Welcome to Invested in Climate. Protecting the planet and decarbonizing the global economy is the challenge of our time. We all have a role to play, and the opportunity we face is unprecedented. Invested in Climate aims to help people do more to address climate change through their work, investment, lifestyle, and activism. I'm your host, Jason Rissman. I support a growing community of top climate and ESG leaders as the chief experience officer at NationSwell, and I'm an adviser to the climate practice at IDEO. I'm also an investor and startup adviser. And when it comes to climate action, I know I'll be a lifelong learner, always looking to have more impact. If you like what you hear, give us a good rating on Apple, Spotify, or wherever you found us. Sign up for updates and suggest ideas for future episodes at investedclimate.com. Follow us on social, subscribe, and spread the word. Thanks for joining.
Hi folks. This week we're doing something a bit different. Rather than our typical interview format, this is a recap of New York Climate Week. I'll share some of my impressions, and you'll hear from folks like Vice President Al Gore, California Senator Henry Stern, several friends, and fellow climate travelers. You'll hear some segments from sessions I attended. Sometimes it might sound like you're actually there in a room full of people. If you hear an occasional cough or something, try to just think of it as getting closer to the experience of being there without any risk of coming home with COVID. Over 75,000 people kicked off the week by taking to the streets for the climate march on September 17th. Over the ensuing week, thousands of people from around the world joined over 585 official Climate Week sessions and likely as many unofficial ones. Here's Adam Lake, organizer of Climate Week from the Climate Group.
It's the 15th year that we've hosted Climate Week NYC, and it is not just the biggest event we've ever run. It is actually officially the biggest climate event ever to take place in the world of all time. So it's really, I think it's a really, really big week. I think what I'm most impressed by is seeing the real variety of events taking place where people are discussing actual action. I think we're looking at subjects as diverse as food, environmental justice, built environment, electric vehicles. There's so many experts in New York City coming together, collaborating, but also pushing themselves on how we can do more, further, and faster. From royalty to resistors, students to CEOs, corporate sustainability leaders, elected officials, actors, attorneys and artists, investors, inventors, storytellers, scientists, diplomats, and teachers. Attendees were as diverse as the climate movement itself today. That is, it includes everyone that cares about the planet and is doing something to protect it. Climate has become the biggest, broadest, and arguably the most important movement in human history. And Climate Week was a massive coming-together moment for us all.
Climate Week began in 2009 and was at first a small event trying to piggyback on the UN General Assembly meeting. Sideshow no longer, Climate Week has taken the main stage. New York's ballrooms, exhibition halls, and conference rooms teemed with keynotes, panel discussions, and roundtables. You've got President Clinton interviewing the Pope and a week-long climate science fair that took over New York's High Line Park. There were art shows, workshops, and film screenings, cocktail parties, and river cruises. The New York Times called it Burning Man for climate nerds. Here's what Bonnie Guri, co-founder of Green Portfolio, had to say.
This year's Climate Week was unlike any other Climate Week I've attended, mainly because it has become a cool scene. All of our previously nerdy parties have really come into vogue. There were so many people who wanted to attend, who were attending, who were throwing events and networking parties, and that was really fun and at the same time really useful. In some ways, it was an enormous festival, but it was something else, too. Bringing together thousands of people who dedicate their brains and hearts to battling the climate crisis, who feel the weight of the planet's future on their shoulders. It brings a palpable energy. The hope and fear echo in every conversation. There's the excitement about new commitments, technology, and policies. The undeniable truth that we're not moving nearly fast enough and have a long way to go. Prepared talking points on stage are followed by deep exhales and safe spaces. It's all there. In multiple meetings, I saw people cry. One group burst into spontaneous song. The heaviness of the moment and the effort it takes to remain focused, optimistic, and committed. It's all felt. So too, the spark of inspiration as new ideas lift your spirit with new possibility and the feeling of community, of being together in this historic fight. One person I spoke to told me this was her favorite week in recent years. She said this work is so isolating, and now being with my people, it felt so good to meet so many passionate and brilliant people. These are my people, and this has been really inspiring.
Alex Wright Gladstein, founder of Sphere, shared her take on the week.
Climate Week was bursting with energy this year. It was incredible to see how many people were in one place at the same time in New York to talk about climate, and to see the real focus that emerged on fossil fuels this year. I've never seen such a focus in a universal way in climate conversations in the past on fossil fuels really being the source of the problem. Everyone was calling a spade a spade, starting with the march to end fossil fuels on Sunday, and then it was a recurring theme throughout the week. A highlight for me personally was meeting Jane Fonda and hearing her say the same and telling everyone how we need to stop investing in fossil fuels. And my favorite part of what she said was we should stop sleeping with people who are invested in fossil fuels. Let's just get everyone to do it. Let's make it socially unacceptable to invest your money in fossil fuels. I loved hearing that. She's such a rock star, and Climate Week was amazing.
Clearly, new ideas were welcome, as were new participants. Here's Nyla Mabro from the Clean Fight, the New York chapter of New Energy Nexus.
What's also exciting is the shift in the makeup of who's at Climate Week. It used to be a lot of people who've been doing this work for a long time, and now there are so many new people who are looking to transition, who recently transitioned into climate, and that new energy tamps down the jadedness and brings new insight and perspective and hope. And that is great, so keep joining the party, people.
Meanwhile, at One Ventures, Tomqi noted that the conversation seemed to be growing up in some ways.
The thing I like about this moment is people are getting a lot more real. You know, there was a lot of exuberance about climate investing and the carbon markets and all that kind of thing. And some of those things were out of band with what actually practically works or is true. So I like a moment where things get called out a bit. And I also like a moment where we kind of look at the trajectory so far and we ask ourselves honestly, are we going to get there or not? People are realizing this will not happen that quickly. Now, it's this weird kind of like combination of you need to act really urgently because if you don't act urgently, it will go on way longer than it needs to. It'll take hundreds and hundreds of years to repair, as opposed to we could get a lot of this done in 50 years. But like I think in the modern era, we don't think about 50 years as a short amount of time. Even though in practice, like you look at the physics of what it takes for an ice cap to refreeze and for a number of the damages that we've already created to get repaired, it's like, oh, that's actually already longer than 50 years, guys. So like we'll have to understand that even in 50 years we won't have all of it repaired, right? We will be in this kind of intermediate state. So I think the realization that this is a multigenerational challenge, but also the ability to kind of stick with the urgency of it, it's, I want to say that is the main message everywhere yet, but I think the people that are heads down in it are all realizing that, and we're getting ready for the 50, 100 years it's going to take.
Kirsten Snow Spalding, vice president of the investor network at Ceres, noted not just the seriousness of the conversation, but also the alignment of stakeholders needed to drive real progress.
I saw a number of things that were different and I think important this year. One was really a shared sense of commitment to addressing climate change, and I saw that in conversations between investors, companies, and policymakers. I think for the first time the announcements that we heard from policymakers were really designed to align with the commitments and the actions that are being taken by companies and investors. I think a really important shift in the conversation, a sense of collaboration between all of the actors who need to make changes in the real economy. I do want to note that I think this was different. Last year, we heard lots of conversations about commitments and targets. There was concern about greenwashing and accountability, but this year the conversations were about plans and progress.
I kicked off the week in a somewhat surreal way. I work for a company called NationSwell. We're an executive membership network and advisory that helps sustainability and other leaders take on bigger bets and be more successful. We were invited to bring some NationSwell members like Michael Kabori, the chief sustainability officer for Starbucks, and join Al Gore and other climate leaders in ringing the NASDAQ bell on Monday morning. Ushering in Climate Week by ringing the NASDAQ bell felt a fitting start, as a question on everyone's minds was if capitalism is up for the challenge. Will corporations lead the transformation needed to cut emissions? Here's how the vice president began the morning.
Thank you to NASDAQ for dedicating today's ceremony to what I and many others view as the most important issue of any of our lifetimes, the climate crisis. I'm grateful to be here representing the partnership I co-founded and serve as chair, Generation Investment Management, and to be speaking as one of the many tens of thousands of people taking part in this week of climate advocacy in New York City. As we kick off Climate Week, we find ourselves at a critical inflection point. We are suffering horrific and rapidly escalating consequences of the climate crisis. Our world has just experienced the warmest months ever measured with instruments, including what scientists believe are the three warmest days in at least 125,000 years. This is our moment of truth. Will we take the action necessary to safeguard humanity's future? We can. We must. And I believe we will. While we have much more to do, the tide is beginning to turn, and so are the markets. My partners at Generation and I believe very strongly that you don't have to trade value for values. The companies that are leading the clean energy transition are proof of that. But the work of solving the climate crisis is not solely the work of companies producing solar panels or developing novel alternatives to fossil fuels. The transition to a net-zero economy requires action within every business. So I'm here not only to ring this historic bell. I'm here to recruit you, all of you. The actions we take in this decade will determine the future world we leave for our children and grandchildren. So let's get to work. Thank you. And thank you, NASDAQ.
After the bell ringing, it really started to feel like Climate Week. Coffee and refreshments, networking, and some really thought-provoking conference sessions organized by the NASDAQ team. The vice president started us off with his assessment of the state of climate progress.
But anyway, what's changed over the years? Not enough. It's a short answer, but quite a lot is also part of the answer. We're in the early stages of a sustainability revolution that's powered in part by the new information technologies, AI, machine learning, and also the biorevolution in biology and genetics. So people can now, you're seeing the manipulation of electrons and protons and atoms and molecules and proteins and peptides and genes with the same proficiency that the IT companies have demonstrated in managing this. And this sustainability revolution is likely to have the scale of the industrial revolution coupled with the speed of the digital revolution. And it's really coming on very fast. However, the crisis is still getting worse faster than we are deploying the solutions that are available. We are putting 162 million tons of man-made heat-trapping pollution into the thin shell of blue oxygen around the planet, which is just, you know, 5 to 7 km high, and we're using it as an open sewer. It builds up there. The average CO2 molecule stays there for 100 years. And the accumulated amount now traps as much extra heat in the Earth's system every day as would be released by 600,000 Hiroshima-class atomic bombs exploding on the Earth every 24 hours. That's insane that we're allowing this to continue. Most of the heat goes into the oceans. It doesn't stay there, with apologies to Las Vegas. And that accelerates and distorts the water cycle. That's why we get these huge downpours. Rain bombs, some of the scientists call them now. And the same extra heat also makes the droughts take hold much quicker and last longer and deeper. And the list of perils with the melting ice and the rising sea level and tropical diseases moving toward the poles to the areas where more people live and conditions that combine higher temperatures and higher humidity that exceed the levels that human beings can survive. If you get the prospect, the Lancet Commission says if we don't change quickly, we could have 1 billion climate refugees and migrants crossing international borders. That could threaten our capacity for self-governance. Look at the xenophobic ultranationalism that comes from a few million. So I'm sorry to you, I have a lot of buttons you can press here this morning. The headline is this past year, for the first time, the climate crisis has moved to center stage in global politics and geopolitics. You see it and hear it everywhere. That's good news. We have also seen impressive new ambition starting with the United States of America with the so-called Inflation Reduction Act. The IRA was really a climate act. The sticker price or the amount they say it puts towards solutions is 369 billion. But the heavy lifting is done by tax credits that are mostly open-ended. And the demand in this first year has made it clear that it's going to be three times larger than the sticker price. It's probably going to be 1.2 trillion or more. And that is really supercharging the flow of capital into these sectors. We've seen since then new ambition in Australia with a new government and a complete positive reversal of their climate policies. The same with Brazil with President Lula coming back into office and protecting the Amazon. The European Union, their pre-existing inclination to accelerate the clean energy transition merged with the craven attempts at blackmail by Putin trying to get support for his sadistic invasion of Ukraine. And one of the ministers in Germany said renewable energy is freedom energy. And so we've seen an accelerated response in Europe. So all of that's really good. Now the bad news is we are still walling off most of the developing countries from access to capital. Second part of your question was how can private capital play a role? I mentioned all that new deployment of solar and wind, which is incredible, cost has come down so dramatically. 86% of the financing for those deployments came from the private capital markets. Okay. But it has gone mainly to Europe, North America, Japan, the modern developed countries, plus China and India. But if you're in a place like Nigeria where solar electricity, I mean, it's a godsend that they ought to be developing it. But instead when they go to market, the interest rate they have to pay is sometimes seven times higher than what is paid in the US or Canada or the UK or Germany. And that means they're really prohibited from gaining access to the private markets when the entire world needs that. Now there's extra risk there. Of course you have rule of law risk, offset risk, currency fluctuation risk, corruption risk, etc., etc., etc. And the global institutions, the World Bank, the IMF, the other multilateral development banks are supposed to take those top layers of risk off the top of the stack and give them fair access. They have not yet been able to do that. There are reforms underway. Banga is a great new head of the World Bank. Kristalina Georgieva, the IMF, is moving forward aggressively. We need the regional MDBs also, and we need the wealthy nations to help with the recapitalization, and we need these institutions to change their leverage ratios, and it can be done without enhancing risk, but they can get more money going into developing countries to power this revolution.
The vice president concluded with a shout-out for an organization we featured in a recent episode, Climate Trace.
I'm also in pursuit of, with the help of my partners, an organization called Climate Trace, tracking real-time atmospheric carbon emissions, climatetrace.org. It's free. You go to it now. We have every significant point-source emission site for greenhouse gas emissions on the planet. At the beginning of COP28, we will announce the new iteration, a thousand times larger. We don't have the backyard barbecues, there's a very long tail on carbon burning, but there are large companies now using climatetrace.org to change their supply chains to shift suppliers from high-carbon to low-carbon suppliers. And it is beginning to have a really dramatic impact on procurement and on supply chains around the world.
The themes Vice President Gore voiced were ones I heard repeatedly throughout the week. Excitement balanced with alarm. The feeling of better-than-ever momentum with exciting technological progress and the massive support of the Inflation Reduction Act mixed with deep concern, sometimes near panic, that we're not moving fast enough. We'll hear more from the vice president later in the episode, but first let's go deeper and understand both the reasons for excitement as well as concern. Starting with the unprecedented opportunity to invest in climate tech. Here's Katie Ray, CEO and managing partner of the venture firm, The Engine.
The opportunities are ridiculously enormous, right? I mean, if you think about how we are going to fully change over our infrastructure to clean energy, you know, you're not talking about trying to knight unicorns and not even deca-unicorns. Like, what do we call trillion-dollar companies? I don't know, Clay. Clay must know the word. But that's what we're shooting for. We're shooting for companies that will represent how we're going to find energy, how we're going to distribute it, and distribute it to people all over the world, not just in developed nations. So if you think, I had such a fascinating set of conversations before this about the developing world and energy, but areas that I'm super interested are very low-cost, very clean forms of energy. So if you think of deep geothermal or fusion, these are types of energy sources that could be put almost anywhere in the world, and we need it, and these are going to be the biggest companies of the future. And so that's an area I'm interested in. But it's not as narrow as that, right? We have to look, I think there are opportunities across decarbonization, how we grow everything, how we're going to distribute healthcare and medicine. These are all related to climate change and what's coming in the future. So I consider myself incredibly lucky because we are going after very, very large opportunities, and we're at a sea change in these companies starting to get to manufacturing and become very real, which is why big capital is coming towards them. I'm a seed investor, but now you are seeing very, very large pools of capital turn these into the reality that we need for climate change.
Katie was followed by Jeff Johnson, managing partner of Tamasic, who shared an example of the type of company he's excited about.
One of the very first investments we made was in a company called Solugen. It's a company down in Houston that makes industrial chemicals from enzymes instead of fossil fuels. And what I love about Solugen is that some of their first customers didn't even know that they reduced the carbon intensity of their products by 90% relative to incumbents. These were oil and gas guys who had two questions. How much does it cost? Does it cost the same? And does it work the same? Oh, and it's made right here in America. All right, let's do it. And over the last five years, Solugen has built a nine-figure revenue business with software-like margins selling a product that takes CO2 out of the atmosphere instead of emitting it. And they're going to work their way one by one down the list of the biggest chemical products in the entire world to build one of the biggest players in a trillion-dollar industry, and which is one of also the dirtiest industries in the world, selling to customers that aren't there because of guilt or shame. They're there because the products are just better, faster, cheaper, and stronger than the thing that they're replacing. And so for us, I think for many of the people here, that's the prototype.
Clay Dumas of Lower Carbon Capital shared his thoughts on why, throughout the economic downturn, climate investing has remained more resilient than other venture spaces.
There's a reason that climate has outperformed the rest of early-stage tech. Let's start with the fact that culture has just shifted from boardrooms to kitchen tables. And people realize today that lower carbon is just in their pure economic self-interest. It is also based on a recognition that independence for energy and raw materials and critical inputs to our economy is as much a matter of national and economic security as it is about private security. Doesn't hurt that through the IRA, we're about to pump a trillion dollars into the US economy to help accelerate this entire space. And we're going to add hundreds of billions more from Europe and Korea and Japan and India and Brazil and Canada and frankly any economy that has its eyes open right now. Finally, there's another trend here, which is that you have a just a very rapid movement of talent into climate. Speaking personally, I have never been busier. The space has never seemed as big to me as it does today. And it's part of the reason that at Lower Carbon we were able to, we just announced this raise, another $550 million, to keep investing in founders that have a reasonable ambition to go solve the very biggest problem of our time. When I think about that question, the way that I respond to it is by saying the headwinds that a lot of the rest of the economy are facing right now are tailwinds for a lot of the sectors that we're investing in. From our standpoint, this is just something that people are starting to pick up on, and they get it.
And it's not just venture capital that's driving the opportunity for climate tech. Clay talked about the unique opportunity for climate founders today.
I think the first thing that I would tell founders that are thinking about raising their round of capital right now is don't just go speak to other VCs. Try to understand the full capital stack that's going to be available to you. One of the cool things by investing in the spaces that we invest in is a lot of founders are taking deep technical risks, but they're not taking market risk. The demand curves are known. Buyers are out there saying, 'You can supply to us cement that has this performance with these properties at this price. We'll buy it.' And founders can turn around and take those contracts and offtake purchase agreements and go to lenders and banks and strategic partners and go get financing that's less than venture dollars in the earliest stages. So from our standpoint is before you or as you go and speak to venture investors on what it's going to take to raise that seed round, go talk to the folks downstream to understand how quickly you can graduate from venture dollars into the stuff that's going to help you get really big.
But successfully decarbonizing is going to take more than just successful ventures and sustained investor interest. Our dependence on fossil fuels is a systemic problem deeply interwoven into the fabric of our society and economy. And real progress will require not just new technologies being developed and scaled in isolation, but they'll need to connect. Here's Ian Samuels, founder and managing partner of New System Ventures.
24/7 carbon-free energy on an hour-by-hour basis across the globe. It's going to require a massive number of solutions coming together that need to work together as opposed to in conflict with one another. And that includes firming renewables with long-duration energy storage, developing dispatchable baseload clean energy such as geothermal, fusion, fission, hydro, and others, and being able to better match the supply and demand of electrons through time and space by having a more transactive and intelligent energy grid. And then lastly, creating the financial systems and structures that will enable investment through different capital structure instruments into each part of that.
While there's relatively easy money to be made amidst the climate transition, only focusing on the low-hanging fruit won't adequately finance the enormous change that's needed. Al Gore's partner Colin Leuk talked about that funding gap and how they're approaching it through what they're calling climate investing.
There's plenty of climate finance flowing. The problem is it's going through financially kind of driven mandates, investment mandates. As a consequence, that money is ending up in safe investments, let's say, in renewable energy infrastructure in North America, for example, or in climate tech. And what that misses is everything else that needs to be decarbonized. So heavy industry, all the hard-to-abate stuff, steel, cement, aviation, shipping, all of the Global South, all the nature-based solutions do not naturally fit into investment mandates that are purely IRR-driven. So the finance industry as a whole needs to basically innovate. So we, the finance community, are very good at optimizing risk-return. So the last kind of 20 years of Generation, we've been trying to prove that you can make better long-term financial returns. What we now need to do is actually also make at-scale impact. And the ESG movement is getting a lot of heat right now, as is, you know, sustainable investing as a whole, is for having demonstrated that risk-and-return optimization part of the job but has failed miserably on the impact side of the job. And we basically believe that is because the objective of investing needs to evolve to deliver an impact, not just risk and return. What Just Climate does as an investment business is it has a north star of decarbonization, and our ambition is to avoid and remove a gigaton a year by 2030. We think that's going to take about $50 billion. To get $50 billion, we need to deliver fiduciary returns, right? We need to deliver appropriate financial returns, so do not misprice risk. So what you do is you start, we talk about this as climate investing, where essentially you are looking for the highest positive climate impact in a timely manner at a scale that is relevant to the climate, and then you are looking for those opportunities that you can underwrite commercially. So traditional investing, even sustainable investing, basically starts with how do I make 20% return, okay? And then sustainably, and you basically invest to hit that 20% number, and you hope that the impact is positive. Okay, that's not always the case because investors will optimize around the financial objective, not around the impact objective. That's why there's so much greenwashing in the market. Most of these climate funds are not climate funds because the objective is to make money, it's not to make impact. Sometimes there's an overlap, but not always. What we've tried to do is flip that equation around and start with that goal. And how this manifests very practically for the investment team is that 100% of the performance fees of this fund are linked to impact. Okay, we think this is where carry is going. So most private equity investors basically have a 2-and-20 model or whatever it is, and they basically just make loads of money off the carry, and that's got nothing to do with the impact they generate. It's all to do with how much money they make. Right? So what we've said is even if our investment team makes 50% IRR, if they don't make the impact objectives that we have agreed with our clients, who are pension funds, they will not get any money. So what that does for a dealmaker is it really focuses them on delivering impact. So I think just to sort of practically bring that to life, I would urge the finance community to evolve their incentive structures to absolutely include impact. That's what we're doing at Just Climate.
Colin's call for the finance community to evolve is really aimed at private equity and venture investors. The need for broader change in finance, however, was echoed and supported at Climate Week by the US Treasury Department as Secretary Janet Yellen announced the principles for net-zero financing and investment. In launching the principles, Secretary Yellen made several points that are worth mentioning. First, that there are over $3 trillion in annual investment opportunities associated with the transition to net zero. Second, that without considering climate change, financial institutions risk being left behind, stuck with old business models and missed opportunities. And finally, that more than 650 institutions representing roughly 40% of global financial assets have made net-zero commitments. Over a hundred of those institutions are in the US. The new principles aim to address their need for more clarity and consistency around these commitments. And the principles also seek to help firms that have yet to make commitments get started. Kirsten Snow Spalding from Ceres weighed in on the importance of these principles.
We heard Janet Yellen's announcement, her plan for net zero, and we really saw investors responding to that, saying, 'Yes, we are going to put out our investor climate action plans. We know that companies are going to be issuing their plans and aligning them with the science, not just saying here's what we'd like to do, but here's what we are planning to do. Here's where our expenditures are going to go, and they're going to do their lobbying to align with the commitments and the plans that they've made.'
