As active impact investors, we’ve had the privilege of meeting hundreds of entrepreneurs doing incredible work across each of our four areas of focus: education, health, economic empowerment and resource efficiency. We’ve learned a lot about what opportunities exist to leverage technology for good and how various companies are solving these problems. As we approach our five year anniversary, we thought it would be valuable to share some of our observations with the broader impact investing field.
Part two in the series is an overview of what we’ve seen in the world of resource efficiency. Because Impact Engine is focused on software and data-driven companies, it can be challenging for us to find companies that are a fit, but we have made two investments over the past year and hope to make many more in years to come. Below, we’ve identified three broad themes we’re seeing.
Regional droughts and water shortages, as well as aging infrastructure in places like Flint, MI, have cast a spotlight on clean water access and increased the urgency for farms and government agencies to find more efficient solutions. There is also a growing need for more innovative sewer system and stormwater management tools. To put things in perspective, the annual revenue for products and services in the water industry exceeds $600 billion. In this sector, we’ve found that water-focused startups have one of three major end goals: conservation, improvement of water quality (either for drinking or for wild sources like rivers, lakes, oceans) or improvement of sustainable access. Startups are tackling these goals in a variety of different ways: using smart meters to detect water leakage, implementing a water credit system for high-risk drought areas, and developing technology to monitor water quality. We see a major opportunity here for startups building analytics and reporting platforms that can more effectively manage water usage and quality and increase access to areas in need.
Coal, petroleum, natural gas, and other mined fuels provide the majority of US electricity and other US energy needs, much of it imported, and with just over 4% of the world’s population, the US is one of the top CO2 emitters from burning fossil fuels. Fortunately, the cost of clean energy is decreasing and the market is growing. In 2016, renewable energy sources accounted for about 10% of total U.S. energy consumption and about 15% of electricity generation. We see a lot of interesting startups focused on both core technologies as well as marketplaces for alternative energy sources (e.g. wind, solar, biomass, hydropower, or biofuel). We also see opportunities in energy storage, installation, and management (e.g. building or utility-level energy monitoring and actionable suggestions) as well as analytics & reporting platforms and consumer cost analysis tools to track CO2 emissions and report office, plant and home major energy efficiencies.
One of our portfolio companies allows commercial real estate owners to measure and manage the environmental impacts of their building portfolios. Measurabl is a sustainability reporting software that enables real estate owners and occupiers to collect, manage, report, and act upon sustainability data. Subscriber data is then mined to build custom benchmarking and identify opportunities for improving sustainability, such as lighting retrofits.
The agtech and food sectors are booming right now, with companies creating solutions to reduce food waste (finding uses for ugly and excess produce) and thereby reduce resource utilization (water, fertilizer, energy). Agricultural production accounts for 92% of total human water usage and contributes 13.5% of total global GHG emissions. On top of that, demand is growing. The United Nations Food and Agriculture Organization (UN FAO)projects that food production must increase by 70% over the next forty yearsto satisfy increasing demand due to population growth and rising economic prosperity. The need for efficient tech solutions in the sector has never been greater.
Startups are using many approaches to tackle food waste and resource management. Companies are using drones and satellite software applications to optimize water and fertilizer use. As global warming is changing weather patterns, farms are using predictive analytics tools to manage weather risk. Though farmers are relatively technology-averse, they want to be able to integrate the many targeted solutions currently available on the market. Industry groups are trying to break down the platform integration barriers.
One Impact Engine portfolio company tackling food waste is Full Harvest. Up to 24% of fruits and vegetables are discarded at the field, often due to imperfections in shape, size or color. Full Harvest is the first institutional B2B platform matching large farms with food & beverage companies to bring them significantly lower priced, yet perfectly usable, imperfect and surplus produce that would otherwise have been discarded. They are solving the food waste problem at the farm level, reducing waste and creating value along the entire supply chain.
Another emerging sector in waste management is recycling and toxic waste management. While the United States is home to only 4% of the global population, it is responsible for more than 30% of the planet’s total waste generation. One of the biggest contributors of toxic waste is electronic waste (or “E-waste”), which represents 2% of trash in American landfills but 70% of overall toxic waste. Startups in the recycling industry cover the three Rs (Reduce, Reuse, Recycle), which include everything from increasing participation in recycling programs through online marketplaces, increasing the effectiveness of recycling through municipalities and operators, and finding alternate uses for old home goods and other e-waste. Unfortunately, the waste industry is slow to adapt to tech innovation and has been resistant to change. Additionally, the proliferation of flexible packaging has presented many challenges to the recycling industry. However, municipalities have become increasingly aware of the cost of waste and are seeking help from companies using education, market-creation and analytics platforms to drive reuse and recycling.
We are excited to see the landscape of resource efficiency continue to evolve, and we welcome your thoughts. Join us next month for part three of our Impact Tech Opportunity series.
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