Pre-Investment Considerations: Deep Dive with AENU’s Melina Sánchez Montañés
Melina Sánchez Montañés, a climate tech investor and VP Impact with AENU, was one of the four outside reviewers who provided feedback during the creation of Frame’s Pre-Investment Considerations methodology guidance. As a reviewer, Sánchez Montañés played a critical role in ensuring that the work of the authors and contributors not only met the needs of climate investors but that it also upheld Frame’s values and principles.
In the following Q&A with Project Frame, Sánchez Montañés shares why direct comparisons that use a common language are essential, and her aspirations for forward-looking climate impact assessments beyond greenhouse gas emissions.
What motivated you to offer your time to review Project Frame's methodology guidance?
I have been part of the impact venture capital space for years and one of the shared pain points has always been how to align and converge impact measurement and management methodologies. This is important for founders so that there is consistency in data requests and evaluations, for limited partners so that they can compare funds on an apples-to-apples basis, and it is important to impact VCs so that we can drive the entire category forward by creating a common industry understanding.
Within all impact areas, climate is a special case because of the possibility of focusing on a single quantifiable metric that can be compared from fund to fund: GHG emissions. This is why I was excited to engage with and support Project Frame’s pre-investment methodology; we can finally have one standard methodology for the industry.
That being said, contributing to climate solutions spans beyond GHG emissions. Therefore, I hope in the future we can also work toward building a broader methodology on how to measure and report on other ecological impacts, such as biodiversity.
Of the topics covered by the methodology, which did you feel was the most pressing to address and why? How do you feel this work addressed that topic?
The distinction between planned and potential impact is one of the most important–and basic–concepts of the methodology. For years, climate investors have set climate thresholds under which they would narrow down the types of technologies or companies that fall within their investment strategy. However, there has been confusion over apple-to-apple comparison as some investors use planned and others potential impact in their external communications.
Having a common language brings more transparency and clarity for various stakeholders, from startups to limited partners, that work with climate investors.
What questions do you think remain to be addressed by Project Frame’s methodology guidance?
One of the big questions that remains is how to quantify horizontal attribution. Especially for enabling technologies, the question of attribution is often a point of debate among climate VCs.
Some relevant questions are:
Should VCs be transparent and report on enabled GHG emissions or try to calculate the attribution factor for an enabling technology?
What are the constraints and resources needed for startups and VCs alike to provide an informed attribution factor? Is the calculation process fit for purpose, especially at early stages?
If we choose to calculate attribution, how do we ensure we avoid ‘garbage in, garbage out’?
Although vertical attribution is easier to calculate and there is more consensus around the table, there is one open question that will become increasingly more relevant as limited partners demand rigor and transparency of climate VCs. It is how–or whether–one should calculate impact per amount invested to be able to understand and track individual investor contributions.
Looking forward, how would you like to see forward-looking emission impact assessment continue to evolve? Or, how would you like to see climate investing evolve with respect to assessing forward-looking emissions impact?
One thing I think should be part of the iterative discussion on this methodology is how to adapt it to different investors within different levels of resources, start-up engagement strategies, and investment strategies.
For example, first-time funds without a full-time impact or climate team might not have enough resources to dedicate to this level of methodological rigor. Likewise, early-stage investors might not have access to the right level of data, such as baselines or start-up data.
And while this methodology is focused on emissions, I still think the industry needs to incorporate other [types of] impact. Just like one might use an LCA for the impact unit, it would be great to think about how to integrate other LCA factors in a more comprehensive climate methodology that goes beyond GHG emissions.
Melina Sánchez Montañés is a climate tech investor and VP Impact with AENU, Before joining AENU, Melina set up a $5M Fund for the Alfred Landecker Foundation as its Managing Director and helped build the World Economic Forum’s COVID Alliance for Social Entrepreneurs. She holds an MBA from Tuck School of Business at Dartmouth, MPA from Harvard Kennedy School, and a BA from Yale University.
AENU drives systemic transformation in venture capital towards impact, accessibility and stakeholder-alignment. They are an impact technology fund aligned with Article 9 SFDR with a focus is on early-stage climate tech companies based in Europe.
