Pathzero raises $8.6m amid a rush by fund managers to measure financed emissions

Pathzero raises $8.6m amid a rush by fund managers to measure financed emissions

Pathzero founders Charbel Ayoub (left) and Carl Prins

Investors have bolstered the coffers of Pathzero with an $8.6 million capital raising that aims to tap into the strong growth experienced by the company’s carbon reporting and analysis technology for the funds management sector.

The latest Series A+ round has boosted Pathzero’s total fundraising program to $15.6 million in the past year amid a new push by the federal government to implement a climate reporting framework for the funds management sector by FY25.

Pathzero, a company founded by Carl Prins and Charbel Ayoub in 2020, specialises in the measurement and management of financed emissions, with its technology employed by the likes of StepStone, HESTA and Carthona Capital.

The funds managers use Pathzero's data-driven tool, Pathzero Navigator, to report on the financed emissions of their investment portfolios. Pathzero says its technology ‘connects financial institutions to their portfolio companies and facilitates the secure flow of carbon information between trusted parties’.

The latest capital raising has been backed by existing investors Carthona Capital, Clyde Bank Holdings and Antler, as well as a number of Pathzero’s senior executives.

The investors have piled further into Pathzero share register following a stellar year of growth, led by a rapid take-up in recent months that has seen annual revenue growth of 1,271 per cent thanks to a raft of new customers coming on board.

The company says it has signed strategic deals with several asset managers and superannuation funds, including health industry super fund HESTA.

“Since the rollout of Navigator, we have seen immense interest from the market and have closed some cornerstone deals,” says Pathzero CEO Carl Prins, whose career background is in the investment banking sector.

“This interest reflects the critical need for technology that enables collaboration between businesses to solve the Scope 3 challenge at scale. The gamechanger for us has been to go beyond carbon accounting and create a carbon information network allowing firms to engage and collaborate with their portfolio companies to bring down emissions.”

Pathzero sees continued growth ahead with the looming prospect of government-mandated emissions reporting for the funds management industry.

The federal government is currently seeking submissions for a consultation paper that will inform the design and implementation of standardised, internationally aligned requirements for disclosure of climate-related financial risks and opportunities in Australia.

“Pathzero is growing rapidly, and we want to ensure we exceed the expectations of newly signed customers,” says Prins.

“We’ve seen a lot of success with Australian superannuation funds and asset managers. This funding will allow us to double down and deliver an unparalleled experience to those clients while continuing to grow our network both here in Australia and globally through further strategic partnerships.”

Ahead of a standardised system planned by the federal government, the Greenhouse Gas Protocol currently sets the global standard for defining and accounting for Scope 1, 2 and 3 emissions. The Partnership for Carbon Accounting Financials (PCAF) Standard sets methodologies for financial institutions to measure financed emissions.  

“Since PCAF launched in November 2020, it's seen rapid adoption across the financial sector,” says Prins.

“Today, more than 340 financial institutions have joined, representing over US$85 trillion in total assets under management. This signals that financial institutions understand regulation on financed emissions is imminent.”

Carthona Capital sees its investment in Pathzero as strategic in light of the growing importance of regulating financed emissions.

“After first investing in Pathzero over a year ago, we’ve seen the company go from strength to strength,” says Dean Dorrell, a Carthona Capital partner.

“We have every confidence in what their tech offering brings to the wider financial industry and are proud to be early adopters of their services ourselves. As regulation intensifies across sectors, we are looking forward to the years ahead as monitoring and reducing financed emissions becomes second nature to financial institutions.” 

Avarni raises $3m in bid to help businesses better understand scope 3 emissions

The news comes hard on the heels of 2021-founded carbon management startup Avarni raising $3 million in a round led by deep tech venture firm Main Sequence, along with existing investors Vulpes Ventures and Common Sense Ventures.

The initial team members of that business met at a Sydney-based tech incubator where they saw a massive gap in the market on carbon reporting, and their hard work has led to the creation of one of the world’s most comprehensive datasets on emissions using artificial intelligence to forecast the impact of different decarbonisation scenarios.

Avarni helps some of the world's largest consultancies and enterprises understand, report and forecast their carbon footprint across scope 1, 2 and 3 emissions - the latter pertaining to emissions by an organisation's suppliers and in the supply chain, which is an area where the remains a major gap in understanding and sourcing data.

Since its inception, Avarni has grown quickly, analysing more than $100 billion in corporate spending data and 150 million tonnes of carbon emissions in supply chains.

Avarni’s extensive data set has seen it secure deals with major consulting firms such as KPMG Australia, as well as other major global enterprises such as Point B and 5B focussed on expanding their Scope 3 decarbonisation solution sets. Avarni is also a technology partner at the McKinsey Digital Capability Center, part of McKinsey & Company’s global Digital Capability Center Network. 

"Since our launch roughly a year ago, we have made huge strides in Australia and globally to help companies continue to progress their decarbonisation journey, and use our AI-backed platform to allow businesses to access their Scope 3 emissions quickly, effectively and without the burden of significant cost," said Avarni co-founder and CEO Tony Yammine.

"Climate risk is one of the biggest concerns for executives, boards and shareholders today, and that’s not going away anytime soon. Now, we’re entering a new exciting phase, which will see us remain laser focussed on providing extensive data sets and insights to become the go-to carbon management platform for companies and their advisors."

Other founding members of Avarni include Misha Cajic, CPO and previously a product manager at Atlassian, and Anuj Paudel, CTO and previous cloud network engineer at Macquarie Telecom Group.

"What Avarni has achieved over the last year has been phenomenal and they are on a strong trajectory despite a challenging economic environment," said Vulpes Ventures managing partner Field Pickering.

"The team is rapidly building one of the biggest data sets available on corporate emissions. This is the intelligence businesses need to inform their decarbonisation strategies – and Avarni is at the forefront of rapidly collecting this information."

"Despite the vast numbers of commitments to emissions targets, as well as the growing number of countries mandating disclosures, enterprises are struggling to understand, let alone manage their Scope 3 emissions," added Main Sequence partner Mike Zimmerman, who will join the Avarni board. "Avarni’s traction with some of the world’s largest consultancies and their clients puts them in a great position to help us decarbonise the planet."

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