PitchBook Data, Inc. John Gabbert Founder, CEO Nizar Tarhuni Vice President, Institutional Research and Editorial Daniel Cook, CFA Head of Quantitative Research Institutional Research Group Analysis Anikka Villegas Analyst, Fund Strategies & Sustainable Investing anikka.villegas@pitchbook.com Emerging Sustainable Investing Opportunities: Carbon Utilization How carbon utilization can create a double bottom line of financial returns and positive social and environmental Impact PitchBook is a Morningstar company providing the most comprehensive, most accurate, and hard-to-find data for professionals doing business in the private markets. Insights developed in collaboration with John MacDonagh, Senior Analyst, Emerging Technology at PitchBook Data. Key takeaways Data Alyssa Williams Senior Data Analyst • As usage of carbon capture technologies continues to rise, the question of what pbinstitutionalresearch­@pitchbook.com to do with captured carbon has grown more urgent, and carbon utilization is part of the answer. • The financial return potential of this opportunity is dictated in large part Publishing by carbon capture’s proliferation, government funding and regulatory Designed by Caroline Suttie support, challenges faced by its main alternative, and corporate Published on December 11, 2023 sustainability commitments. • Carbon utilization has the potential to create positive environmental Impacts Contents by enabling a more sustainable lifecycle for captured carbon, providing lower- Key takeaways 1 Introduction 2 Financial return potential 3 Environmental and social Impact potential 7 carbon substitutes for traditional products, and reducing reliance on an alternative that presents environmental risks in addition to social ones, creating a minor social Impact potential as well. 1 Emerging Sustainable Investing Opportunities: Carbon Utilization Introduction Venture capital, often serving as the incubator of emerging technologies, is well positioned to invest with positive social and environmental Impact goals in mind. VCs can draw on their expertise and resources to foster the businesses that have the greatest potential for both Impact and returns, especially when keeping an eye toward companies for which success necessarily marries the two. This fact has not gone unnoticed by VCs, which represent 42.7% of the total count of Impact funds raised since 2007.1 Yet, the landscape of prospective opportunities is expansive and rapidly evolving, making it difficult to keep track of which ones have the greatest financial—and Impact—return potential. Emerging opportunities often go beyond the investment areas traditionally associated with sustainability, such as solar energy or electric vehicles, encompassing a host of lesser-known technologies. Even within the familiar themes, there are niche investment opportunities developing. In this analyst note series, we surface opportunities across emerging technology verticals such as agtech, mobility tech, and carbon & emissions tech that we believe are poised to perform well within the next decade, from both financial-return and Impact-return perspectives. In doing so, we hope to help guide VCs pursuing the “double bottom line” through the complex landscape to the most fruitful opportunities. For each analyst note in the series, insights are developed in collaboration with a PitchBook Emerging Technology Analyst covering the relevant vertical, using their subject matter expertise and previous research, as well as some external resources, to inform our perspective on the space. We discuss the opportunity’s major drivers of return potential as well as the investment risks and obstacles it faces. We also explore its social and environmental Impact potential, how the opportunity fits into various IRIS+ Impact themes, 2 and potential metrics to help quantify those Impacts. Ultimately, the aim of this research is to give VCs and their LPs a better understanding of how the opportunities align to their return and sustainability goals and provide companies operating in these spaces a sense of how to optimize and communicate their social and environmental Impact. This analyst note focuses on carbon utilization, which encompasses a wide range of developing approaches to making use of captured carbon dioxide (CO2) and is the main alternative to carbon sequestration. Historically, CO2 was largely used in urea production and enhanced oil recovery, the latter of wh