Why We Invested in NCX

Energize Ventures leads $50M Series B in the Natural Capital Exchange (NCX)

Eileen Waris
March 2, 2022

Energize Ventures is proud to lead the $50 million Series B investment in NCX—the leading marketplace for quality carbon credits. J.P. Morgan, Intercontinental Exchange (ICE), Dalus Capital, and Clearvision Ventures also joined the round, along with existing investors Scribble Ventures, as well as Marc Benioff's TIME Ventures. Energize partner Katie McClain joins the NCX board, and principal Eileen Waris joins as a board observer. This investment marks Energize’s first investment in carbon markets and nature-based solutions.

A new wave of demand for voluntary carbon markets

The last two years have been marked by a flurry of climate commitments as corporations increasingly allocate resources and investment dollars towards mitigating climate impact. According to GreenBiz, 38 percent of companies in the S&P 1200 have set or committed to setting a net-zero target. This represents a huge shift from just five years ago, when only one percent of companies had targets in place.

This wave of commitments has had a ripple effect in the global voluntary carbon market (VCM). The leading indicators of a major boom are visible. In 2020, value traded in the VCM doubled. In 2021 it tripled, exceeding $1B for the first time. While the market is still nascent, corporates are already purchasing offsets by the millions (tons and dollars). From tech giants like Microsoft and Stripe who typically lead the curve in sustainability, to heavy emitters like Delta and Shell, leaders across the full spectrum of the global economy are already allocating seven-figure budgets that only promise to get steeper over time.

As demand increases, we’re likely to find ourselves in a supply-constrained market. Let’s take the world’s largest compliance market as a case study— the EU ETS (Emissions Trading Scheme). As parties struggled to meet increasingly stringent emissions budgets, they were forced to buy more emission credits and supply became constrained. Prices tripled in the 2021, from roughly €30 per ton to over €90 per ton today. As pressure mounts on corporates to make progress on their emissions goals, a similar dynamic is likely to play out in voluntary markets. In a market that is not yet regulated, there are major discrepancies in the quality of credits from one provider to the other. All solutions are not created equal. Quality will be a significant driver of price.

A carbon solution that’s ready to scale today

The 2020s will be a defining decade for climate action. Swift action and significant investment will be needed to reach the goals laid out in the Paris Agreement and combat the inertia of climate change. Though there is no silver bullet for achieving emissions reduction, one thing is certain: time is of the essence, and solutions that are proven, readily available and scalable today can capture outsized value.

Enter: NCX – a science-driven forest carbon marketplace that leverages remote sensing and AI to deliver large-scale, immediate impact for climate and communities.

Energize has been researching carbon and emissions platforms for years, and while we’re excited about the novel negative emissions technologies that are emerging, we were hard-pressed to find high-quality emission reduction solutions that were both scalable and could deliver immediate, near-term value…until we met NCX.

As a tech-enabled marketplace for environmental commodities, what stood out to us about NCX were two things: their rigorous carbon accounting methodology and their technology-enabled approach to baselining and verification of carbon credits. NCX’s core business centers around developing high-quality credits which reflect the reality of climate impact through their data-driven, ton-year accounting approach. NCX Basemap, a combination of high-resolution forestry, timber, and climate data assembled over the past decade, can be leveraged to generate incredibly accurate baselines for carbon projects upon which carbon sequestration results can be measured and verified. The resulting high-quality, verifiable credits are directly advantageous to both their corporate customers and the landowners. What’s more, NCX’s marketplace is free for landowners to join and has no minimum acreage requirements, expanding the market and making it accessible to all.

Though not a panacea, natural climate solutions have the capacity to provide up to one third of emission reductions needed to reach 2030 goals. NCX’s leading solution is poised to shift the paradigm and prepare the industry to scale to meet impending demand.

The markets for renewable energy and carbon look alike

As climate and sustainability investors, we have an up-close view of the corporate entities and financial institutions that are leading the charge on climate change. Many of them are among our LPs. This access gives us a close understanding of their budgets, pain points and purchasing decisions when it comes to things like renewable energy adoption and emissions reduction. Many of the same customers who reduce emissions through clean energy purchases are also now looking to remove carbon through solutions like NCX.

As more companies look to high-quality carbon credits as a way to offset their emissions, NCX is focusing on scaling its supply to support this demand. This starts with enrolling more landowners on their platform and leveraging Basemap to lower the costs typically associated with scoping and baselining plots for potential carbon projects – which is how NCX operates similarly to project developer in many regards. This is another reason we were confident in our ability to support NCX’s growth post-investment. Aside from our track record of helping scale climate software companies commercially, Energize also has unique experience in renewable energy project development. Katie McClain, who is joining the NCX board, spent years scaling operations and developing utility-scale wind and solar projects for Invenergy (also an Energize LP) prior to joining Energize. We are excited to bring these insights to our partnership with the NCX team as we support their mission of enabling natural capital to reach its full carbon sequestration potential.

A data-driven approach built on forestry expertise

NCX, formerly known as SilviaTerra, was founded by Zack Parisa and Max Nova, a forester and a computer scientist who saw a gap at the intersection of the forest industry and legacy carbon projects. Through Microsoft’s AI for Earth program Zack and Max were able to build the world’s highest-resolution map of all forested acres in the contiguous U.S. This dataset was the foundation upon which NCX was built. Today, the platform leverages this data with expertise in forestry, timber, economics and technology to unlock the full carbon potential of our forests by enabling every landowner to be part of the climate solution.

NCX’s track record of building strong relationships with landowners positions them to develop and scale other natural commodities, such as those related to wildlife habitats and biodiversity. This latest infusion of capital will enable them to scale their product to reach new natural capital markets, expand geographically and grow their team with more mission-driven talent. We’re thrilled to partner with Zack, Max and the rest of the NCX team in carrying out their mission to connect every landowner to net-zero pioneers.