Dear Celo community,
Greetings from the Climate Collective - so great to see many of you at ETHDenver.
The urgency around addressing climate change has never been more clear. Despite the disturbing updates, we’re finding hope and inspiration in the many groups sprinting to leverage Web3 to drive climate action at scale.
The last few months have further convinced us that we can do even more to support web3 Celo founders - and the whole ReFi industry - in accelerating this shift. That’s why we’re here to share an update from our first year of operations and preview a proposal for follow-on funding, focused on key pain points and opportunities we have identified in the current state of the web3 x climate sector. Through this proposal, we hope to demonstrate both the urgent AND important reasons for increasing our capacity to be more catalytic in meeting the needs of the ReFi ecosystem. Climate Collective (CC) has a small but highly-effective core team in place, and a clear sense of the emerging opportunities and their maturity level (aka, what to focus on, and when). Now is the time to double down.
IF YOU ONLY READ ONE SECTION - this is the one. Look over our Strategic Deliverables (copied/pasted just below - and captured further down the doc) and let us know how we can partner on these areas in 2023.
3 Strategic Deliverables for 2023
We streamlined our core objectives around three strategic deliverables:
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Adoption and deployment of blockchain across the climate sector: Carbon markets were our focus in 2022, in 2023 we’re expanding to also support private and public sector commitments around ESG, real world assets, decarbonization efforts, and climate data systems. We also believe there are massive opportunities to partner with institutional/governmental bodies such as sovereign “debt-for-nature” swaps, and interoperable climate datasets with UN bodies.
We do this through the following programs:
- Support the success of our Members
- Partner management of existing grant portfolio
- Entrepreneur in Residence program for 3 months rotations
- Pilot projects with traditional climate stakeholders (onboard web2 climate leaders to web3), including WWF, IADB, CIFAR alliance, Carbon Business Council, Web3forGood, World Bank (CADT)
-
Thought Leadership: We already have several in-flight initiatives but have had to deprioritize promising opportunities with prominent institutions such as The Brookings Institute due to lack of bandwidth. Going forward, we want to do more than partner with other leading orgs; we want to become the leading convener and launch our own thought leadership events, series, and platforms.
We do this through the following programs:
- Activations at selected Climate-first events (GoodTechFest/May, Climate Dialogues/Bonn, COP28)
- Policy workstream, tracking and engaging with key policy makers for climate policy (US + EU + LATAM focus for 2023)
- Blockchain 101 education series for family offices, foundations and impact investors
- Refreshed MarComm’s strategy for Climate Collective and Marketing flywheel across members and grantees, OptEds (McKinsey, WEF, Brookings), Guest blogs, Newsletter
-
Market maturity: This work stream addresses some of the key barriers to scale and commercialization of blockchain based climate solutions, like interoperability, on-chain liquidity, climate data standards and architecture, better understanding of market pain points (demand+supply), and exploring alternative funding models for climate tech companies.
We do this through the following programs:
- Industry framework grants (RMI on quality assurance framework, Data oracle framework, open source data platform)
- Climate Data infrastructure partnership (Filecoin) and Interoperability infrastructure grants
- Sovereign Debt for nature swap pilot (w. Circle and Emerge Labs)
- Cambridge University energy + carbon footprint of Ethereum research + landing page
Table of Contents:
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Retrospective
-
CC Revised Mission
-
Outcomes from Initial Proposal
-
Macroeconomic Headwinds
-
Reassess Sector Needs & Expand Audiences
-
Summary
-
Next Phase
-
3 Strategic Deliverables for 2023
-
Increase Capacity for Team and Advisors
-
Celo double-down on Climate
-
Preview of Upcoming CGPs
-
cUSD Denominated Budget
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CGP #1: Restart Grants & Expand Contributors
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CGP #2: On-chain Carbon Offsets for Celo Protocol Emissions
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CGP #3: Chainlink deployment on Celo
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Establishing a sustainable business model for Climate Collective
-
Key Questions for Community
Retrospective
CC Revised Mission
The Climate Collective was first [announced] in October ‘21 as “a community driven effort to fight climate change by tokenizing rainforests and other carbon sequestering assets.” Over the next year, we pursued this goal. Moving forward, to recognize that tokenizing carbon is not a standalone solution for climate change, the scope of our mission has grown.
CC’s revised mission reflects our matured understanding of the potential for web3 technology to help unlock climate action at scale. The new mission includes, but is not limited to, tokenizing carbon credits: “Our mission is to build a trusted and liquid market for high-quality, digital environmental assets that enable people and the planet to thrive”. By using mass-coordination tools to solve mass-coordination problems, we’re advancing planetary health and a regenerative financial system. This refocus received positive feedback in the Celo forum post around our “look back and refreshed strategy” from December ‘22.
Onboarding natural capital, or Digital Environmental Assets (DEAs) as they are now known in the industry, to Mento (Celo Reserve) continues to be an active priority. However, this ambition must be balanced with legal considerations given the recent Markets in Crypto Assets (MiCA) regulation, and broader sentiment around stablecoins given adverse events in 2022.
Outcomes from Initial Proposal
Since the first draft of our initial proposal just over a year ago on March 22, 2022, the landscape for ReFi, and more broadly, web3 x climate, has evolved exponentially. Climate Collective has been a driver of a lot of this progress - we have established Climate Collective as an institutionally-credible, market-leading entity and have built a holistic, interconnected climate ecosystem on Celo.
Snapshot of interoperable Climate Collective ecosystem:
- Supply: FlowCarbon, Toucan, Thallo, CarbonPath, Sequestr, Sanergy, Plastiks, Kolor
- Markets: Senken, Atem, Sequestr, Celo DEXs, Unergy
- Demand: Spirals, CarbonTitle, Avatree, Wildchain, Cyberbox
- dMRV & Climate Intelligence: SimplexDNA, MRV Collective, GainForest, Silvi, Athena; OpenEarth, dClimate, Hyphen
The bullets below highlight how we have achieved key goals from our initial proposal:
- Achieved our initial goal of building a diverse, interoperable climate ecosystem that positions Celo at the forefront of ReFi
- Supported a number of innovative climate applications including plastic credits, forward financing, digital land ownership, regenerative community currencies, and DNA sampling-based biodiversity credits on-chain (examples include: Plastiks, Senken, SolidWorld, Sequestr, Kolor, Sanergy, SimplexDNA)
- Experiment with Internet of Things (IoT) sensor integrations and other environmental monitoring, reporting, verification (MRV) applications (examples include: SimplexDNA, MRV Collective, Athena Protocol; and more recently onboarded Hyphen and dClimate into the Climate Collective)
- Collaboratively define qualitative and quantitative assessment framework standards for Mento reserve assets in partnership with Rocky Mountain Institute (RMI), one of the most well-respected institutions in climate broadly and carbon specifically, which will enable comparison of carbon credits from disparate standards, including “Big 4” registries, regional/jurisdictional registries, and web3-native “self-certified” credits. This framework, expected to be ready for public use in July ‘23, will guide Celo’s carbon offset purchases (see CGP #3), as well as Mento’s natural capital onboarding at a later stage.
For reference, we have disbursed roughly half of our grants budget - 2.7/4.7 M CELO - and have just over $1M worth of outstanding commitments. Our initial proposal also outlined our intentions to provide up to 1M CELO (~$2M) in initial anchor liquidity for the purpose of minimizing slippage until carbon pools are of sufficient size. After the market downturn in summer ‘22, we determined this was too risky to do with reduced and uncertain funding. “Day 0” liquidity, however, continues to be a key barrier for the majority of CC projects.
Macroeconomic Headwinds
Just as the web3 x climate sector has faced unexpected blockers, so too have the broader crypto, carbon, and global markets. Our initial proposal used a conservative price estimate of Celo at $2, but our average swap rate is just under $0.7 at the time of writing. We lost over 65% of our runway and capital resources in the market downturn - but have still delivered what we promised.
On the carbon markets side: Verra, the leading issuer of carbon offsets in the Voluntary Carbon Market, prohibited tokenization of their carbon credits due to numerous concerns, some of which are outlined in their public consultation. This posed an acute challenge to several Climate Collective companies, and forced the sector to pause to think critically about how best to leverage web3 tools in the context of incumbent carbon systems. [It’s also worth noting recent developments with GoldStandard, the second largest registry, who announced that they are proceeding with tokenization in consultation with Climate Collective members Toucan, Flowcarbon, and Thallo. This is a positive signal to the market and we expect it will help unblock several initiatives.]
Reassess Sector Needs & Expand Audiences
Market conditions notwithstanding, Climate Collective’s work attracted attention from reputed climate institutions and experts. In September ‘22, Anna Lerner joined as the full-time CEO to bring deeper climate expertise, networks, and credibility to the community. A seasoned operator, having worked across climate finance and corporate sustainability (former World Bank & Meta), she is bridging the web3 x climate sector and historically ‘sticky’ problems that the incumbent climate sector has been trying to address for decades.
Between December ‘22 and March ‘23, Climate Collective paused public grant applications in order to reassess how best we can serve the sector given the major changes in crypto and carbon markets; and to prioritize supporting and integrating our members and grantees with strategic partners and initiatives outside of web3. We have launched work around:
- Quality assessment framework for high-quality carbon assets with Rocky Mountain Institute
- Supply-side capital constraints (with Allegory);
- Unlocking and unblocking on-chain demand (with carbon market industry groups and Climate Collective members);
- Interoperability (with Axelar, Hyperlane, infrastructure partners);
- Market making (with Ethereum Climate Platform, World Economic Forum, Ripple’s Sustainability Initiative, Hedera’s Sustainability Fund, among others).
These bodies of work will be published openly as prominent ecosystem resources to educate the web3 space on how to build impactful and relevant climate solutions.
On a high level, we reoriented our partnership focus to prioritize more traditional climate investors, organizations and policy makers - we think this is an effective way to ‘normalize’ blockchain solutions for climate action. We have subsequently been invited to play a key role in various high-profile initiatives: Climate Collective is co-chairing a WEF working group on Blockchain for Climate, chairing the Climate Science and the Advisory working group of the Ethereum Climate Platform (ECP), active member at IETA, close collaborator with RMI, participant in McKinsey Green Leaders Summit, panelist at Google’s invite-only Digital Environment Asset event, and so on. Anna and the team have also been featured as keynote speakers, guest speakers on podcasts, and panelists across leading web2 and web3 channels.
Summary
In summary, Climate Collective has:
- Achieved its initial goal of building a diverse, interoperable climate ecosystem that positions Celo at the forefront of ReFi
- Established itself as the leading voice in the sector for both web3 and institutional audiences
- Built a small but committed, diverse, cross-functional team (3 FTE and 3 part-time resources, intentionally built along Justice, Equity, Diversity, and Inclusion principles)
- Gracefully navigated turbulent markets across crypto and carbon
Next Phase
3 Strategic Deliverables for 2023
We streamlined our core objectives around three strategic deliverables:
-
Adoption and deployment of blockchain across the climate sector: Carbon markets were our focus in 2022, in 2023 we’re expanding to also support private and public sector commitments around ESG, real world assets, decarbonization efforts, and climate data systems. We also believe there are massive opportunities to partner with institutional/governmental bodies such as sovereign “debt-for-nature” swaps, and interoperable climate datasets with UN bodies.
We do this through the following programs:
- Support the success of our Members
- Partner management of existing grant portfolio
- Entrepreneur in Residence program for 3 months rotations
- Pilot projects with traditional climate stakeholders (onboard web2 climate leaders to web3), including WWF, IADB, CIFAR alliance, Carbon Business Council, Web3forGood, World Bank (CADT)
-
Thought Leadership: We already have several in-flight initiatives but have had to deprioritize promising opportunities with prominent institutions such as The Brookings Institute due to lack of bandwidth. Going forward, we want to do more than partner with other leading orgs; we want to become the leading convener and launch our own thought leadership events, series, and platforms.
We do this through the following programs:
- Activations at selected Climate-first events (GoodTechFest/May, Climate Dialogues/Bonn, COP28)
- Policy workstream, tracking and engaging with key policy makers for climate policy (US + EU + LATAM focus for 2023)
- Blockchain 101 education series for family offices, foundations and impact investors
- Refreshed MarComm’s strategy for Climate Collective and Marketing flywheel across members and grantees, OptEds (McKinsey, WEF, Brookings), Guest blogs, Newsletter
-
Market maturity: This work stream addresses some of the key barriers to scale and commercialization of blockchain based climate solutions, like interoperability, on-chain liquidity, climate data standards and architecture, better understanding of market pain points (demand+supply), and exploring alternative funding models for climate tech companies.
We do this through the following programs:
- Industry framework grants (RMI on quality assurance framework, Data oracle framework, open source data platform)
- Climate Data infrastructure partnership (Filecoin) and Interoperability infrastructure grants
- Sovereign Debt for nature swap pilot (w. Circle and Emerge Labs)
- Cambridge University energy + carbon footprint of Ethereum research + landing page
Increase Capacity for Team and Advisors
Climate Collective has been capital efficient with a lean team - highly committed but extremely leveraged. We have had to pass on many promising opportunities to partner or build, postpone critical projects, and can’t be as responsive to cLabs and the Celo community as we would like to be. As we expand the team, we intend to double down on our diversity and representation, expanding to new geographical locations and areas of expertise.
During the last year we’ve met excellent operators and subject matter experts across climate finance, data, product, and growth, whom we would like to bring onboard through ‘specialty programs’ enabled by grants (outlined in “CGP #1” section). This is currently unfeasible with our $1.5M annual operating budget - we’re already at 80% burn rate/month which makes us reactive and inflexible. Our grants are powerful resources, but so too are functional and subject matter experts that can develop institutional knowledge of the Celo ecosystem, of Climate Collective members, and weave an even more powerful set of solutions together out of the current high potential fabric, not to mention the new networks and perspectives this brings for future growth and impact.
Celo double-down on Climate
At the Climate Collective we believe we are approaching an inflection point for the web3 x climate sector. Celo now faces stiff competition from other blockchain ecosystems with 9-figure USD denominated grant funds. If Celo is to be the unequivocal “home of ReFi”, the community needs to double-down on what differentiates us most: mission-driven credible operators collaborating to build deeply thoughtful, holistic solutions for climate initiatives. Many ecosystem partners are supporting this reinforced narrative, and we believe we have a unique role to play to uplevel credibility and thought leadership for the Celo community.
Preview of Upcoming CGPs
cUSD Denominated Budget
Climate Collective navigated and continued to operate in the turbulent market conditions of 2022/23 as a grant provider, despite losing over 65% of the CELO-denominated budget. As we plan to scale up our operations and build market infrastructure for DEAs, we need a clear financial forecast. To that end, we have requested capital measured in [c]USD, with a proposed structure on how to implement this in the CELO-denominated community fund.
CC will propose to set its maximum spend permit on the community fund at 10M CELO over two years, but we hope to not use the full amount. This number accounts for CELO at $0.50 and protects our budget from market volatility associated with adverse events. CC would withdraw CELO in 8 equal chunks each quarter, and transact OTC with Mento to convert to cUSD (as opposed to selling large chunks of CELO on open markets).
CGP #1: Restart Grants & Expand Contributors
As indicated in our 3 strategic deliverables, CC has identified 3 key areas we aim to address with 5M cUSD-denominated grant funding.
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Climate innovation grant fund: web3-climate pilots, forward contracts, direct payments for ecosystem services (climate focused UBIs), dMRV systems ~2M cUSD
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Strategic partnerships:
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Academic research organizations (e.g Brookings, RMI, etc), leading consulting firms (e.g. McKinsey, CarbonDirect, KPMG, etc), banks ~1M cUSD
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Targeted marketing, convening, and industry research, which includes a series of in-person digital environmental asset summits, industry reports, and other products (building on Google/SIP’s first gathering, we want to regularly bring together web2 + web3 + corporate sustainability leaders) ~1M cUSD
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Specialized programs: establish Entrepreneur in Residence (EIR) program, secure lead for climate data infrastructure and policy R&D (sovereign debt-for-nature swaps), provide travel-grants for important climate/carbon market events, etc. ~1M cUSD
Our official CGP will provide detailed information on the intended use of funds. Based on comments in the Celo forums such as this from Tim Moreton, CEO of cLabs, we believe that the community supports further CC grants based on our successful track record thus far.
CGP #2: On-chain Carbon Offsets for Celo Protocol Emissions
Along with Spirals Protocol, Mercy Corps Ventures, and Celo Foundation, CC is leading the transition of Celo’s carbon neutrality mechanism to utilize tokenized carbon credits on Celo. See this post for more details.
CGP #3: Chainlink deployment on Celo
In partnership with Chainlink Labs and Celo Foundation, the Climate Collective is serving as a representative of the Celo community on the multisig wallet that administers keys to the Chainlink-Celo Rewards and Fee Pool. Full details can be found in this governance proposal 88.
Establishing a sustainable business model for Climate Collective
There is a lot of interest from other blockchains, philanthropists and venture capitalists to support an expansion of Climate Collective. That said, we’re still a young - and small - organization so we need to do some homework on what structures make sense and how to expand in a strategic but sustainable way. We are excited about these opportunities, and one important strategic commitment we are making through this new resource request is to create a more sustainable financing model for Climate Collective.
In the coming months we will be building out a more crisp value proposition and exploring pathways to make this shift in seeking inputs from our wider community around what this could look like - a DAO, a Climate Collective digital asset, a formal 501(c)3 - we’re open to ideas! Two years from now, we aim to be financially sustainable and return all unused capital to the community fund.
Key Questions for Community
We would deeply appreciate community feedback on the following key questions:
- Should the next iteration of the grant program focus on specific themes, be more of an open call for proposals, or include options for some combination of the two? If specific thematic areas are to be included, which ones are the most pressing?
- What liquidity pool structures would most benefit ecosystem projects? (eg. consolidated Curve pool, individual Uni/Ube-swap pools, other infrastructure)
- What other key climate challenges do you see Climate Collective as well positioned to tackle? What remaining value within the Celo ecosystem could Climate Collective help to unleash?
. Here are some relevant links that could have been nicely placed across the doc making it look dynamic and well designed
. Couldn’t agree more with the imperative to double down and leverage the power of blockchain to address climate change.