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💸 "Microsoft’s $1B Climate Innovation Fund"

The Interchange

Photo by Matthew Manuel / Unsplash

Table of Contents

Host: Shayle Kann
Guest: Brandon Middaugh | Director | Climate Innovation Fund at Microsoft Sustainability
Category: 💸 Funding

Podcast’s Essential Bites:

[11:20] “Around the time we were setting our 2030 goals, […] our CFO, Amy Hood, who receives investment proposals and new ideas from every corner of the world on a regular basis, […] really saw a couple of these in the sustainability theme and said, […] what should we be doing on a on a capital front? And simultaneously in our business operations, our teams […] were really seeing a need for capital, beyond our four walls to accelerate the type of solutions that we need to buy at scale. And so between those two things, we recognized that for Microsoft to make this transition, it's not enough to do that internally, we're going to need to be able to buy solutions that may not exist at scale today. And that's really where the concept of the Climate Innovation Fund originated.”

[12:46] “When we took a look at the need in the market, we first set out to say, what are the gaps in the marketplace that mainstream capital is not serving? And then what are the solutions? Those of us who've worked in climate technology for some time, recognize that there's a portfolio of solutions you need to have. And so first, we looked from a science based target setting perspective, what technologies are necessary to achieve the commitments that we're laying out? Then we mapped those in terms of what's receiving funding, what's not, and what's most important to Microsoft's operations, to our customers, and the industry around us.”

[14:27] “The specific gaps in the market [have] changed from a technology perspective. They haven't changed as much in terms of the type of capital that's missing. We still see early project finance, early scaling capital at the intersection of software hardware in particular, to be a gap. But specific technologies within that some of those are receiving. [….] There are certain sub sectors that are very popular and there are others that are almost orphaned, maybe because people are concerned based on prior experiences a decade ago in the clean tech space, or because it's just a longer capital cycle to bring those solutions to scale.”

[16:14] “In the early project finance category, the investment we're working on with Climeworks is a great example […]. Climeworks is a direct air capture company. They have built a facility in Iceland, that is capturing CO2 out of ambient air, and permanently storing it underground and in a basalt formation. So this is an example of the type of technology that while it's received venture capital funding to be developed in the lab, and so on, really often comes up against a wall when it comes to going to the markets and getting some of the early early scaling capital for specific infrastructure assets.”

[18:01] “The carbon removal strategy becomes a really critical part of our pathway to net zero. For us the real transition in the last couple years here has been the transition to emphasize negative emissions specifically, net negative solutions, whether nature based or engineered, that are actually pulling CO2 out of the air and serving as a carbon sink to offset the ongoing emissions. These are different from avoided emissions, which are a form of reduction elsewhere in someone else's activities.”

[23:12] “When we came out of the gate in forming this fund and launching it in 2020, what we defined were four key principles. And these are really designed to describe the type of impact we're looking to have. First, we defined that we're looking to have a climate impact by 2030. We're investing in the types of technologies, the types of solutions that will bring that transformational decarbonisation to market on this decade timeframe as opposed to multiple decades in the future. Second, we articulated that we're focusing on underfunded markets, the gaps I mentioned earlier. Third, we're emphasizing solutions that also have a positive climate equity or social co-benefit associated with that. And lastly, we are looking for areas of shared alignment things, where we can bring relevant insight to the to the table, where there's some alignment to Microsoft's core business, or that of our customers that allows us to have insight into the end market so that we can be accelerating these decarbonisation solutions and they can accelerate our decarbonisation pathway as well.”

[26:43] “Microsoft's climate strategy does include an emphasis on carbon, as well as water, waste, and ecosystems. And all of them are either contributors to, or impacts of climate change. Waste, we see in terms of embodied carbon being another really direct pathway to decarbonisation and carbon reduction. Water is the primary way that climate change and climate impacts are mediated. And so we really see the two as intrinsically tied together. And then ecosystems that really [are] related to climate in the sense of both the insights into climate impacts, as well as the type of carbon sinks and nature based solutions.”

[28:09] “[Microsoft’s internal carbon fee] is a fee that touches every business group across Microsoft. And it's used to support green initiatives, including carbon removal purchases […]. And so today, our carbon fee of $15 a tonne, supports the carbon removal that we then need to do for the areas that are beyond the scope of what we can reduce today. And we think that that's a really important way to both drive the measurement, the tracking of our carbon ledger, and then also to really tie our operational activities directly to the negative emission purchases we are making.”

Rating: ⚡⚡⚡

🎙️ Full Episode: Apple | Spotify
🕰️ 42 min | 🗓️ 09/24/2021
✅ Time saved: 40 min