Global warming is an accelerating problem, which no one can ignore. Thus, we at Butterfly Ventures have committed to eliminating all our carbon emissions. We have started a collaboration with CO2Esto, which offers the possibility to acquire emission allowances from the EU Emissions Trading Market. As part of our new sustainability strategy, we acquire the same amount or more emission allowances than we emit each year. Thus, Butterfly Ventures becomes the first carbon-neutral VC in Europe.

VCs are the agents of change

According to Crunchbase data, 32 billion euros was invested in European startups in 2019. In the USA, startups raised 97 billion euros last year. Venture capitalists play a major role in the development of business environments around the world and they have the capability to drive technological and economic change. With this in mind, we feel that it is an opportunity, as well as a duty, to embrace change also in environmental matters.

Combatting climate warming doesn’t mean compromising returns – instead, addressing the issues and taking concrete actions is the only sustainable way to operate in the long-term. Future generations, leaders, and consumers are fully aware of the climate crisis and the importance of sustainability across industries will keep rising.

Our approach to carbon footprint reduction

CO2Esto calculated our flight emissions and assisted us with other calculations. We calculated the number of other emissions by using Hiilifiksu carbon footprint calculator, which is tailored for non-governmental organizations and other associations. The calculator takes into account five different scopes: energy, travel, waste, services and events, and purchases.

The results indicated that a vast majority, 77 percent, of Butterfly Ventures’ emissions come from traveling, while other scopes account only for 23 percent.

carbon neutral venture capital

Carbon footprint (kg CO2 ekv.)

Travel: 27,246
Events and services: 6,511
Purchases: 1,592
Energy: 788
Waste: 312

Measuring the pros and cons

After calculating the number of our emissions and analyzing the results, we made a plan to reduce the numbers. It wasn’t a straightforward task because the topic is pretty complex. For example, quitting flying would limit the opportunity to run this type of business drastically. Meeting people and networking is a major part of a VC’s – especially an early-stage VC’s – job. Flying might not be that necessary for a VC in London or New York, as those are metropolises with thousands of startups and industry events. However, the situation is slightly different in more remote areas, such as Finland. Staying put in one place would limit the opportunity to meet promising entrepreneurs and fellow investors. Some startups could be left without funding.

Many of our portfolio companies develop highly meaningful innovations. For example, IPDx helps in detecting diseases earlier and easier. Surgify makes bone surgery safer. Optiwatti cuts heating costs up to 40 percent. Being mobile maximizes the chances of finding great investment opportunities alike. Flying is bad, investing in impactful startups is good – where to draw the line? It’s impossible to measure the results of different solutions precisely. After pondering on different angles, we came up with three points.

Annual 10 percent (per portfolio company) decrease in emissions from traveling

It’s obvious that the end boss of the scores is traveling – meaning mostly flying in our case. Traveling accounts for 27 tons of carbon emissions, so first and foremost, we will focus on it. Annually, we will decrease traveling emissions by 10 percent per portfolio company. The decrease will be accomplished by – well, flying less – more efficient distribution of tasks between the team members, and by organizing more meetings on Skype instead of seeing face-to-face.

We’re planning to do this as long as air travel isn’t part of the emissions trading scheme. If a significant environmental tax would be issued, we would deduct that from the compensation budget as we wouldn’t want to pay for the same things twice.

Waste recycling system

An unpleasant fact is that we haven’t had proper recycling systems at our offices. As we’re a small firm that doesn’t manufacture or sell anything physical, the amount of waste is small. However, the system will be reformed. Plastic, paper, and biowaste won’t see each other in our trash bins anymore.

Green energy

Thirdly, we will switch to green energy in our Oulu office. In Helsinki, our office is in Maria 01’s premises and in Stockholm, we’re at Epicenter. Thus, we can’t decide the type of electricity by ourselves in those locations (at least not yet).

Eliminating unavoidable carbon emissions

The third and final step was to choose a service provider for compensating Butterfly Ventures’ unavoidable carbon emissions. There are several operators in the market, and we discussed with a few of them. We chose to eliminate our emissions through CO2Esto’s service because their model is market-driven, has an immediate effect, and offers the most effective route to prevent carbon emissions. The company was founded by climate researchers from VTT (Technical Research Centre of Finland) in 2016.

As mentioned, CO2Esto acquires emission allowances from the EU ETS (Emissions Trading System) and keeps them away from the market. The EU ETS is the world’s biggest emissions trading system, as it accounts for over 75 percent of international carbon trading. It limits emissions from more than 11,000 industrial plants and covers around 45 percent of all greenhouse gas emissions from the EU. The EU ETS works on the “cap and trade” principle: a cap represents the total amount of emissions that can be emitted within the area under the system. Over time, the cap is decreased so that the number of emission drops. Eliminating emissions through the EU ETS directly prevents a certain amount of greenhouse gases to be emitted in Europe.

As the calculations indicated, Butterfly Ventures produced 36,488 tons of carbon emissions in 2019. We have decided to acquire 50 tons of emission allowances (including a safety margin of 37 percent) from the EU ETS, which makes Butterfly Ventures carbon neutral. Our goal is to keep reducing Butterfly Ventures’ carbon footprint (per portfolio company) each year, and that way, also decrease the number of emission allowances we need to acquire.

Other options for compensation

Other options that we considered:

Taimiteko compensates carbon emissions by increasing the number of carbon sinks in Finland. The organization’s mission is to plant 10,000 hectares of a new forest by 2030.

WWF Green Office
WWF Green Office system helps companies in decreasing their carbon footprint, finding sustainable solutions, and using natural resources more environmental way.

Ilmastoapu offers compensation through different Gold Standard certified projects, which produce VER (Verified Emission Reduction) units.

Nordic Offset
Nordic Offset offers environmental consulting, commercial emission reduction and Gold Standard certified emission reduction credits from the voluntary carbon market.

Future steps

Combating climate change is not a simple challenge that one can just ignore after buying 50 tons of emission allowances. So, what’s next? We have some ideas that we’re planning to tackle in the future.

Creating best practice for portfolio companies

So far, we have invested in 62 startups and keep investing in roughly 10 companies every year. We have a plan to create best practices regarding environmental concerns for the startups we’re funding.

Measuring impact on a wider scale

As mentioned, we were struggling when we tried to weigh the impact of our actions. With this in mind, we decided to join The Upright Project’s research consortium that aims to build an overview of Nordic investing and business in 2020. The Upright Project has built a model to measure a company’s impact on the environment, health, society and knowledge. We’ll get back to this once we get the results!