Greenhouse gases (GHGs) in the earth’s atmosphere play an important role in keeping the planet habitable. However, having too much of these gases in the atmosphere causes climate change and is the catalyst behind the many climate disasters we’ve seen in recent months. GHGs include carbon dioxide, methane, nitrous oxide, and fluorinated gases; however, carbon dioxide makes up the majority of all GHGs, representing 80% of U.S. greenhouse gas emissions .
As discussed in Capitalizing on Carbon Neutrality: The Past, Progress, and Potential, collectively, we are starting to realize the importance of taking better care of our planet, and many of us are looking for ways to reduce our carbon footprint in order to emit less carbon dioxide and other GHGs.
There are several practical business reasons as to why companies should reduce their carbon footprint: namely, to increase cost savings and improve stakeholder relations (according to The Guardian, 66% of consumers are willing to pay more for environmentally sustainable products ). One of the most important reasons, however, is to slow down climate change. 2021 has seen a significant number of natural disasters and catastrophic weather phenomenon, which illuminate the severity of global warming. To achieve real climate progress, businesses and individuals must focus on rapidly decarbonizing their operations and lifestyles. But some emissions are unavoidable – this is where Patch comes in.
Who Is Patch?
Founded in 2020 by Brennan Spellacy and Aaron Grunfeld, Patch brings together companies in need of carbon-removal solutions with those who provide them. Patch’s API puts climate initiatives on autopilot by programmatically neutralizing carbon dioxide emissions, making it simple for businesses to launch carbon-neutral products and services. They do this by partnering with the world’s best carbon-removal scientists and offset developers to build a network of high quality, high-trust projects. Patch offers users access to verified and unverified carbon credits, with all verified carbon credits in the Patch network adhering to one of the big four standards: Gold Standard, Verified Carbon Standard, American Carbon Registry, and Climate Action Reserve.
Patch estimates the emissions generated by or associated with specific activities and processes, such as passenger car travel and blockchain transactions, and using that information, businesses can seamlessly purchase negative emissions on the Patch platform from projects that specialize in mineralization, improved forest management, biochar, and more. The result is the removal of hundreds of thousands of tonnes of carbon from the atmosphere each year.
At Purpose Investments, we were one of the first firms in the world to embed Environmental, Social and Governance at the foundation of how we build products. Working with Patch, we’re extremely excited to take the next step toward the increased sustainability of our operations through carbon offsetting.
Patch’s Approach to Carbon Removal
Achieving a carbon neutral state requires a two-pronged approach. First, Patch works with users to measure the carbon footprint of certain activities. Then, they assist users in buying an equal amount of carbon offsets to balance these emissions.
1. Measuring Emissions
One component of Patch’s API called Patch Estimates allows users to calculate the equivalent amount of CO₂ emitted by certain activities, like shipping, travel, or using crypto. To make these calculations, Patch uses carbon accounting frameworks, including the Greenhouse Gas Protocol, and leverages data from large organizations such as the Environmental Protection Agency (EPA), Department of Energy (DOE), and International Civil Aviation Organization (ICAO). To measure crypto’s emissions, which is most relevant to Purpose, Patch uses a methodology that is an extension of the approach pioneered by Cambridge, Marc Bevand, and others.
2. Offsetting Emissions
Once users have calculated how much carbon is attributed to their activities, they can buy and expire an equal number of offsets to balance it out. Patch enables users to choose from a broad network of nature-based, human-engineered, and carbon-avoidance solutions that bring together vetted carbon-offset developers and the latest negative emissions technology.
Why We Believe This Is the Right Approach for Investors and Why We Chose Patch
As discussed in this carbon offsetting whitepaper, there are two different approaches that organizations can take to offset emissions – (1) purchasing voluntary carbon offsets or (2) buying carbon credits that are part of the cap-and-trade system. At Purpose, we believe that offsetting is more effective than cap-and-trade credits because while cap-and-trade programs transfer the right to emit, the offset credits we buy represent investment in conventional and negative emissions projects that facilitate the removal of CO2 from the atmosphere.
For example, our crypto custodian also purchases carbon credits; however, while we buy offsets that remove CO2or prevent additional emissions, they buy and “vault” (lock away) carbon credits that represent the right to emit carbon.
Voluntary carbon offsets are also assessed based on co-benefits, which is an offsetting project’s ability to deliver value over and above just removing emissions. For example, projects can have co-benefits like improving community employment opportunities, air or water quality, or food security; helping habitat conservation; and improving or providing access to energy, health, and education services. Cap-and-trade schemes do not offer co-benefits—they are simply a mechanism to transfer the right to emit.
We chose to partner with Patch because we believe they have a superior methodology for measuring the emissions from crypto. Their methodology treats hash power like a public good and distributes the benefits from mining activity equally to anyone who uses the network. The energy expenditure of a crypto-network is derived from hash power and adjusted by a factor to consider the incremental power required for cooling and the supporting IT infrastructure.
When it comes to mapping the energy consumption to market participants, there are two methods: by transaction and token (i.e., supply). While there are slight differences between Bitcoin and Ethereum, in essence, transaction-based considers the fund’s daily transaction volume as a percentage of the network’s daily transaction volume. The token-based approach considers the fund’s daily holdings as a percentage of the total token supply. In the transaction-based approach, one realizes the entirety of their emissions expense upfront versus incrementally over time in the token-based approach. Purpose uses the token-based approach to protect investors from market volatility and ensure the fund is conservatively accounting for emissions.
We acknowledge that there is no perfect way of measuring the carbon footprint of a network. This is why we use a conservative method to ensure our carbon neutrality goal goes beyond words on a page and has a meaningful impact in the world. If you’d like to read more in-depth details on our methodology, it can be found here.
— Claire Vaughan is a Product Analyst at Purpose Investments
 "Inventory Of U.S. Greenhouse Gas Emissions And Sinks". US EPA, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks.
 “The troubling evolution of corporate greenwashing,” The Guardian, August 2016: https://www.theguardian.com/sustainable-business/2016/aug/20/greenwashing-environmentalism-lies-companies
The content of this document is for informational purposes only, and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained on this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice and neither Purpose Investments Inc. nor is affiliates will be held liable for inaccuracies in the information presented.
This information has been compiled by representatives for Purpose Investments Inc., an investment fund management firm. The information contained in this document was obtained from sources believed to be reliable; however, Purpose cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” intend,” “plan,” “believe,” “estimate” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.