Fund managers can leverage ESG-related data to generate insights

Almost two centuries ago, gold prospectors in California set off one of the greatest rushes for wealth in history. Proponents of socially conscious investing claim fund managers will start a similar stampede when they discover that environmental, social and governance (ESG) insights can yield treasure in the form of alternative data that promise big payoffs — if only they knew how to mine it.

First, let’s be clear: ESG is not on the fringe.

There may be some truth to that line of thinking if you take some of the rhetoric and advertising out of the equation.

First, let’s be clear: ESG is not on the fringe. The European Union has implemented new financial regulations via the Sustainable Finance Disclosure Regulation (SFDR). These improve ESG disclosures and considerations and help to direct capital toward products and companies that benefit people and the planet. As we write, the U.S. Securities and Exchange Commission is also considering drafting and implementation of ESG-related regulations.

Whether enacted or currently under consideration, these rules encourage fund managers to integrate sustainability risks into their business processes, report on them publicly, stamp out greenwashing, and promote transparency and knowledge among investors. Accordingly, it will become easier to compare firms’ sustainability efforts, too, allowing stakeholders from all corners to make more informed decisions.

Incorporating ESG factors into investment strategies is not new, of course. The world’s largest asset managers have been practicing it for years. According to the Governance & Accountability Institute, 90% of companies listed on the S&P 500 now produce sustainability reports, an increase of 70 percentage points from more than a decade ago.

Yet some are still groaning about adopting an ESG investing mindset; they see ESG as a nuisance that detracts from their mission of earning high returns. But could this mindset mean they are missing important opportunities?

Don’t wait

Waiting for new mandatory ESG reporting and compliance framework standards in the U.S. puts Americas-focused managers at a significant disadvantage. Fund managers can start gaining insights today from alternative data originating in ESG-related data stemming from climate change, natural disasters, harassment and discrimination lawsuits, and other events and information that can be mined.

Ford to open new lab to develop next-gen lithium-ion and solid-state batteries

Ford Motor Company will open a $185 million R&D battery lab to develop and manufacture battery cells and batteries, a first step toward the automaker possibly making battery cells in-house. The facility comes as yet another signal to consumers and other automakers that the auto giant is no longer hedging its bets on the transition to battery electric vehicles.

Company executives declined to provide a timeline on when Ford might scale its battery manufacturing, but it is clear that the company intends this facility to lay the groundwork for such a future.

The Ford Ion Park will be based in southeast Michigan and will be home to more than 150 employees across battery technology development, research and manufacturing. The facility will likely be around 200,000 square feet and will open at the end of 2022. The facility will be supported by Ford’s batteries benchmarking test laboratories in nearby Allen Park, Michigan, which is already testing battery cell construction and chemistries. Also nearby are Ford’s product development center in Dearborn and Ford’s battery cell assembly and e-motor plant in Rossville.

The new facility will be led by Anand Sankaran, who is currently Ford’s director of electrified systems engineering. He described it as a “learning lab” to create both “lab-scale and pilot-scale assembly of cells,” including next-gen lithium-ion and solid-state batteries.

Ford is thinking about the transition to BEVs in phases, Hau Thai-Tang, Ford’s chief product platform and operations officer, explained. In this first phase, when BEVs are being largely purchased by early adopters, Ford’s working with external supplier partners. The company is now preparing for phase two, when Ford will bring more products to market and BEVs will take more of the market share. “So in preparation for that next transition into the second phase, we want to give Ford the flexibility and the optionality to eventually vertically integrate,” Thai-Tang said.

“Our plan to lead the electric revolution will certainly be dependent on the progress that we make on battery energy density, as well as cost,” Thai-Tang told reporters Tuesday.

“The formation of the Ford Ion Park team is a key enabler for Ford to vertically integrate and manufacture batteries in the future,” Thai-Tang said. “This will help us better control our supply and deliver high-volume battery cells with greater range, lower cost and higher quality.”

This would be a huge boost for domestic manufacturing of battery cells, which is dominated by companies based in Asia, such as Panasonic (Tesla’s main supplier), South Korea-based LG Chem and SK Innovation, Ford’s current battery cell supplier. Executives said the global pandemic and the semiconductor shortage have highlighted the importance of having a localized and domestically controlled supply chain.

“We know in terms of batteries, it’s a very capital-intensive business to be in,” Thai-Tang said. “The best tier one suppliers in the world spend a large amount of their revenue on R&D spending, and then the capital expenditure required to build and stand up battery plants is quite high. So as we think about this, the scale and volume that we would need to have dedicated sites for Ford is a big consideration, and we’ve talked about how bullish we see this transition happening. We’re at a point where now, there’s sufficient scale for us to entertain having greater levels of vertical integration at some point.”

Tesla wants to make every home a distributed power plant

Tesla CEO Elon Musk wants to turn every home into a distributed power plant that would generate, store and even deliver energy back into the electricity grid, all using the company’s products.

While the company has been selling solar and energy storage products for years, a new company policy to only sell solar coupled with the energy storage products, along with Musk’s comments Monday, reveal a strategy that aims to scale these businesses by appealing to utilities.

“This is a prosperous future both for Tesla and for the utilities,” he said. “If this is not done, the utilities will fail to serve their customers. They won’t be able to do it,” Musk said during an investor call, noting the rolling blackouts in California last summer and the more recent grid failure in Texas as evidence that grid reliability has become a bigger concern.

Last week, the company changed its website to prevent customers from only buying solar or its Powerwall energy storage product and instead required purchasing a system. Musk later announced the move in a tweet, stating “solar power will feed exclusively to Powerwall” and that “Powerwall will interface only between utility meter and house main breaker panel, enabling super simple install and seamless whole house backup during utility dropouts.”

Musk’s pitch is that the grid would need more power lines, more power plants and larger substations to fully decarbonize using renewables plus storage. Distributed residential systems — of course using Tesla products — would provide a better path, in Musk’s view. His claim has been backed up in part by recent studies from the Massachusetts Institute of Technology, which found that the U.S. can reach a zero-carbon grid by more than doubling its transmission capacity, and another from Princeton University showing that the country may need to triple its transmission systems by 2050 to reach net-zero emissions.

Musk is imagining a radically different electricity grid system than the one we have today, which is centrally controlled and run by grid operators, independent organizations such as the California Independent System Operator or the Electric Reliability Council of Texas. It’s a vision that is riddled with bureaucratic and logistical challenges. Utilities and regulatory policy would need to solve how to handle a large influx of so-called “distributed energy resources,” such as solar panels on residential roofs, which may run contrary to utilities’ long-established business models.

It’s important to note that whether renewables-plus-storage will be alone sufficient to decarbonize the energy grid is a contentious question. Many experts believing that the land use demands, storage requirements and intermittency issues of renewables may make their role as the country’s primary electricity generator a pipe dream. But Musk has long been bullish on the renewables-plus-storage model, tweeting last July that “physics favors electric transport, batteries for stationary storage & solar/wind for energy generation.”

Crusoe Energy is tackling energy use for cryptocurrencies and data centers and greenhouse gas emissions

The two founders of Crusoe Energy think they may have a solution to two of the largest problems facing the planet today — the increasing energy footprint of the tech industry and the greenhouse gas emissions associated with the natural gas industry.

Crusoe, which uses excess natural gas from energy operations to power data centers and cryptocurrency mining operations, has just raised $128 million in new financing from some of the top names in the venture capital industry to build out its operations — and the timing couldn’t be better.

Methane emissions are emerging as a new area of focus for researchers and policymakers focused on reducing greenhouse gas emissions and keeping global warming within the 1.5 degree target set under the Paris Agreement. And those emissions are just what Crusoe Energy is capturing to power its data centers and bitcoin mining operations.

The reason why addressing methane emissions is so critical in the short term is because these greenhouse gases trap more heat than their carbon dioxide counterparts and also dissipate more quickly. So dramatic reductions in methane emissions can do more in the short term to alleviate the global warming pressures that human industry is putting on the environment.

And the biggest source of methane emissions is the oil and gas industry. In the U.S. alone roughly 1.4 billion cubic feet of natural gas is flared daily, said Chase Lochmiller, a co-founder of Crusoe Energy. About two-thirds of that is flared in Texas, with another 500 million cubic feet flared in North Dakota, where Crusoe has focused its operations to date.

For Lochmiller, a former quant trader at some of the top American financial services institutions, and Cully Cavness, a third generation oil and gas scion, the ability to capture natural gas and harness it for computing operations is a natural combination of the two men’s interests in financial engineering and environmental preservation.

NEW TOWN, ND – AUGUST 13: View of three oil wells and flaring of natural gas on The Fort Berthold Indian Reservation near New Town, ND on August 13, 2014. About 100 million dollars’ worth of natural gas burns off per month because a pipeline system isn’t in place yet to capture and safely transport it. The Three Affiliated Tribes on Fort Berthold represent Mandan, Hidatsa and Arikara Nations. It’s also at the epicenter of the fracking and oil boom that has brought oil royalties to a large number of Native Americans living there. (Photo by Linda Davidson / The Washington Post via Getty Images)

The two Denver natives met in prep-school and remained friends. When Lochmiller left for MIT and Cavness headed off to Middlebury they didn’t know that they’d eventually be launching a business together. But through Lochmiller’s exposure to large-scale computing and the financial services industry, and Cavness’ assumption of the family business, they came to the conclusion that there had to be a better way to address the massive waste associated with natural gas.

Conversation around Crusoe Energy began in 2018 when Lochmiller and Cavness went climbing in the Rockies to talk about Lochmiller’s trip to Mt. Everest.

When the two men started building their business, the initial focus was on finding an environmentally friendly way to deal with the energy footprint of bitcoin mining operations. It was this pitch that brought the company to the attention of investors at Polychain, the investment firm started by Olaf Carlson-Wee (and Lochmiller’s former employer), and investors like Bain Capital Ventures and new investor Valor Equity Partners.

(This was also the pitch that Lochmiller made to me to cover the company’s seed round. At the time I was skeptical of the company’s premise and was worried that the business would just be another way to prolong the use of hydrocarbons while propping up a cryptocurrency that had limited actual utility beyond a speculative hedge against governmental collapse. I was wrong on at least one of those assessments.)

“Regarding questions about sustainability, Crusoe has a clear standard of only pursuing projects that are net reducers of emissions. Generally the wells that Crusoe works with are already flaring and would continue to do so in the absence of Crusoe’s solution. The company has turned down numerous projects where they would be a buyer of low-cost gas from a traditional pipeline because they explicitly do not want to be net adders of demand and emissions,” wrote a spokesman for Valor Equity in an email. “In addition, mining is increasingly moving to renewables and Crusoe’s approach to stranded energy can enable better economics for stranded or marginalized renewables, ultimately bringing more renewables into the mix. Mining can provide an interruptible base load demand that can be cut back when grid demand increases, so overall the effect to incentivize the addition of more renewable energy sources to the grid.”

Other investors have since piled on, including: Lowercarbon Capital, DRW Ventures, Founders Fund, Coinbase Ventures, KCK Group, Upper90, Winklevoss Capital, Zigg Capital and Tesla co-founder JB Straubel.

The company now operates 40 modular data centers powered by otherwise wasted and flared natural gas throughout North Dakota, Montana, Wyoming and Colorado. Next year that number should expand to 100 units as Crusoe enters new markets such as Texas and New Mexico. Since launching in 2018, Crusoe has emerged as a scalable solution to reduce flaring through energy intensive computing, such as bitcoin mining, graphical rendering, artificial intelligence model training and even protein folding simulations for COVID-19 therapeutic research.

Crusoe boasts 99.9% combustion efficiency for its methane, and is also bringing additional benefits in the form of new networking buildout at its data center and mining sites. Eventually, this networking capacity could lead to increased connectivity for rural communities surrounding the Crusoe sites.

Currently, 80% of the company’s operations are being used for bitcoin mining, but there’s increasing demand for use in data center operations, and some universities, including Lochmiller’s alma mater of MIT, are looking at the company’s offerings for their own computing needs.

“That’s very much in an incubated phase right now,” said Lochmiller. “A private alpha where we have a few test customers… we’ll make that available for public use later this year.”

Crusoe Energy Systems should have the lowest data center operating costs in the world, according to Lochmiller and while the company will spend money to support the infrastructure buildout necessary to get the data to customers, those costs are negligible when compared to energy consumption, Lochmiller said.

The same holds true for bitcoin mining, where the company can offer an alternative to coal-powered mining operations in China and the construction of new renewable capacity that wouldn’t be used to service the grid. As cryptocurrencies look for a way to blunt criticism about the energy usage involved in their creation and distribution, Crusoe becomes an elegant solution.

Institutional and regulatory tailwinds are also propelling the company forward. Recently New Mexico passed new laws limiting flaring and venting to no more than 2% of an operator’s production by April of next year, and North Dakota is pushing for incentives to support on-site flare capture systems while Wyoming signed a law creating incentives for flare gas reduction applied to bitcoin mining. The world’s largest financial services firms are also taking a stand against flare gas with BlackRock calling for an end to routine flaring by 2025.

“Where we view our power consumption, we draw a very clear line in our project evaluation stage where we’re reducing emissions for an oil and gas projects,” Lochmiller said. 

Mighty Networks raises $50M to build a creator economy for the masses

Mighty Networks, a platform designed to give creators and brands a dedicated place to start and grow communities, has closed on $50 million in a Series B funding round led by Owl Ventures.

Ziff Capital Partners and LionTree Partners also participated in the financing, along with existing backers Intel Capital, Marie Forleo, Gretchen Rubin, Dan Rosensweig, Reid Hoffman, BBG Ventures and Lucas Venture Group. The investment brings Palo Alto-based Mighty Networks’ total raised since its 2017 inception to $67 million. 

Mighty Networks founder and CEO Gina Bianchini — who started the company with Tim Herby and Thomas Aaron — is no stranger to building nurturing environments for community building. Previously, she was the CEO and co-founder of Ning, where she led the company’s rapid growth to three million Ning Networks created and about 100 million users around the world in three years. 

With Mighty Networks, Bianchini’s goal is to build “a creator middle class” founded on community memberships, events and live online courses.  

“Basically we have a platform for people to create communities the way that they would create e-commerce stores,” she told TechCrunch. “So what Shopify has done for e-commerce, we’re doing for digital subscriptions and digital payments where the value is around a community that is mastering something interesting or important together, and not just content alone.”

The company’s flagship Business Plan product is aimed at new creators with the goal of giving them an easy way to get started with digital subscriptions, Bianchini said. Established brands, organizations and successful creators use the company’s Mighty Pro plan to get everything Mighty Networks offers on their own branded iOS, iPad and Android apps. 

Mighty Networks — which operates as a SaaS business — has seen impressive growth. In 2020, ARR climbed by “2.5x” while annual customer growth climbed by 200%. Customers are defined as paying creators who host their community, courses and events on their own Mighty Network. The company also saw a 400% annual growth in payments, or rather in subscriptions and payments where a creator or brand will sell a membership or an online course.

The pandemic was actually a boon to the business, as well as the fact that it launched live events last year.

“We were able to help many businesses quickly move online — from yoga studios to leadership speakers and consultants — and now that the world is coming back, they’ll be able to use the features that we’ve built into the platform from day one around finding members, events and groups near them, as well as making everything via not just the web but mobile apps,” Bianchini said.

One of the startup’s goals is to help people understand that they don’t need massive amounts of followers (such as 1 million followers on TikTok) to be successful creators. For example, a creator charging 30 people for a subscription that amounts to around $1,000 a year can still pull in $30,000 a year. So while it’s not huge, it’s certainly still substantial — hence the company’s intent to build a “creator middle class.”

Mighty Networks has more than 10,000 paying creators, brands and coaches today. Users include established creators and brands such as YouTube star Adriene Mishler, Xprize and Singularity University founder Peter Diamandis, author Luvvie Ajayi Jones, comedian Amanda Seales, Girlboss founder Sophia Amoruso and brands such as the TED conference and wellness scheduling platform MINDBODY.

“Content alone will kill the creator economy,” Bianchini said. “We can’t build a thriving creator movement on an exhausting, unfair dynamic where content creators rent audiences from big tech platforms, are required to produce a never-ending stream of content and get paid pennies for it, if they get paid at all. Creators need to own their own community on the internet, where members meet each other and get results and transformation.” 

Owl Ventures Managing Director Amit Patel said his firm was impressed by Mighty Networks before it even met the company.

“No company in this space has more loyal, passionate believers, and when we saw firsthand that creators could successfully build paid communities and online courses on a Mighty Network with as few as 30 members, we wanted to be a part of unlocking this creator middle class for a million more creators,” Patel said in a written statement.

The company plans to use its new capital on product development across media types, payment options and expansion into new markets. 

Earlier this month, Pico, a New York startup that helps online creators and media companies make money and manage their customer data, announced that it had launched an upgraded platform and raised $6.5 million in new funding. Essentially, the company is building what it considers to be an operating system for the creator market.