A new hero for climate tech? Meet Synthetic Biology

Climate change is one of the major challenges that our planet is confronting today. As per NASA data and many other sources, the temperature on Earth has been increasing year after year at an alarming rate since we started using fossil fuels.

The effects of climate change on several areas of society are interconnected. Drought may have a negative impact on both food production and human health. Flooding has the potential to spread illness and destroy ecosystems and infrastructure. Human health difficulties can raise death rates, reduce food availability, and reduce labor productivity. The effects of climate change may be observed in every part of our world. However, the effects of climate change vary across the country and around the world; even within a single community, the effects of climate change might differ between neighborhoods or people.

Carbon dioxide is the most significant greenhouse gas in terms of climate change, which is why you hear so many references to "carbon" when people talk about climate change. There are three key reasons why CO2 is so important in today's global warming. For starters, there is simply too much of it: Every year, we add about 35 billion tons of CO2 to the atmosphere, primarily by burning carbon-rich fuels like coal and oil that were previously locked in the earth. Second, it lingers in the atmosphere for a long period. The CO2 we produce now will remain above us for hundreds of years, reflecting heat. This means that even if we halt all new CO2 emissions tomorrow, the warming effect of our previous emissions will be seen for many lives.

Finally, many businesses rely on carbon-rich fuels or other CO2-emitting activities. This includes the use of fossil fuels for electricity, heat, and vehicle power, but it also includes the production of concrete and steel, the refining of raw oil and gas, fermentation (for example, to make alcohol or pharmaceuticals), and the decay of plant matter (such as after trees are cut down). All of these industries can make improvements to reduce CO2 emissions, but the same solutions will not work for all of them.

Governments responsible for 63% of global emissions have committed to net zero, with business net-zero pledges spanning 12% of the global economy (approximately $9.81 trillion in revenue).

Assuming that the US, China, and other nations who have stated or are contemplating such objectives but have not yet submitted them to the UNFCCC fully execute them, global warming by 2100 may be as low as 2.0°C ('Optimistic objectives' scenario). 131 nations have adopted or are contemplating net-zero objectives, accounting for 73% of global GHG emissions.

However, it is the updated 2030 NDC objectives, not the four extra nations, that contribute the most to the reduction in predicted warming compared to our previous estimate, emphasizing the necessity of stronger near-term ambitions.

The challenge

CO2 must be removed from the atmosphere to virtually zero from all sectors (including agriculture, land use, and construction, as well as energy) within a few decades.

Although numerous carbon dioxide removal strategies like "negative emissions technologies" (NETs)- which remove carbon dioxide directly from the atmosphere or enhance natural carbon sinks- have been studied. Some methods of achieving carbon dioxide removals, or “negative emissions,” are available today. These take two main forms: engineered solutions, such as direct-air capture (DAC) and bioenergy with carbon capture and storage (BECCS); and natural climate solutions, such as reforestation.?

The convergence between biology and engineering called “Synthetic Biology” appeared as one of the new revolutionary technologies to solve this and many other problems of our society.

What is Synthetic Biology (SynBio)?

The National Institutes of Health (NIH) defines Synthetic Biology as “A field of science that involves redesigning organisms for useful purposes by engineering them to have new abilities''. If you want to learn more about it you can watch this amazing video from freethink on Ginko Bioworks - Video

In other words, SynBio has the potential to create or reinvent biological systems that either meet our human needs or develop novel biological circuits or modules. Those standardized functional modules are the key to SynBio because they make them detachable and compatible with different environments and purposes.?

SynBio can be employed for various medical applications like diagnosis, cancer therapies, infectious diseases, and drug discovery, and also to solve climate change. In particular, for this case, it is engineering microorganisms or plants for sequestering or converting CO2 (Carbon Capture) to a stable non-respirable form, that can be used to produce other compounds or to be integrated as part of an existing process or manufacturing chain, without returning it to the atmosphere, which makes it a negative carbon technology.

Which Synbio companies are working on climate?

When we search for technologies using Synbio for Carbon Capture, we can immediately tell that this space is relatively new. The first companies dedicated to this matter were founded in 2005 (Figure 4 ) having engineered microorganisms and plants as chassis.

In line with the recent boom in ClimaTech startups, LanzaTech (founded in 2005) is so far the only company (from the list above) that went public just recently in February 2023 with a 2B USD valuation and a - 26% stock value from IPO.

Other companies like Biomason are in their Series C round and the newest ones so far are in their Series A.

It is important to mention that SynBio has been around for longer. Companies like Novozyme, which was founded in 2000 and went public in 2002 (CPH:NZYM-B, currently delivering + 8,6X from IPO value), is a company providing solutions for a broad range of applications (like agriculture, industry processes, and health) by re-engineering thousands of everyday products for their customers.?

Novozymes has made 3 investments and 16 acquisitions. Their most recent investment in 2018 in a series A round for Plant Response (a biotech company developing innovative biological approaches to improve plant health and productivity, addressing sustainability challenges for food production).

Although investing and acquiring is one way to enable or unlock the potential of new ventures in this space, other companies like Gingko Bioworks are playing a major role by providing the know-how and licensing of organisms to new promising biotech startups that aim to harness the power of SynBio for carbon capture and other sustainability issues.

Ginkgo Bioworks develops, engineers, tests, and licenses biological products and custom microbes across multiple markets. In 2017 co-founded Joyn Bio together with Bayer. Even though Joyn Bio is a nitrogen fixation company, their multi-year strategic partnership with Bayer aims to develop biological solutions in carbon capture, expanding Ginkgo’s biologics division.

VCs backing these companies

If you arrived here from the therapeutics space, you might not recognize the majority of the following investors, with some of them recently expanding their Deep Tech portfolio to ClimaTech technologies, many of them having a good part of their portfolio committed to climate tech.

As the rate of capital deployment has slowed, many previously high-velocity investors are sitting it out and not doing as many climate deals. In H1’23 the most active investors included Breakthrough @Energy Ventures, Lowercarbon Capital, Climate Capital, Temasek Holdings, Collaborative Fund, MCJ Collective, Energy Impact Partners, SOSV, Fifth Wall, and S2G Ventures.

We can also see that all these companies raised their last round within the last 2 years and that the oldest carbon capture-focused company LanzaTech, took 18 years from their funding to go public. In contrast, more recent companies like BioMason already raised a series C, suggesting that the times are shortening. We will see how this space looks in the following 5 years.

Additionally, CO2 emissions are right now on the agenda of big energy providers and industry enterprises, and some of them are active investors of these types of technologies.

Are we really backing climate tech?

Climate investment Venture capital investment in climate technologies has decreased by 40% since the beginning of 2022. More than 75 funds are already investing in climate technology in a variety of ways, including general climate technology, high-impact technology, vertical technology, and deep tech. But all of this money is still a drop in the bucket compared to the $1.4 trillion in private equity and venture capital available for investment in 2019.

Deep-tech investors must also recalibrate their expectations, which does not always imply accepting lesser returns. They can extend the life of funds long enough to de-risk R&D and commercialize the ensuing goods. They may notice the increased complexity of the technology and business models involved and diversify their investments across technologies and industries. Breakthrough Energy Ventures, for example, has collected more than $2 billion and is supported by Bill Gates and other renowned limited partners such as Jeff Bezos, Michael Bloomberg, Richard Branson, Vinod Khosla, Jack Ma, Xavier Niel, and Masayoshi Son.

On April 2023, A group of venture capital firms including Tiger Global and Union Square Ventures on Tuesday set up an alliance aimed at making private tech investing more climate-friendly.

The Venture Climate Alliance (VCA), a partnership of more than 20 climate tech and generalist funds, aims to strengthen the VC industry's contributions to climate tech, an area of technology dedicated to finding solutions to climate catastrophe. According to Crunchbase data, the investment companies involved handle a total of $62.3 billion in assets.

Generalist VC companies will need to review their carbon impact on a regular basis and match their early-stage startup bets with net-zero ambitions. For climate innovation investments, VC companies that have joined the alliance must ensure that the technology they are investing in has the potential to reduce at least 100 megatons of CO2.

What do agreements look like in this space?

You might be used to seeing agreements in the therapeutic or med tech, in which companies partner with big pharmaceutical or device companies in order to move forward their technology and get acquired in the future, that′s pretty much the overall pathway.?

In this space, you can find very interesting R&D joint development agreements like the one Ginko Bioworks and Solvay announced early this year in which they will be working together in a multi-year agreement to unlock the power of synthetic biology as an enabler of more sustainable chemicals and materials, contributing to the transition towards more environmentally-friendly solutions. This alliance will start by focusing on new sustainable biopolymers, specialties that could tangibly impact a breadth of markets, from home and personal care to agriculture and food. Another of Ginko′s strategic developments with Visolis to to Improve Microbial Strain for Bio-Isoprene and Sustainable Aviation Fuel Production??

Nevertheless, you might find different strategic alliances since the end product and business model can be expanded. One example is a collaboration between LanzaTech and Inditex in 2021 that led to the design of a capsule collection for the retail group’s largest brand Zara that incorporates fabric made with carbon emissions, avoiding their emission into the atmosphere (CarbonSmart?). This partnership surely is having a huge impact not only in business but also in marketing, since other brands are partnering with LanzaTech to customize their brands like H&M with H&M move.

Is there a way to scale up the process of NES in order to make them investable?

To scale up negative emissions, we need to put a value on it. I think using a carbon contract or a similar regulatory instrument is the way forward to make sure investors in negative emissions have a longer period of time where they can guarantee the value of the essential product that they’re producing - Jens Wolf

I′d like to leave you with 2 questions for you to give us your thoughts:

1. How SynBio will impact Climatech in the near future?
2. Do we need to think harder in ways to capture the value of SynBio? Is there a need to think about other business models?

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