Our Investment in Pachama
Scaling the forestry carbon offset market through trust and incentives
Reforestation is often touted as a readily available, affordable, and low-tech solution to address climate change. As one of nature’s original means of carbon sequestration, forests have the capacity to draw down a third of atmospheric emissions according to The Nature Conservancy; and at the average price of $10 per ton, it’s hard to beat in terms of cost-effectiveness. For these reasons, it’s no surprise that, as The Wall Street Journal reported, reforestation is one of the leading go-to options for companies to achieve their net-zero commitments. However, despite its efficacy and price, reforestation still faces a number of headwinds to scaling meaningfully. Much of it has to do with the opportunity cost of preserving a forest as opposed to commercializing it for logging or razing it for agricultural or residential development. Carbon offset markets, typically used by CO2 emitting corporations, are designed to shift the economics in favor of protecting forests. On paper, this marketplace offers compelling incentives to preserve and expand these natural carbon sinks; however, verifying a forested land’s sequestration potential remains a manual and expensive process, performed by a fragmented and costly network of entities. As a result, traditional forest-based carbon offsets are hampered by a lack of trust from potential large scale purchasers.
Pachama directly tackles these inefficiencies in the forestry carbon offset market by building trust and transparency between forest developers and offset purchasers to usher in a growth in reforestation. We’re very excited to announce our investment in Pachama and support the vision of its founders, Diego Saez-Gil and Tomas Aftalion, in sequestering gigatons of CO2 each year by scaling the footprint of forests.
Pachama endeavors to sequester gigatons of CO2 by scaling reforestation through its trusted carbon offset market.
What is Pachama?
Founded in San Francisco, Pachama has built a carbon offset market through which companies can purchase high-quality carbon credits from verified forest project developers. One of its central value propositions is creating trust and transparency in a market that has historically lacked those qualities. To deliver transparency, Pachama uses satellite data to analyze a forest’s sequestration performance.
Pachama synthesizes several types of topographic and arboreal data captured from satellites and drones to ascertain and monitor carbon sequestration activity of a forest.
By aggregating data from sources such as radar, satellite imagery, and LIDAR, Pachama extrapolates a range of insights through its proprietary artificial intelligence and machine learning models. This provides a more robust understanding of the health and sequestration performance of a forest and does so at materially reduced costs relative to manual inspection and measuring. The result is an offset exchange with high-quality credits buyers can trust and lower costs for forestry developers who are able to sell into a much larger market.
You can learn more about Pachama by listening to an interview Jason did with Pachama’s co-founder and CEO, Diego Saez Gil, in 2019.
Why Did We Invest?
For Pachama’s co-founders, Diego and Tomas, the important role forests play in combating climate change is personal. Both from Argentina, they have witnessed the devastation wrought on the Amazon by deforestation while simultaneously realizing its important role in solving the climate crisis. Prior to founding Pachama as its CEO, Diego built a track record of founding and growing startups to successful exits. Tomas, Pachama’s CTO, offers deep expertise in artificial intelligence and machine learning which underpins Pachama’s technology. Together, they’ve assembled an impressive team of nineteen mission-driven employees who hail from the likes of SpaceX, Google, Tesla, and other preeminent organizations.
Disruption Through Data & Disintermediation
As we dug into Pachama and the problems it solves, we realized the landscape of entities, involved in the certification and brokering process for forest-based carbon credits, is extremely fragmented. The offset market is fraught with a number of third-party intermediaries that add costs at each juncture. The automation and data strategy Pachama is pursuing enables it to drive efficiencies throughout the process while lowering costs and increasing trust and transparency. This is similar to the effect AirBnB had on the online property rental market, once dominated by Craigslist, and will be a driving force increasing the transaction volume of carbon credits.
Positioned From Seed to Sprout
To date, much of Pachama’s work has focused on forestry projects that already offered carbon offsets. In March, the company announced it would embark on its first foray into project origination. We see this as a major opportunity to not only optimize the existing market of forestry projects but also grow the market as a whole. Serving companies with net-zero commitments such as Microsoft and Shopify, Pachama is well-positioned to expand and facilitate the carbon credit market through the launch of new forestry projects, much like Amazon Web Services has simplified the process of spinning up scalable server infrastructure.
Pachama has assembled an exceptional team, focused it on a critical opportunity, and demonstrated impressive early traction. We feel privileged to join the company as it creates the leading platform to scale forestry development and restoration.
If you are an accredited investor and want to learn more about being an investor in our fund (to back more great companies like this one!), reach out here.