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Michael Smith, who has a background in impact investing and as a world-touring DJ (yes, really), is one of the firm’s general partners. He said the fund’s goal is to reinvent what we buy: from the materials that go into products, to the services that use those materials, to the technology that could keep those materials in circulation. The company decides what to invest in based on what Smith describes as a project’s “circular regeneration potential” across five themes: their resource footprint, greenhouse gas emissions, material waste, toxicity and human impact.
In an interview with Protocol, Smith opened up about the fund’s philosophy, some of the early companies it backed, and whether its focus on consumer goods is consistent with the fact that we should all probably limit our consumption. After all, the just-released Intergovernmental Panel on Climate Change report found that demand-side changes could reduce emissions by up to 70% by mid-century. For Smith, however, we will never completely stop using. “[W]We believe there are better ways to consume,” he said.
This interview has been edited for brevity and clarity.
What is the rationale behind Regeneration.VC’s focus on decarbonizing consumer products?
With apparel accounting for 10% of global emissions, and food and agriculture accounting for a third of global emissions, we see opportunity to focus on the underlying supply chain of these companies, as well as on products passing through various consumer touchpoints. And we think there will be a lot more funds and a lot more capital going into this in the future. There have been specialist funds, but we are the only fund that we know of today focusing on consumer applications of circular and regenerative technologies.
It is relatively common to hear that individual actions have such a small impact on the climate crisis that changing our consumption habits should not be our priority. How does Regeneration.VC contextualize its consumer-centric approach, given the enormity of the challenge?
We firmly believe that every person can play a role in the climate emergency, and each of us can change the conversation in the supply chain and vote with our wallet. The CEOs of companies, the people who vote on climate legislation: all of these people are also individual consumers. And the more that momentum happens in apparel or food systems, the more it sets the stage for major regulatory changes. But there are also big businesses to build and address the underlying needs to get there and bring about change. If people aren’t asking for alternative packaging, food or clothing, how can we tackle emissions embedded in the supply chain through regulation alone?
We need to treat everything on the planet as vital, important and connected, and find new ways of consuming that are much more like those of our grandparents and generations before us.
To say that our individual actions don’t matter, I think is just plain wrong. There is an opportunity to educate and be aware of how we consume things. It can guide our decision-making with our families, with our communities, with the companies we work for, with the countries we are part of. And I hope it will reflect on [United Nations climate talks called] the Conference of the Parties and has real and significant impact and results.
What has been the reaction of mainstream brands to your work so far?
We have been very encouraged by the reactions from large portfolio companies and large corporations. Because they have made very bold statements about circularity, they are eagerly looking for options to achieve their goals and many of our investments are well positioned to help achieve these goals for major consumer brands.
We invest alongside large corporations in a number of our companies, and I would rate their interest as very high and vital to their future. We believe that within a year or two, major trade agreements will be announced; in fact, a number of our portfolio companies have direct partnerships or commercial agreements with large corporations.
Can you show me some examples of companies Regeneration.VC has invested in so far?
Our first investment is a company called CleanO2, a commercialized carbon capture micro-enterprise based in Calgary. The company revolves around a patented CarbinX unit, which is about the size of a refrigerator. It is installed in natural gas heating systems, where it captures emissions and converts them into carbonates. These carbonates are high-value, energy-intensive ingredients that are used in many industrial products like soaps, detergents, and fertilizers. So we take emissions from HVAC systems and convert them into things like soap and fertilizer that are directly usable in these buildings or buildings nearby.
To say that our individual actions don’t matter, I think is just plain wrong.
Another example is a company called Arrive. They are accelerating the transition to the circular economy for retailers by providing turnkey rental and resale services to big box retailers. One of their launch partners was Dick’s Sporting Goods; if you go to Dick’s site you can buy or rent things. If you are renting, Arrive on the back end takes care of the shipping, receiving, cleaning and related packaging. And the idea here is that if a piece of clothing, a tent or golf clubs can be reused many times – instead of being redone many times – there is great potential for emissions savings.
Most environmentalists and climatologists say we need to buy less stuff. Do you think the projects Regeneration.VC invests in could lead to increased consumption in a way that could be counterproductive?
The minimum viable opportunity for us is that we immediately replace something that is already made and we are able to reduce the emissions associated with it or even apply regenerative thinking and pull the carbon out of the ground and make materials.
The maximum — and what you mean is something that really excites me — is to get more of the things that we have. How to extend the life of products? How are heritage products made? When you and I were kids, you had pieces from grandparents passed down from generation to generation. We want to encourage that, and we’re looking for companies that build things that aren’t single-use and go to landfill. We need to treat everything on the planet as vital, important and connected, and find new ways of consuming that are much more like those of our grandparents and generations before us. Are we here to eliminate consumption? No, it’s not viable; but we think there are better ways to consume.
Is there a different timescale associated with the decarbonization of these consumer sectors, such as leather or plastic, compared to, for example, heavy industry?
The good news about clothing and food is that because they are driven by consumer tastes and preferences, we can move the underlying supply chains within them faster. And you’ve seen it happen in food, you’re seeing it happen in fashion, you’re going to see it happen in packaging. This kind of change can happen much faster than the decarbonization of heavy industry, and that encourages us. This is a climate emergency that we find ourselves in, and we believe we can bring about change on the ground in these industries very quickly.