PitchBookPitchBook Data,Inc.John Gabbert Founder,CEOEmerging SustainableNizar Tarhuni Vice President,InstitutionalResearch and EditorialInvesting Opportunities:Daniel Cook,CFA Head of Quantitative ResearchCarbon UtilizationHow carbon utilization can create a double bottomInstitutional Research GroupAnalysisline of financial returns and positive social andenvironmental ImpactAnalyst Fund StrategiesSustainable Investinganikka.villegas@pitchbook.comPitchBook is a Morningstar company providing the most comprehensive,mostaccurate,and hard-to-find data for professionals doing business in the private markets.Insights developed in collaboration withJohn MacDonagh,Senior Analyst,EmergingTechnology at PitchBook Data.DataKey takeawaysAlyssa WilliamsSenior Data AnalystAs usage of carbon capture technologies continues to rise,the question of whatpbinstitutiona lresearch@pitchbook.comto do with captured carbon has grown more urgent,and carbon utilization is partof the answer.PublishingThe financial return potential of this opportunity is dictated in large partDesigned by Caroline Suttieby carbon capture's proliferation,government funding and regulatorysupport,challenges faced by its main alternative,and corporatePublished on December T,2023sustainability commitments.Carbon utilization has the potential to create positive environmental ImpactsContentsby enabling a more sustainable lifecycle for captured carbon,providing lower-Key takeawayscarbon substitutes for traditional products,and reducing reliance on analternative that presents environmental risks in addition to social ones,creatingIntroductiona minor social Impact potential as well.Financial return potentialpotentialPitchBookEmerging Sustainable Investing Opportunities:Carbon UtilizationIntroductionVenture capital,often serving as the incubator of emerging technologies,is wellpositioned to invest with positive social and environmental Impact goals in mind.VCs can draw on their expertise and resources to foster the businesses that havethe greatest potential for both Impact and returns,especially when keeping an eyetoward companies for which success necessarily marries the two.This fact has notgone unnoticed by VCs,which represent 42.7%of the total count of Impact fundsraised since 2007.Yet,the landscape of prospective opportunities is expansive andrapidly evolving,making it difficult to keep track of which ones have the greatestfinancial-and Impact-return potential.Emerging opportunities often go beyond the investment areas traditionallyassociated 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,wesurface opportunities across emerging technology verticals such as agtech,mobilitytech,and carbon emissions tech that we believe are poised to perform well withinthe next decade,from both financial-return and Impact-return perspectives.Indoing so,we hope to help guide VCs pursuing the "double bottom line"through thecomplex landscape to the most fruitful opportunitiesFor each analyst note in the series,insights are developed in collaboration with aPitchBook Emerging Technology Analyst covering the relevant vertical,using theirsubject matter expertise and previous research,as well as some external resources,to inform our perspective on the space.We discuss the opportunity's major driversof return potential as well as the investment risks and obstacles it faces.We alsoexplore its social and environmental Impact potential,how the opportunity fitsinto various IRIS+Impact themes,2 and potential metrics to help quantify thoseImpacts.Ultimately,the aim of this research is to give VCs and their LPs a betterunderstanding of how the opportunities align to their return and sustainability goalsand provide companies operating in these spaces a sense of how to optimize andcommunicate their social and environmental Impact.This analyst note focuses on carbon utilization,which encompasses a wide range ofdeveloping approaches to making use of captured carbon dioxide (CO)and is themain alternative to carbon sequestration.Historically,CO,was largely used in ureaproduction and enhanced oil recovery,the latter of which involved pumping CO,intooil fields to increase the extraction of oil and extend the lifetime of the oil fields.3However,the end products of up-and-coming carbon-utilization companies fit intothree major categories:industrial chemicals,fuels,and construction materials.Withdecarbonization now a major investment theme in both PE and VC,carbon capturecapacity is growing,and the question of what to do with carbon once it has beentrapped is more pressing.Since 2013,46 VC-backed companies have entered thecarbon-utilization space with $1.1 billion in investment.2