Spotlight: Ecosystem Integrity Fund

When Ecosystem Integrity Fund (EIF) came to my attention in 2014, the members were raising capital for their second venture fund. I found them to be particularly attractive because of my background in physics and environmental science and their serious focus on environmental sustainability. Today, the depth and breadth of that sustainability focus makes EIF stand out against other venture capital funds.

Take a look at two EIF investments: Bluon, Inc and For Days Clothing

HVAC equipment is responsible for 40% of global electricity use and 12% of the world’s greenhouse gas emissions. Bluon has developed a replacement refrigerant that improves the efficiency of HVAC equipment and significantly lowers global warming potential (GWP). Why is that important? Because of the high global warming potential of existing refrigerants, the management and replacement of these ubiquitous chemicals in air conditioning systems across the globe has been identified as a top priority in mitigating climate change.

To aid in the training and support of technicians and the adoption of Bluon’s refrigerant, the company developed a mobile app that more than 50% of technicians have adopted. The platform has rapidly grown into the largest HVAC community. Moreover, the impact of incorporating this replacement refrigerant, TdX-20, in existing equipment, has already led to impressive energy savings and reduction of carbon emissions (see graphic). In 2022, EIF completed a Series B investment in Bluon.

As a contrasting example, let’s look at the fashion and clothing industries.

According to a 2022 National Institute of Standards and Technology (NIST) report, 85% of clothing donations end up in landfills, and there is minimal infrastructure or information on how to responsibly handle textiles at the end of their life cycle. Tackling this problem is For Days, a clothing startup that creates recyclable apparel and incentivizes customers to return used clothing by rewarding them with digital currency that can be used on new goods.

According to the company’s website, 90% of all returned For Days clothes are recycled into new materials. The company accomplishes this via its Take Back Bag, which customers can order for $19, fill up with unwanted clothes, and return for an instant $20 credit toward their next purchase.

Fifty percent of all Take Back Bag items are downcycled into shoddy rags and insulation, 45% of all Take Back Bag items are resold, and 5% of all Take Back Bag items are sadly, truly trash. The Take Back Bag is the company’s best seller, with more than 80,000 bags sold, and 2.4 million garments saved from landfills.

By aligning virtue and value, For Days solves a real problem for its customers. As a result, the company has been growing by 3x every year, while demonstrating industry-leading customer loyalty metrics.

In 2021, EIF led a Series A investment in For Days because the fund recognized that the incentives and economics of a closed-loop system for fashion are most powerful when you connect the beginning and end of a garment’s life.

These two investments show how EIF considers sustainability from a systems perspective.

Problems are systemic by nature and, in seeking to address them, the team is trying to shift the behavior of large, established systems. According to EIF, because these systems are typically well-established and may resist change, successful investing in sustainability requires a sophisticated understanding of system behavior, incumbent technologies, stakeholder interests, and other factors.

Looking at the bigger picture before settling on a particular growth-stage company in which to invest helps the fund identify more viable business solutions that make incremental change, rather than disruptive change, to systems.

EIF seeks the greatest possible impact with the least possible amount of capital.

The firm’s investment focus includes areas of sustainability such as renewable energy, energy efficiency, waste reduction, green chemistry, power grid management, transportation, agriculture, water, and natural foods. In addition, it looks for quantifiable long-term positive impacts on reducing greenhouse gas emissions and enhancing climate change adaptation.

With its success over the last decade, EIF has attracted more than $450 million in investment capital across five funds and has invested in dozens of companies with impressive impact metrics and outstanding financial results.

This publication is distributed to clients and friends of Natural Investments, LLC (NI). NI is an investment adviser registered with the SEC. It is for educational purposes only and is not intended to contain recommendations or solicit sales of any specific investment. Authors, representatives, or related persons of NI may own securities mentioned in here.

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