Viewpoint: A playbook for early-stage climate software investing

Viewpoint: A playbook for early-stage climate software investing

Photo: Ella Ivanescu/

An economist by training, Aktsa Efendy is a tech builder & venture capitalist, having invested in a slew of ventures in Southeast Asia with a core focus on education, health, and climate.

The global carbon offset market has been rocked by several scandals lately. A report in The Guardian in January this year showed that more than 90% of the rainforest offset credits approved by the world’s leading certifier, Verra, are likely to be ‘phantom credits’ that do not represent genuine carbon reductions. Another in-depth piece by The New Yorker in October showed that fake credits are rampantly being sold in the market.

Carbon offsets, which are essentially credits that an organisation can buy to neutralise its carbon footprint, were touted as a solution to global warming.

It is important to note here that deploying the right technologies can help strengthen the guardrails of higher-integrity carbon offsets.

Specifically, private capital can do a lot of good by increasingly backing more vertical-focused climate software players that solve very specific peripheral problems across the harder-to-tackle parts of the carbon project development value chain.

In Southeast Asia, there are quite a few vertical-focused climate software startups such as Ocean Supercluster-backed Coastal Carbon, Antler-backed Sangti Tech, and OpenSpace-Ventures-backed Thryve Earth.

How tech can solve problems in the carbon value chain

There are three areas in the carbon project development value chain where unique problems exist that vertical-focused climate software can ameliorate.

The first is in the pre-qualification stage. Potential offsets typically take many months, or even years, and can cost an arm and a leg to pass the pre-due-diligence (PDD) stage before its carbon sequestration potential can be verified. The problems are amplified in the case of more nascent offset strategies, such as seaweed, where no commercially available technology exists to pre-qualify their sequestration potential cheaply.

The second is in the monitoring and measurement stage, which has two sides. One, carbon projects that have gone through the PDD phase and are currently in development must be continuously audited on their carbon sequestration progress, which can be broadly tracked by Measurement, Reporting, & Verification (MRV) tools that are also used during the initial pre-qualification stage. Two, companies looking to go carbon-neutral must also first get “accounted” for their current emission levels to know how much offsets they must eventually purchase. While abundant in-market software now exists that can do carbon accounting affordably, they are often limited to Scope 1 & 2 emissions tracking, lacking in the ability to provide visibility over Scope 3, where most emissions are often concentrated.

The third and final area in the carbon project development value chain involves the actual brokerage of ready-to-be-sold, verified credits.  The Verra incident teaches that marketplaces must be able to scalably curate & further vet the integrity of credits, ensuring that buyers have access to only the highest-integrity offsets. This is done to ultimately encourage project developers to maintain high standards for the offsets they introduce to the market.

Tech ventures solving problems in the carbon value chain

Source: Diagram from Bain & Temasek.


In Southeast Asia, we are increasingly witnessing the emergence of vertical-focused climate software ventures that are tackling the nuances in the carbon project development process as explained previously.

In the pre-qualification stage, we have seen the likes of Coastal Carbon, built by University of Waterloo scientists Kelly Zheng & Thomas Storwick, that pair a proprietary developed AI model and in-situ IoT sensors that help to accurately measure the carbon sequestration potential of seaweed. This was previously considered a notoriously difficult undertaking, given that existing satellite technologies struggle to measure submerged aquatic vegetation like seaweed that is often over 250m below the seal level.

In the monitoring & measurement stage, we have seen the likes of Sangti Tech, built by former Bain climate consultant Hitesh Bhuraria and Google software engineer Nishant Singh, that help enterprise logistics providers and shippers in Southeast Asia and India in automating the accounting of specifically Scope 3 logistics carbon emissions, subsequently providing actionable insights on how to decarbonise through access to high-quality carbon offsets through their own built marketplace.

In the carbon credit sales stage, we have seen the likes of Thryve Earth, built by Vinay Kulkarni, another former Bain climate consultant. Unlike typical offset marketplaces where they simply broker available vetted credits, Thryve is involved in the origination of the credits’ underlying projects since Day 1, providing a comprehensive toolbox that forest and wetland project developers can use to streamline the PDD, MRV, & even verification application processes in a single platform. By being involved across virtually every juncture of the project development value chain, Thryve can provide an unparalleled layer of curation and transparency for credits that they eventually sell to buyers.

Playbook for startups and investors

Emerging climate fund managers like Rohin Pathak & David Pardo of are increasingly focused on zeroing their investments in Southeast Asia. 

Given the nascency of the climate tech market in Southeast and drawing from proprietary learnings, two key lessons ought to be kept in mind for both climate asset allocators and venture builders in the region.

For investors, a key focus should be scouting for and backing founding teams with a unique twin set of crucial abilities: the engineering prowess to develop technology that isn’t yet commercially available and a nuanced understanding of the unique challenges that impede potentially high-integrity offsets from being able to come online at scale, such as funding access, scalability, and compliance with established frameworks to ensure quality and longevity of sequestration potential.  

The typical VC framework of assessing opportunities based on comparable companies (i.e. are there large, successful ventures out there that the evaluated opportunity can be benchmarked against?) and sized ceilings (i.e. how big is the potential market) might be helpful yardsticks. But strictly abiding by them will leave investors passing on potentially lucrative opportunities, especially as early-stage climate investing requires value-creation as opposed to a value-capture perspective.

Source: Bessemer Venture Partners

For startup founders, the extensive time and capital required to innovate demand a careful balance between retaining control over their ventures and securing enough funding to test and validate their concepts through each critical phase of development.

With a scarcity mindset, founders must assume that even if the triad of lab-proven experiments, successful commercial pilots, and go-to-market sales has not been achieved, scalability is yet within the horizon, begging the need for further experimentations.

Edited by: Pramod Mathew

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