of new ideas.
In September, we were joined by Béla Hanratty, Ross Madden, and Shravan Shah from venture fund Keeling Capital to hear more about how the firm is working to tackle climate change by investing in innovative climate tech solutions.
Long-time friends Ross and Béla established Keeling Capital in 2022 after spending around 15 years working in investment and financial markets, bringing on Tony, who has about 30 years of experience of investing in renewables and decarbonisation strategies, as a third member of the team. Shravan recently came on board to lead sector research and support fund allocations. Keeling Capital was named one of Ireland’s ‘Hot 100 Startups’ for 2024 by the Business Post.
Ross began by explaining that the name ‘Keeling Capital’ is a reference to the Keeling Curve, the plot of atmospheric CO2 concentrations. The mission of the firm is to help bend that curve by investing in innovative, scalable, and profitable technology. The team believe that their ‘fund-of-funds’ model puts them in a strong position to tackle the complexities of climate tech investment by derisking the process through diversification.
Ross helped frame the discussion by defining ‘climate tech’ through Keeling Capital’s six key areas of focus: energy, heavy industry, built environment, transport and mobility, food and agriculture, and carbon management. Under each of these categories, there are sub-sectors that each have their own value chain, with the result that a diverse range of different companies, business models, and technologies can be covered. Keeling’s primary investment interest is early or growth-stage businesses.
Speaking about opportunities, Béla discussed the macro-economic and political tailwinds that are driving investment in the energy transition, such as the upward trend in commitments by governments, as well as by industry sectors and individual corporations, to take meaningful action. He highlighted that the related background real-economy environment has seen year-on-year investment in the transition increase significantly in recent years, predominantly in infrastructure and the electric vehicles sector.
The number of people working on climate tech has “increased by an order of magnitude in the past four or five years… We now have some of the most talented and ambitious entrepreneurs of a generation dedicated to building climate companies”.
This surge in entrepreneurial activity has seen a rapid rise in the number of venture funds targeting early-stage climate-tech enterprises. In many cases, these funds have taken a sector-specific approach. For family offices, foundations, pension funds, and other similar types of investors, “navigating this space is extremely complex as there’s been an explosion in the number of investment options and the general lack of track record makes informed decision-making and risk assessment very difficult,” said Béla.
The team went on to explain how Keeling Capital's fund-of-funds approach, under which Keeling invests in the best-managed, dedicated climate venture funds, helps to overcome these challenges. The fund-of-funds model allows for diversification across businesses at various stages of development, in various sectors and sub-sectors, and in different geographies. It also allows for a variety of manager styles or approaches. “We aim to de-risk climate tech investments by diversifying across 10 to 15 funds ultimately, which translates into about 200 to 300 underlying companies,” said Ross.
The team also discussed their approach to investment fund selection. “Our starting point is ‘where do emissions come from?’ The vast majority arise from energy in one way or another. So, our focus is heavily concentrated around the ‘energy complex’,” said Béla. Keeling Capital consider reducing demand for fossil fuels through greater efficiency and scaling of low-carbon electrification and heat as key priorities, but also look at opportunities in low-carbon molecule development for industries such as aviation and shipping, as well as carbon management (capture and removal).
Question Time
One of the most engaging aspects of our Talk Series is the Q&A session with our expert speakers. The summary below highlights just a few of the fantastic additional insights shared by the Keeling Capital team.
BwB Managing Director Jennifer Faust asked about Keeling Capital’s value-add for LPs.
Ross noted that the firm’s edge comes from their deep expertise in climate. “We spend 100% of our time focused on climate, speaking to climate investors and looking at climate companies and climate funds. That gives us an advantage from an information perspective,” he said, going on to highlight the importance of collaboration and knowledge sharing within the broader ecosystem. “We share deal flows with GPs, introduce LPs to GPs, and GPs to LPs. We try to approach our relationships with GPs as peers and not simply as arm’s-length investors,” he added.
The firm believes that, given the development stage of the climate tech market, a fund-of-funds is currently the best approach for facilitating access for LPs, but that its strategy will likely shift as the market grows and matures. “We call ourselves a climate finance platform because our own strategy will evolve with the market,” added Ross.
BwB Managing Director, Steve Smith, asked the team to elaborate on the fund selection process, noting that in a fund-of-funds structure this is “a mission critical” element of the process.
The team have adopted a ‘three-gate’ approach. “The first gate is climate relevance – are they investing in the right things,” said Ross. “The second gate is the value chain of private markets investing – essentially looking at sourcing selection, underwriting, value creation, and exits…And the third gate is the operational and organisational set-up.”
BwB Executive Director, Christine Zhou, asked if there are any market segments that Keeling Capital see as currently undervalued or where significant unexplored potential exists.
Béla stated that one major area of opportunity is in grid management, particularly “the extent to which grid flexibility can be increased, for example, looking at issues such as demand-side response or storage. And grid technology – how to make the grid smarter and get more capacity out of existing infrastructure”.
He offered Belgium as an example, explaining that the country already has 10 gigawatts of installed solar, mostly on residential rooftops, which is roughly the same as its peak demand. “We were told that increasing the amount of solar penetration would not currently reduce the carbon footprint of the country’s electricity because the carbon intensity of managing the grid would increase in parallel.”
Ross added a broader note on the importance of open sourcing information and engaging with individuals across the ecosystem as crucial to driving activity and developments forward, pointing to Béla’s blog as one example of this. “Getting people engaged, energised, and excited about this investment space and its opportunities is something we really care about.”
Sincere thanks to Keeling Capital for sharing their expertise and insights.
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