Sustainable Finance Panel

Again, I want to thank our panelists today to join us on Earth Day of all days uh to talk about sustainable investing sustainable investing panel. Uh most of you or a lot of you know me. I'm an adjunct here at uh school and I teach a class called financing energy infrastructure. >> So um I think we should just jump right in if that's okay. Um all right. So uh we're in a business school. I'm actually technically part of the finance faculty. And so I want to talk a little bit about sort of returns. Um and just to kind of frame this a little bit, right? So clean energy investment is about 2 trillion uh in 2024. Um but what interestingly the climate dedicated funds that were raised in 2020 to 2022 haven't exited yet. Right? So the returns is the TBD. Nobody knows if they're going to be good or bad. At the same time, ESG premium or any kind of value that people put on the ESG label has basically squeezed to zero, right? Um, and so the question for you guys on Earth Day is if you strip away all of the stuff, right, strip away client sustainability, making the world a better place, you know, where the business school here, what is the business case for what you guys do, right? What is on the risk adjusted return the justification for? >> I'm happy to start. Yeah, great. >> Um, and Jason and I are friends, so this should be a fun. Um, so I actually I love this question because we talk about this a lot. I think there was a concept when the term ESG came out that oh it must be low returns or it must be concessionary capital and that's actually not the case because if you think of energy and power, these are industries that are growing. Um, they need a lot of capital. they're very capital intensive and need hard assets and so they're constantly needing you know more to grow. Um and the proof where we play is bridge financing. So if you think of today there are a lot of whether it's energy climate startups or early stage companies they've used equity to grow to date venture or growth equity and then you have the banks that are willing to finance larger companies that have are well established and they have revenue and they're profitable and they need $300 million. Who's playing in that middle space bridging from equity to the bank financing or traditional capital? So that's where we come in. So if you think of equity being 20 to 25% returns and the banks being let's say 6 to 8% total returns there's a place in the middle that's kind of mid teens 15 17% that helps to bridge the gap and you know sometimes we get the question of like oh that seems very expensive for climate because people think that it's consecutary but it's the capital that's needed to get from point A to point C. Um so I think there's a a big business piece um for making great improvements. >> Uh I guess I'll take the question two different ways. So first is when we started generate think before um CEO the thumb partner artist and generation guy named David the CEO of SAS asset management and so he came obviously from mainstream management background with the main track record like I'm starting KB Hall right so you know you have this person walking into a room who has this all this credibility um as a fiduciary and he would always try to make the business case for sustainability. And Ed would almost inevitably then say, "Well, are you willing to accept the returns?" He would say, "No, I just spent the last 15 minutes explaining the business case for sustainability, right? There's a massive bias against the idea in capital markets that taking into account quote unquote sustainability and that goes anywhere from how you manage people uh to you know diversity in the workplace uh to benefits and employee ownership especially for a climate group. So especially around issues of lowcarbon technologies um whatever the kind of climate angle is we used to always say no no no there are these inevitable trends that are happening costs are coming down the regulations coming in you know you can have benefits with good customers uh partners and then ultimately you can make more money right so the business case was always center to generation and then all the other verbs I've ever looked at. I do think that um I can talk specifically about spring but I'll stick with kind of the macro for now. It was this very kind of I'll call famous meeting because we basically went to go meet with the chief investment officer of Kalper which is one of the biggest investment in the world fund and David and the CEO were having this debate and he was basically trying to make David prove that returns from sustainability uh are better than returns from conventional investing. And eventually it basically came down to you cannot prove that they're better if you take into account sustainability. And David said you can't prove they're not better if you take into account sustainability. And so I think all investing is it's idiosyncratic. There's what you know there's when was your fund started. There's how much liquidity do you want? How much risk are you willing to take? And so I think there are enough data points that show that there are just as many strategies investing taking into account sustainability um that are highly profitable as there are strategies that don't take into account sustainability that are highly profitable. So what I always conclude with is um you can't prove it is more profitable but you can't prove it isn't. It all depends on the strategy and obviously the team, the execution, exogenous factors, things like that. So to me, it's a question you have to engage if you're in a space because people want to try to make you fight it, but they just say, look, there's enough evidence to say that you can make more money doing this. And there's also a lot of underperformance in the sector just like there was. So it sounds like the consensus at least from you two that you focus more on just the financial returns than we want to make the world a better place. I mean obviously you get to do both but is that really kind of the the what you start with is just the the classic this is kind of how much risk you're taking this is what your returns are um or or do you blend the two? >> Um I so there are points where I'll take my galvanized hat off for some of these things. So taking that off. Yes. >> So it is I mean if you look across the industry and you're like where could there be a lot of money to be made and where there are really interesting opportunities. I actually think climate is that space. And the more people get nervous about volatility and they pull back and investors are nervous because of political and and like news articles that actually creates an opportunity for people to step in and structure really lucrative uh opportunities and and be that capital that's that's filling the gap. So yes, but then personally this is the one of the first times in my career where I feel very aligned with um the purpose and the mission of a firm and the work that I'm doing. And so it's like the perfect nexus of yes, I do feel like we're making this cleaner and cleaner and I'm very excited about that and also it's a great place to to make investments. I mean I would say something similar which is I think that being a part of a missiondriven farm and a missiondriven culture which generation curricane all were has been a competitive advantage for every single one of those organizations and it's because one it's recruiting people so you know half the generation team came straight out of golden right after David and then we recruited most of the rest of the team from people who like our portfolio and energy had worked with Schroeder, another guy worked with that, you know, wherever. So like we recruited our entire back office straight just took them out because they were I'm sure the same thing has been galvanized. So you can go get people um and we pay competitive wages. It's not like making a discount on what they're making, but because of the mission, you can attract people from very high-profile, very experienced places. So one is with people and the second is with counterparties. Um I would say even when I was a public equity analyst, we had better access uh to management teams. We had better access to equity research. Um because people wanted us as a client and I think people wanted us as a shareholder because we kind of signaled something to the market. Um and in the private market thousand% massive competitive advantage field we'll talk about laterars that we just invest in. We absolutely won the deal because we were committed to climate and because they're delivering clean base low power and they had term sheets at higher valuations with better terms from crossover public private hedge funds, mainstream private equity firms, even mainstream even climate funds at mainstream climate firms like a car or KPR where they're like we just don't trust that these people actually when the chips are down that they won't make us throw in a nat gas to serve a data center like we want people on our team who are mission aligned and so I think it's a massive competitive advantage in in any number of ways I mean just just to wrap right so I I'm so I'm French as many of you guys know so I'm I'm by nature very skeptical and cynical and and everything is terrible all the time right but actually what you guys are saying makes a lot of sense just to just to kind of summarize what you guys are saying you know Look, climate first of all is an enormous commercial opportunity. There's huge amounts of capital needed in the sector. Whether or not it's profitable is up to the markets, but it is it is a big sector. Second, climate can allow you to attract the best people. Many of the people in this room I would consider, are some of the best people, but in a competitive uh market for talent where investing is just people, ideas, and numbers on a spreadsheet, that's a huge advantage. And then thirdly, I think this was super interesting. Um being aligned and having um having a a mission can sometimes allow you to originate opportunities. And again, it's very competitive. Everybody wants to invest in the best deals. And so having that um you know, no BS, right? Like really like this is kind of what we stand for can allow you to find differentiated investment opportunities. And all three of those are pretty important, right? I mean, I think all three of those can really make a can make a business. Um so just moving on to the second topic which is technology and what you guys are investing in what you guys are seeing right so let's just take off the table uh PV solar onshore wind and batteries right that's the stuff that I invest in it's bankable it's simple it works you can put billions of dollars >> batteries are simple >> well we can talk about that actually if you [laughter] want um but what what is what is just on the horizon uh what is right after the next sort of set of opportunities you guys are looking at and let me give you a couple um a couple things And again, I'm a I'm a debt guy, so I hate everything just by nature. Um, so so green hydrogen, >> welcome to Megan's life. >> Yeah. No, exactly. You know, we get along great. So So green hydrogen, the cost to currently $4 to $8 a kilogram versus gray hydrogen is $1 to $2 a kilogram. Doesn't work. Uh direct air capture is about $400 uh to $1,000 a ton versus the price of carbon at markets, which is about $50 to $100 a ton. Doesn't work. Um, offshore wind. I don't need to tell this room what's happening in offshore wind, but just to give you a data point. Uh, Orstead wrote down $4 billion in 2024. And the US, certainly the the world is bigger than just the US, but the US is definitely pulling back from it. [snorts] So, aside from the kind of conventional bankable technologies, what gets you guys excited and what are these students going to be working on when they get out of here? Because they're going to be working on the stuff that you guys are working. >> I was going to have you go first. in the universe. >> Um the space where I'm seeing a lot of interesting opportunities right now is fleet electrification. >> Um from uh so if you think of one obviously there's a lot of spaces that are moving more towards autonomous vehicles but just in general even if you don't go autonomous there's electric vehicles. Um and so we're seeing some within kind of the personal electric vehicles but the space that I think is really interesting is where you have a fleet of let's say commercial trucks. Um or if you think of a like an Amazon, right? They those trucks might be going in a roundabout radius so they're not going super far. Um and so then you know where they're going to come back to charge to. There's kind of collocation of those charging and you don't have to worry about how long it's going to take and where am I going to find my next charger. So some of those are really interesting from a credit standpoint or like if you're giving a loan. The nice thing there is you might have some contracted cash flow. You have the asset value of the vehicles you can lend against. So it makes it pretty interesting. Um there's still some challenges with it. So if there's a charging component, people don't know what historical utilization of a charger looks like yet. You can't say 10 years I know how much this electric vehicle charger is going to get used. So they're definitely challenges, but I think over time that's a space that's going to grow. I definitely think geothermal is going to get to a place where credit becomes very interesting. Um, and then my personal favorite is next generation manufacturing. Um, I think it's very aligned actually with almost all administrations, but certainly the current administration wants to reshore onshore jobs and to like build more in North America or in America. And if you think about it, there's just a lot of new things that need to get built. So let's say you have a grid that needs to become more efficient. Building the manufacturing facility that can build the chips that go into that like it there's a lot of stuff that needs to go into data centers and AI getting built. Um so I think that's a really interesting space and the part that I like about it is usually you can use equity dollars to get it past what we call like will it work risk. So you can prove that it works and then our capital comes in to help them expand to to grow and then eventually get taken out by a bank facility. Those are some spaces that I'm really been liking. >> Luckily we're talking about a few of those >> relook at one of our fleet businesses. Um so uh well first I'll tell you some things we're not doing that are interesting. So one I think I think long duration storage. Yeah. >> As opposed to kind of conventional battery storage. So we have a development platform that's doing a lot of conventional storage and solar. I do think longduration storage like form and things like that are really interesting. I think they are not proven technology though. I I I would argue they're not proven but there's you know some really interesting p commercial pilots going on. Um we're not investing in advanced geothermal. Um there's a company called Fervo that if you don't know which I guess your equity equity or equity >> the equity side of your business is in right which is advanced geothermal which is still >> they have a 3 megawatt facility they're building a >> 500 400 to 500 megawatt facility so there's still commercial scale up risk but there's a dozen startups or kind of growth equity businesses in the advan advanced or enhanced geothermal space that I think are super interesting. So those are kind of two sectors I'd And then the third one I'd say we've looked a lot at but not made an investment in are things like virtual power p plants kind of grid efficiency. Um, I'm not sure it's tech as much as you guys are investors in Octopus, right? So, like >> Oh, yeah. >> grid software, transmission enhancement, like there's a whole bunch of interesting technologies. Some are software, some are actual tech in the grid space. Again, we're not invested in those, but those are three I think are really interesting. The ones we are invested in conventional geothermal this company Sanscar which I think there is still as we were talking about before like a lot of perceived risk because of subsurface and things like that. Um EVs again like not necessarily a technology per se like it's proven technology but um we have an EV fleet business that we're actually starting to sell some assets in. We think it's a really good time to sell those assets because there's some consolidation. There's some acknowledgement that EV is, I don't know, maybe a better total cost of ownership solution for people than gas or diesel powered trucks, >> especially right now. >> Bananas that it took like another war for people to understand this. Um, and then uh so and then we also have an EV fleet financing business. Again, if you think about as an example, I've learned not to use examples that actually are the ones that make the most economic sense, but then the ones that people see every day. If you see the trucks dropping off your Amazon packages every day, those are mostly small fleet owners using gas powered or even diesel-powered trucks, which is insane. like the total cost of ownership of an EV kind of sprinter van is way lower than the total cost of ownership. And so like I think we're in the middle of a transition from to EVs that is going to be we're behind China and Europe and other places. But I do think that's like like a new tech. But I think the EV market is vastly um uh underappreciated right now. And the last thing I'll just say is we also have a green data center business called Saluna which is basically wind powered data centers. So I do think that anything around data center efficiency whether it's water whether it's power whether it's anything like that obviously is something that is a bit a bit of a no-brainer right now from an economic perspective but a lot of that technology is still unproven. We're doing wind so proven but a lot of interesting stuff out there being tried. And if you guys had to pick one technology that you're looking at from the sidelines, you're like, "We're not investing in this right now, but I need to see XYZ to invest in it in five years time, do you guys want to pick one and just tell us like what is the catalyst, right?" Like um >> I get really excited about nuclear. It's like one of my favorite technologies again because I'm French. I have to. It's by by law, but you know, there's certain things that you need to see before people really start getting into nuclear, right? Um and so I you know what what what is that technology that you guys are like, "Hey, I really want to invest in this. I can't do it right now, but if I see blank, then I'll do it. >> I mean, to me, the two big ones uh that we just keep looking at and we keep seeing startups in and we just can't get our head around are green steel and green concrete. >> Oh, interesting. >> Um there are half a dozen to a dozen startups in each of those spaces. I mean, actually, I'd put long duration batteries in there, too, but I already said that one. But um I think Green Steel and Green Concrete are two where a ton of incredibly wellfunded startups funded by the best VCs in the world. A lot of them have strategic investment from offtakers um like steel companies or concrete companies but uh I think they're or they have like a Microsoft or someone who thinks they're going to use it in their in their data centers. Um but those businesses have not been proven to work at sufficient scale for us to believe the economics. Um and they tend to have uh if there's one thing I would tell you today to remember is they tend to have fake offtake agreements. So we hate this because when we have a company like this, everyone wants to see an offtake agreement and we're like >> this is such like, okay, we'll go get you an offtake agreement just to say we have one, but you know, there's all these ways to get out of it. There's all these different, you know, escalators and price. There's ways of messing with it. Um, so a lot of people come to us and say, "We have a pilot plant and this giant offtake agreement with this giant company." And we're just like, it's it's a meaningless kind of piece of paper to us. So, we're looking for either a little more scale or a little more um evidence that people are actually going to buy the product at a certain price. Uh and we can't seem to find that right combination in in steel and concrete. >> Well, Jason, I I can guarantee you that no one who's taken my class will do that because our second or I think third class is all about offtake agreements and exactly what you need to do to get a a project >> uh financed. Um, >> by the way, a lot of these offtake conties. >> Yeah. >> Oh, yeah. >> Penalties for non-performance. And I'm like, >> yeah, >> that's like worse. >> Yes. So, anyway, sorry. >> Yeah. Sorry. Sorry. Um, so >> off take I'm glad you have a class on off takes. That's >> I know. Can you a rare thing? >> Can you imagine anything more exciting to do on a Thursday afternoon at 2 p.m. to talk about >> agreements are fascinating. >> I actually I do too, which is [laughter] we have our own issues. Okay. So, yeah. Well, on that topic, I feel like you all are so lucky to be able to take a course on that because yeah, there's so many times where you'll even speak to a company on the operating side that's like building their business and don't quite understand what the offtake agreement should look like to be able to get the financing, right? So, like to have that knowledge at at this level is incredible. Um, so kudos to you for teaching that. Um, I think the spaces where I would love to invest and can't yet, and Jonah worked with us uh at Galvanized for a bit, so I'm sure he looked at a bunch of these with us. One is actually the geothermal space when it comes to credit. I'm really excited about it, but what we need to see is a little bit more history of performance. Um, maybe even just like a year or two for certain companies. Dancecar is probably the one of the most advanced in the space. um which is why they were able to attract great capital. Um and so that piece and then certainly like the contracted cash flow nature of it. Um and then we certainly have looked at some green concrete. The question is like who's green concrete is actually a great example of one where either the perception or the reality is concessionary pricing >> and um there are a few that do it for the economics and not for what they call the green premium um but I think that's a space that you know would love to see the reason I'd love to see it advance in the future is about 40% of global emissions comes from the built environment. So, it is a really impactful decarbonization um like product that would be helpful. It's just not there yet on the revenue side to to your point. Um and as I mentioned, Galvaniz does have a whole real estate platform where they put on solar and they would love to use more uh decarbon decarbonizing inputs into the buildings. Um nuclear I find is a hard space from credit. So like we should chat cuz I would love to hear Yeah, I'm sure you were looking at much bigger projects, but >> yeah, it was a billion dollar investment inc. And I I think also it needs a longer tenor um for investing. So if I'm looking at three to four 3 to 5 years for my investment, it's hard for me to see a nuclear 3 to 5 years from now, something that's going to get built and be economic to the place where I can see a takeout. Um there is modular nuclear so like building it almost like Lego blocks but still I I today find that a hard space for the credit side given this we do 25 tound 25 to 20 sorry 25 to $200 million so that space is probably a hard space for us. >> I say anyone someone says anytime someone says we're going to do 525s and it's going to work just like 125 >> run screaming. >> Yeah. Um, [laughter] so just just to wrap up on this topic, I mean like I think just for the students, you know, if you guys are sitting at your interview and somebody says, and they should, what do you guys want to invest in? I think you just have a couple good answers here, right? You could say, I like I I really like fleet electrification, [laughter] uh, nextg manufacturing, you know, conventional geothermal is great, but nextg the geothermal, I'd like to see a little bit more operating history, and these people will fall off their seats, right? Um, and green steel and green concrete, not yet proven, but definitely on the horizon, and you basically have your job, >> right? Um, so moving on to politics and so you you you worked on the Hill. Um, what is the uh what is going to be the House count and the Senate count specific? No, I'm kidding. I'm kidding. I'm kidding. Um, let let's focus on let's focus on specific policy as it relates to uh what we're talking about, which is investing in in environmental uh and and and green projects, right? And so just to give a bit of framing, right? The IRA passed in 2022 and that was $370 billion in new incentives. Now, uh, the the current house is trying to claw back $500 million, $500 billion dollars in those incentives. So, you kind of two steps forward, three steps back. Um, at the same time, more than 50% of utility scale solar projects are being hit by tariffs or affected by tariffs. And certainly in what I'm seeing, everyone's renegotiating PPAs are renegotiating panel supply agreements. Everyone everything is getting kind of scrambled up because of that. So, at the federal level, a lot of I think let's call it choppiness, right? Um at the state level very interestingly still you know 30 states have renewable portfolio standards that are binding. You're seeing a lot of places in the US that are really pushing for kind of more renewable uh uh uh uh deployment in the sector. And so you have these kind of twin forces. Federal force which is choppy and certainly right now pulling back. State force which is for on the whole kind of pushing forward. Does the federal just swamp the state or is it more complicated than that? How are you guys navigating that tension? >> Get to go first. >> Go first. >> Um, I think it's, you know, I Well, I'll put our portfolio in three buckets. So, bucket one is things people really like. So, we're doing green green data centers, wind power in Texas, wind powered green data centers in Texas. Like, that's a really good thing to be doing. It's a free-for-all. You can kind of do whatever you want. Texas is kind of a home of, you know, more renewables than people would think. And so, and then Zanscar, which is geothermal, which is clean firm power, has been advantaged in the OBBBA, the the big beautiful bill, big bad bill, was um left geothermal incentives intact. So, kind of some of our portfolio is advantaged by the federal policy environment. Um, so it's not all bad news. some of our portfolio. We have a renewable natural gas business. We have some EV businesses. We have a solar development platform. Those are obviously disadvantaged. I'll give you one obscure example, but I don't know how much you guys looked at RNG, but we have an RNG developer. We'd hired a bank. We were raising $350 million to build a plant that turned uh chicken manure into green fertilizer um and clean shipping fuel. And we had an offtake agreement with a big European shipping business because there was a clean fuel mandate. So Trump threatened to pull the US out of the International Maritime Organization if they kept the clean shipping mandate, right? And so even though the offtake agreement, as I mentioned, is not super worthwhile, Jeff was our bank was like, "Look, we can raise the money if you have the offtake." We had the offtake. We're about to go out. Trump killed the clean shipping mandate. Company is in hibernation basically. Like, you know, we have a it's a great development team. We haven't spent much money, so I think they'll be fine. But, you know, there's an example of where it wasn't just it it was you said federal. It wasn't just federal. There's like an administrative risk to a lot of these businesses that we certainly didn't think. Like, by the way, I don't know if you've noticed about natural gas, but it turns out to be pretty important right now. and you could get a way higher price than we could have in our offtake agreement. So, you know, there's very people are making um the federal the current administration is making irrational economic decisions [laughter] that are affecting companies that even would have good economics otherwise. So, that's the other end of the portfolio. And in the middle there's stuff like, you know, clean fiber, this manufacturing business we're talking about, which, you know, for the most part, I would say is quasi unaffected by um what's going on in DC. So, you have good things, bad things. I will say, you know, to your point on solar, I mean, we have a solar development business. We're about to sell a bunch of solar ass or a small set of solar assets. Um, and we have, you know, 12 biders. Like, we'll make, you know, 1.2 1.4 times our money. like we do fine. So I think there are parts of those market where guess what people are doing? They're just raising prices. >> So I mean it's not killing the solar industry, it's just making energy more expensive, which again is functionally insane as a policy, but like that's how like crazy the world is right now. And then I'll just say the final thing is that so the Fed the administration um is doing its very best to kill all these industries. Um, but the states like this EV charging business I mentioned, we have incentives from California, Oregon, and Washington from their cap and trade programs to build EV charging, right? Uh, >> that's still there. Yeah. >> You know, we're building solar in Virginia. We're building solar in Illinois. They both have incredible incentives for community solar, um, for CNI solar. So it's enough to keep things alive, but it is creating things like um fiak um which is a foreign entity, you know, you can't have foreign entities involved or I guess Baba is another way, you know, made in America. But there's a bunch of rules that are still they're slowing everything down. So people are sticking transformers in warehouses and putting concrete pads down so they can qualify for tax credits. So there's a bunch of weird stuff going on, but it has not killed even the things that are most disadvantaged because fundamentally we kind of need them. >> Yeah. >> Yeah. I I agree with everything you said. The one thing that's becoming clearer and clearer is there's just more energy and power that's needed, right? And so, you know, you have all these news this news about like solar and wind and we're going to cut this off and but the truth is you kind of need all sources of energy to be able to meet the demand that's going to be needed for AI and data centers. So, while there's they're very real, you know, repercussions to some of the announcements and some of them are very real, but then there's also a lot of noise. And one thing that I look to is the our industry is growing. It's growing in terms of jobs. It's growing in terms of projects. Um, and it's a very exciting time to be in the space. So, you just have this like juxtaposition of a lot of fear and nervousness and true volatility versus it's inevitable that this part of the industry has to grow because you you can't, you know, it's not going to be all oil and gas forever. So, we have to grow. >> Um, I'll give you an example on this uh political side. And so, um, this is off the record and I'll give you guys a little bit of insight, which is I'm >> hopefully two weeks away from closing our first deal, um, in our new platform, uh, on credit and capital solutions. And it's in the electric vehicle school bus space. >> So, it's also, you know, other fleets, but mostly it's school buses. And if you think about, >> which again makes so much sense, >> which makes so much sense. And it makes so much sense for a few reasons. It's like you you know that that school bus is going from it's just going to pick up the kids, it's going to drop off the kids and so it has its set route. It comes back to the school to charge. Um you can charge midday and you can charge at night. So it's the cheaper charging. Um >> so in addition about 10% of school bus fleets age out every year, right? So they're they're old. You we've all ridden on old school buses, right? And so the schools make a choice. Are we going to buy new diesel buses or are we going to use the grants that exist and buy new electric school buses? And right now with some of these grants, it's actually cheaper to buy the electric school bus. So, it's a place where it is dependent on some of the political piece, but it's state grants. So, no matter what happens on the federal level, the states are still digging in. For example, New York has a mandate to go 100% electric vehicle school bus. Now, >> are they healthier? >> They're health Well, and so that's the other biggest piece. So it might get delayed like it might not be 100% electric by next year in New York but certainly it's moving the needle forward and Texas is actually one of the bigger states. They have a whole separate electric vehicle school bus program even though you would expect that Texas might not be like the cleanest state and the reason is one they actually are quite energy focused. So so just like Jason said they actually do quite a lot in the renewable space but more importantly it's a health issue. So, a lot of the students who have asthma um have trouble breathing on these diesel buses for like an hour and so they they have a program uh to incentivize it. So, that's a place where like the state programs really matter. But I I >> similar to what Jason was saying, I think we've all become very focused on binary risk. Yeah. >> So, now when we look at an investment, we're like how dependent is it on the federal rules and like what could change? And one place that we actually try to mitigate some of that risk is well we try not to take binary risk but we also shorten the time horizon of which our investments are. So 3 to 5 years feels a lot easier for me to figure out can I invest in this versus 10 to 15 years where I don't I don't know. >> That's interesting because I I was going to ask you sort of credit is especially badly suited for political risk which is binary risk right because there's no recovery if if if uh if something bad happens. So it sounds like you're pulling back kind of >> need political risk insurance in the US soon. >> Well, so I actually asked the [laughter] IMF if I asked Amigga if they would get me political risk insurance for a project that that I was working on and they fell off their seats, don't they? For the US. >> You don't know why that's funny? It's because people >> usually buy political risk insurance for projects in >> emerging markets. No one would ever buy political risk insurance for the US until now. Yeah. >> By the way, just on the EV thing, like just you said diesel, like everybody knows what's happening with diesel prices, right? Like it's just >> Anyway, >> yeah. Also, I would love to hear after this if anyone has ridden on an electric vehicle school bus and would love to hear your thoughts. >> Just putting it out there. >> So, I think I think your firm recently invested in a in a company in Italy, I think methane or some sort of gas type project. Do you guys think about uh do you guys think about things, you know, when you're looking at other countries? Do do you do you find it easier than investing in the US these days or is it is it all kind of the same and it's just kind of an underwriting process? >> Well, so we actually invested in the US. >> Oh, right. Build out. Sorry. Sorry. Sorry. Sorry. >> Totally relevant, but I just want to make sure people don't know we're investing in Italy. >> Yeah. Yeah. Sorry. Sorry. >> So, no, we'd never invest in Italy. That is one thing. >> Um, >> you guys ever look at stuff beyond the US? >> Well, so I'll give you the funny answer, which is we have a Canadian office and we love Canada. >> Yeah. Um so we actually the develop solar development platform I mentioned we actually about half of our capital is going to be deployed into Canada. you know, rooftop solar, CNI solar storage in Canada, you know, Amazon rooftops, Ford motor, you know, Ford facilities like and so the incentives and everything are still in place uh in Canada and they're not so it is a financially derisked market uh substantially derisked market from a regulatory perspective. So, we are aggressively looking at Canada. Yeah. Um, but I do want to just comment on Europe quickly because when we had two or three investments left in the fund, we were pretty aggressively looking for a deal in Europe. Um, because we felt like the thing with things that we're good at on the basically helping people develop projects and managing kind of construction risk and project development risk, which is something we're think we're kind of well known for. Um, and providing development capital and kind of early construction capital are very very scarce in Europe. So I think one interesting opportunity for us and I'm sure for you too is we are doing things in the US from a financial structuring and kind of an execution perspective that could be very valuable in Europe and Europe does have in a lot of ways a better regulatory environment for exactly the same things we're talking about now. And I think that regulatory environment will only improve because they're being much more badly affected by the war obviously in a in a number of areas EVs other things like that. Um, so the short answer to the question is yes. Mostly though, for this fund, we're sticking with Canada, but I think for our next fund, we'd love to be kind of like a third um a third in Europe. Europe has complications, too. It's not like, you know, this safe green haven either. There's obviously, you know, the Hungarian election is a positive sign, but the EU, you know, European Parliament, I mean, it's it's not it's not a clear signal like, hey, we're just going green, right? There's a lot of >> push back both from consumers and from governments and kind of a rightward lean still that is uh doesn't make it risk- free. Do you guys find that maybe the choppiness in the regulatory environment paradoxically could actually help the industry because it kind of shakes out stuff that maybe shouldn't stand on its own or it really kind of the people who make it through this period of uncertainty will be more resilient or or is it just bad? >> I when you said that I was like that's like saying the Hunger Games does some good because like the resilient [laughter] people through >> there's a winner. >> There is a winner. Mhm. >> I don't know if I'd go that far to be like good. >> Um already though I I do think your point is like a relevant one which is a lot of money went into the space >> and there is going to be some fallout of companies that can't make it. A lot of these spaces are very fragmented. So you have like a lot of smaller mom and pop or oneoff projects. I think there's going to be consolidation. So you are going to see winners and losers within [clears throat] the space. But I think that was already going to happen. Now you have a lot more potentially losers because the regulation changed so fast. I also think it's just hard if you think of like people and their lives, right? Like you have CEOs that have been building a business, it's very easy for me to come in and say, "Oh, I I don't want to take binary risks. So this whole space I'm not going to look at for right now." But if you've been an entrepreneur and you've built this company for 5 years and suddenly the regulation changes and um you can't do you know SAF like um >> been a viral. at sustainable fuels that's very hard like paying your people. So I yeah the hunger game's not the easiest right now but but it does it does volatility does create opportunities. So I I do think there is the more people pull back from investing the more there is an opportunity to kind of like step in and help these these companies grow where they didn't have capital before. I mean I think it's a bit of a truism that this is the part of the market where people make a lot of money. >> Yep. Yeah. >> And so if you look at like 2000 2008 um and if you look at vintages of funds which I don't know if you guys are familiar with but like you look at vintages and people who tend to invest at the bottom of an economic cycle or the bottom of a policy cycle tend to make more money. So I do think that like our view is we're kind of risk on right now. I mean, we're looking for deals aggressively like EV consolidation. Like, we wish just, you know, EBCS, so we wish they had enough money to be the consolidator, but they're not going to be, but we're like, okay, it's a great time to sell because there's consolidation happening, right? And so, their assets are at a premium. In other areas, we are the consolidator. We're trying to be aggressive and we're trying to kind of pull stuff in. We be as other people are. Um, like this company Everfleet, which we'll update you on later, we just decided to put more money in. >> That's great. >> Cuz we're just like, look, you know, this is insane. The total cost of ownership, everything makes sense. Like, if we can get this company through this kind of trough, then we believe the company will be incredibly successful. So, first thing I would say is it is a great opportunity. It is always a great opportunity. The problem is that asset allocators, so the people who are >> Yeah. deploying money, the pensions funds, insurance companies, you know, Columbia management company, they are risk off. So, if you have money, you're in a great position. If you don't have money, you can't just go easily raise money because these big pension funds and folks are like, hold on, there's too much risk. So, then you're really out of luck. >> Yeah. And I think we're going to see a lot, the unfortunate thing to me is we're going to see a lot of venture funds, a lot of growth equity funds, a lot of credit funds, a lot of infra funds in our space probably go out of business because they can't raise a next fund. And you could say again, it's the hunger as kind of the fit to survive. But >> I think if you look at kind of >> I'm a very big fan, business school is a good time to think about it of invest thinking about through cycle investing. And if you look at some of the biggest private equity firms or some of the biggest hedge funds in the world like you look at Carlile, Black Rockck, you know, Blackstone, KKR, all started around the same time. You look like Oxif, Fortress, hedge funds, all started around the same time in the cycle. >> Imagine that. >> So, you're just riding the cycle up, right? you're riding cheap capital, free money, you know, risk on, low interest rates, and then then you're big enough to sustain yourself through a macroeconomic cycle and through a downturn. So to me, we're at a point where we should be risk when the market is risk off. >> Yeah. >> My my family has a joke about this, which is they're like anytime I join an industry, it somehow tanks, [laughter] which is like sad. I mean, I joined investment banking in 2008 and then it was the financial crisis literally like two two or three months later and then I joined financial institutions group and then they had a financial institutions crisis and then I joined Riverstone and I it was at that time traditional energy and oil prices went from 120 down to 20 and then I joined Galvanize and then the climate you know all this volatility but to Jason's point you ride it back up it's not a bad place to be and at Galvaniz on the credit side we were very excited that um an investor basically said >> this is a great time to to make money and we have we announced we launched with a $ 1.3 billion investment program. >> First of all, that's an amazing signal. I'm going to kind of I'm going to have a trading strategy [laughter] or whatever. >> I feel like my family does >> I'll give you guys the bad news. There's no one here at Columbia Business School is interested in making lots of money. Uh, but it sounds like [laughter] now is a good time to enter into the into the the the the industry because you want to zag when people zag, right? And so if you enter into the industry when everybody else is crowded trades, you know, everyone can have disappointing returns. So for those of you who are interested in making money, not that many of you, now might be a good time to do it. And so just as we wrap, right, um, uh, a lot of these guys want to have jobs in the industry, right? Um, not the LinkedIn version of blah blah blah, right? like what does it actually take to break in here and I'll I'll give you some ideas of some of the students that I've uh had the chance to work with right so you've got traditional MBA students you know and there are a lot of people who come in from lots of different backgrounds who are not more traditional MBA students people who have worked at developers people who've worked for startups people who are pivoting from one industry to another but are passionate about about this sector and they're went to the MBA to try to break into the industry and everything in between so what specific advice would you give um to to get a foothold here. >> I can kick off. Um and I think one of the reasons we talk a little bit more about money in the space is because there's this perception that it's an eitheror. So if I'm going to go follow my passion, then maybe I'll be giving up something um when it comes to economics. And I think what we're saying is you don't have to, right? So there's opportunity for both, which is just a very exciting place to be. Um, I think one piece to keep in mind is to be to kind of cut out the noise a little bit. Like I do think our industry is growing and there are job opportunities and so keep that excitement and go find those. You are all in a very lucky place where one you have courses that are teaching you exactly what you need and you're in New York City, right? So I think one thing that's underestimated sometimes is the in-person networking and there's so many networking events in the city within this space. So I would show up and put a face to the name. Um and I think the other piece is your excitement and your enthusiasm and hard work will carry you through. Um the to the extent you can get some technical skills so you can use this time to practice financial modeling um and really have like a base that you're coming in with I think does very much help. Um, and the the last thing I'll say is that the the other piece is this is a great opportunity to to do either externships or work with professors. Um, when I was in business school, I worked with a professor and I helped kind of write articles and he actually knew a ton of the private equity um, founders of firms very well. And so just hearing his insight about that was incredibly helpful and it was a bit off the beaten path. didn't see that many of my friends doing these professor internships. Um, so I would I would think about places where you can kind of get a highlevel view of the industry while you're figuring out exactly what you want to do. >> Um, so I actually I went to Duke undergrad and actually teach undergrads and so we just finished our class this semester and we ask everyone who speaks Fury spoken before their advice for them when they were undergrads. So, I haven't thought about advice for business students that recently. So, I'm going to maybe do a this might veer a little off, you know, if you want off off piece advice. So, I think that um what we always advise undergrads and I think there is a relevant argument for business students too is to do something that gets you um policy experience. every single market that you're working in uh has policy risk or policy incentives. And so whether you take a semester off and work on a campaign, whether you volunteer for an advocacy group, you know, they're for permitting reform or whether you work for a government agency or whether you do something because I find the people we work with or counterparties I work with who have no policy experience are freaking useless because they need to get people to give them policy advice, which is terrible. If you're an executive or you're an investor and you do not understand the policy environment that you're working in, you're at a severe disadvantage to other people in the industry. People will take you to the cleaners, >> right? You cannot rely on other people to do policy stuff in this environment. So depending on the political cycle, depending on what state you live in, where you're from, there are offcycle elections. But just the other thing that happens is when you work on a campaign or you work in politics or you work in policy again with an externship or something like that. Um you also build a network. So I literally have a network from the Dukakus campaign, from the Clinton campaign and from the Obama campaign. And I use that network every single day. First of all, a lot of those people become entrepreneurs. They become investors. Um, there's a group of us who started something called Cleave Tech for Obama in 2008. One of the reasons we won the Xanscar deal was I co-founded it with Andrew BB from Obvious who was on the board of Xanscar. Like this is not like soft stuff like this is the hard relationship building that you're talking about that it's so genuine because you've come through something really uh hard and difficult together. And so I would get policy experience, get political experience. It's networking. It's a competitive advantage. I think the second thing I'd say um and then I'll give the generic advice, but the second thing I'd say um is also get operating experience. Um I I really value working across the table as an investor. If what you're interested in doing is being an investor, by the way, I should say. um people who've been executives, people who have run companies, developers love hiring developers, love sitting across the table from developers. Development is almost the best experience you can get to go into investing because you're working with stakeholders. You have to understand financial models. You have a counterparty. You're basically all you do all day is negotiate, >> which by the way is all we do all day. Just so you know, want to know investors. All we do is negotiate with people, right? your peers, you know, the companies, other investors. So, I think being a developer is an incredible experience. One guy came in this year who used to run energy for Microsoft, started a company called Clover Leaf. He told every undergrad to go work at a utility. >> That might sound crazy, but it is a really good idea. Guess what? People need power. Guess who delivers power? Utilities. Right? If you know utilities and you understand power, you're going to have a massive competitive advantage. So, that's kind of three very specific pieces of advice. I think the the generic piece of advice besides I think some of the networking and exterships, those are all really good ideas. And I'm surprised how many business students don't do though is to find something you're passionate about. And like you said about um someone asks you where you're interested in investing like being passionate about something is what's going to differentiate you from other people because generally people are going to have a similar level of technical skill. Um and then the final thing which again I learned deeply intensely this semester with undergrads is AI. you you have to know how it functions in a business environment and especially coming out of business school we are looking to you to tell us and I am telling you the undergrads we worked with were so freaking good at it and I am shocked at how bad a lot of business students are at it >> interesting >> because the they're AI native >> right so if you're 20 like your whole life is being run through cloud and chat Right? So when you come into an office environment, we hired an undergrad from NYU. He's transforming one of our companies. Okay? And so if you're a business student and you're not paying attention to this, I would pay attention to it really fast because you need to be the change engine that comes into the company that teaches us how to use it. >> Well, I'll give you guys some good. So I think that was really good advice. I'll give you guys some good news around some of the students we have here. So >> in my course there are two modeling exercises uh just because people need to learn how to do this stuff. So >> Oh, you you still have to learn. >> If you can't do a financial model by yourself, you're totally screwed. >> Yeah. >> I'm I'm deadly serious. >> You just need to be >> because the models the AI is going to get it wrong at some point. >> Oh yeah, of course. >> Just want to make sure you didn't think I was in >> and then we do uh we do one class just on political risk just because people need to understand that that's like a a clear risk that you always talk about. And then we do one on regulated utilities which is again getting people to pay attention to you [laughter] >> getting people to pay attention to you while you're talking about a regulated utility for you know 3 hours on a Thursday afternoon is difficult but but the students here are amazing of course and they pay attention and everything else. So all the time oh >> yeah just how are you handling AI in your class like what's the business school >> kind of rules policy on AI? >> Uh it depends. It's uh professor by professor and so for me uh I don't care if they use it as long as they tell me but they're not allowed to use it for the final >> sense. >> Um I think we're out of time. Are we or what are we doing with timing? You guys tell me. >> Okay. Does anyone have any questions for the panels? Oh >> you guys talk about how fun right now. Do you expect the largest funds to be or is there something that survive and thrive versus those that? >> It's a great question. Um, I definitely think you're going to see the big names raise because the more investors, and when I say investors on this side, I mean the limited partners, the people who invest in us, the more nervous they get or volatility, it's almost easier to say, okay, I'm going to give it to the carile or whoever. But I think what is very helpful for us is that this is such a sector spec like you need so much sector specific knowledge to invest within energy and then specifically decarbonization that being at a firm that focuses on that. So for example, Galvanize um has a science and tech team. We have kind of policy adviserss also I should have said that um including the the co-founder who's now doing something a little bit different. There are three people who ran for US president at the firm which is the most political firm I've been at. Um so it includes Secretary John Kerry and Tom Styer who's one of the co-founders of the firm and then John Delaney. So like there if you have very specific and they all ran against each other which is the funniest part. >> Um so but like having that unique niche kind of like we have this knowledge that no other firm has I think does attract investors. But yeah, it's it's going to be an interesting time. >> I do think even those big funds, the big funds who have specialty funds, >> I think they are also coming in way under their target. So if you're looking for a job, especially >> and you see a big number like three billion. Well, you should find out what the target was. The target was probably four and a half billion. So I actually think yes, it's a huge advantage to be on a big fund platform. But I think the other thing you're saying is is you're seeing specialty funds like Vision Ridge or S2G or Energize or like these specialty funds you've never heard of come in over Target because like you said, they have a very distinct niche. >> Yeah. I think also from your perspective as you're looking at jobs, it's interesting. It's important to know like what your personality is and where it fits. So I've been at the really big firms and I've helped to build businesses. I found that my favorite place is to be building a new business within a larger platform. So I get the entrepreneurial excitement, but I still don't have to figure out like if the printer works. Um, and I find that more exciting than being at a large firm where it's like a very steady path. So I actually think that's almost more important than some of the other pieces. >> Uh, yeah. Hi Jane. How you look at that advantages? You have a bigger portfolio than me right now. So why don't you go first? >> Uh that's a good question. And I mean I think I think at other firms just going by like peers I think the functions are different. So for example um you know we don't really focus a lot on sales management right because every single one of our companies sells differently right we have 10 companies they all have different customers but like when I worked in software it's like hey like a VP of software sales is a VP of software sales and most board meetings I was in it's like you go through the funnel you find out you know what I mean like if there was a similarity to the businesses so I think we spend a lot of time on development on operations like functional operations of assets, asset development and so we tend to have a team that can do that whereas at a you know a different type of firm you might have people who are more focused on like I said software or sales or engineering or something like that. So I think it depends on the type of business. I will say that I think that firms in our space generally, not venture, but as you get past venture, are belatedly building out portfolio operations teams. Some of that is you have to have a decent amount of money to hire a portfolio operations team, but you guys have had it since the beginning, but um I think it's becoming something that is regarded as more necessary in our space. But when a lot of these firms were started, I don't think people thought about it as different. Um, now I think people realize there are different skills and attributes you need, therefore different types of portfolio support. >> Yeah, we use our science and tech and impact team even to assess if something's a good investment before going into it. Um, so I think that's very helpful. And then we've kind of been using this term growth credit, which is you have like growth, equity, and venture capital, but then you know, we're not traditional credit, we're growth credit. Um, given the nature of the businesses, I bet we'll be very involved with our portfolio companies. Um, so I I know we're running out low on time. >> No, at least for the stuff that I invest in, for what it's worth, um, uh, bigger, more mature companies have really capped upside. There's not that much you can do. So you can swap in and out O andM managers, but you're squeezing out a couple bips. So you're much better off actually optimizing the financing because the um the the upside is capped, but you can mitigate where you can reduce your cost of capital. So you're much better off investing in people who are really good at raising capital, optimizing the capital structure. That's where you can make a lot of money. But if you're, you know, improving uh on andm by, you know, 5% which is really, really, really hard, you might actually spend more money doing that than you would if you just um refinanced and just, you know, came up with a veteran capital structure. >> Multiple expansion, >> sorry, >> multiple expansion. >> There's no multiple expansion in what I do. Uh are I think we're out of time. >> Okay, great. So, I want to thank you guys for joining us and uh [applause]