Measurement in Market Making

In order to provide high-powered incentives in any economic market, you need an accurate and ongoing measurement of quality. For example, it’s difficult to imagine a financial system in which capital market participants cannot review audited financial statements before making decisions about buying or selling. 

Measurement and monitoring are a massive business: the largest four global accounting and audit firms earned nearly $160 billion of revenue in 2020. Furthermore, public companies are incentivized to accurately report their financial figures because errors can lead to significant fines from the SEC, though of course regulation doesn’t eliminate fraud entirely

Carbon markets are no different and much has been written already about the many challenges of carbon drawdown accounting and offsets. For the USV Climate Fund, we are exploring three natural methods of carbon drawdown: forests, soil, and ocean.

We have already made one investment in a forest monitoring company – NCX, formerly SilviaTerra – that fits this measurement thesis. As Albert wrote, “Automated high quality measurement can provide the basis for a continuous and efficient market in forest maintenance and growth.”

Soil carbon and ocean carbon are more difficult to measure because you can’t necessarily use satellites and likely need deep sampling measurements. There are also open questions around permanence

These questions are all the more reason that we are interested in finding entrepreneurs working on the measurement and monitoring problem in soil and ocean carbon as we believe that these are integral to enabling efficiency and effectiveness in today’s nascent carbon markets.