Ryan Grant Little: 0:43

Hello and welcome to Another ClimaTech Podcast, conversations with the people trying to save us from ourselves. In this episode, i talked with Carlota Ochoa Neven Du Mont, climatech investor at Extantia. I reached Carlota in London to discuss investing in gigacorns, which are companies that can offset or prevent a gigaton of carbon release each year, which industries can have the biggest impact in carbon reduction and why many bankers are getting into ClimaTech. I'm Ryan Little Thanks for being here, Carlota. Welcome to the podcast. Great to have you here.

Carlota Ochoa Neven Du Mont: 1:17

Great to be on the podcast. Thank you so much, Ryan.

Ryan Grant Little: 1:20

So I'm fascinated because I know a lot of people in the Climatech space these days, whether they're entrepreneurs, investors. A lot of them seem to have a banking background. Can you go back a little bit? How did you get into banking and how did you make the transition up into today as a Climatech investor?

Carlota Ochoa Neven Du Mont: 1:36

Yeah, sure. So I think my pathway into banking wasn't necessarily intentional. I won, together with some students in my undergrad, we won a stock picking competition which got me an internship at Merrill Lynch. Didn't really have, hadn't really foreseen that, but then spent a summer on the trading floor and got pretty excited by what I saw. So joined Merrill Lynch in the sales and trading scheme out of university into the commodity space, because I thought that I kind of liked the fact of having something tangible to work with, did that for about three years with a focus on European energy and through that kind of had exposure to the early versions of today's carbon markets. It was a really interesting overall, really interesting sector. But I think, like many of my fellow former bankers, didn't really enjoy the atmosphere, the lifestyle and all everything else. That kind of was working at an investment bank and then left to the much sexier startup scene, joined an early tech, an early stage startup, and that was a fantastic, fantastic experience through kind of the pre seed stages. But we ultimately ultimately failed And then I kind of was left thinking with where, where, what I want to do with my life, where I want to go, and then thought kind of like I think, as a lot of people come to that conclusion. That venture is that really kind of nice intersection between between finance and startups.

Carlota Ochoa Neven Du Mont: 3:12

Did did an MBA. Throughout my MBA kind of started getting a little bit on the in the background, anxious about what was going on with our climate, but kind of I think it was at that stage it was a little bit too early. You didn't really have this second round of climate tech 2.0 funds that I would say. So initially joined to my MBA a B2B SaaS fund and at the end started in the background kind of to advise other funds and founders on their strategies around commercialization pathways, using, using carbon markets in in climate tech. And that's how I kind of ultimately initially met the, the extantia guys who at the time kind of operating a small fund. So after my MBA to doing kind of a little bit further work, covid. Covid happened So I pivoted into into Amazon for a very short period of time but kind of was in the background advising on climate tech with, with, with extantia, i joined them as a venture partner And then when they decided to raise their second kind of large institutional round, I joined them full time.

Ryan Grant Little: 4:22

Okay, And so who is Extantia, Who's, who's behind it? What, what's, what are the focuses of of it And what's the? when you say it's a bigger institutional round, how big is that?

Carlota Ochoa Neven Du Mont: 4:32

It's a decarbonization funds with a mission to back technologies that can reduce green, that are solving gigaton emissions problems.

Carlota Ochoa Neven Du Mont: 4:40

The, the meaning, the meaning of Extantia is is extant, which is kind of refers to a state of existing and rising above, which is probably best understood in the context of this Antonin, which is extinct, which kind of to some extent defines are underlined mission, which is to invest in companies that solve gigaton emissions problems and help us as humanity to continue thriving, as opposed to creation, the creating the conditions of our own extinctions.

Carlota Ochoa Neven Du Mont: 5:05

Basically, initially we tested the market in with the smaller funds to try to understand what are there. Are there enough interesting companies that are in that are importantly, investable from a VC point of view, where I kind of the tech has been, has been de-risk to some extent, so that you can really kind of commercialize and scale up these technologies within your typical 10 year fund lifecycle. Tested that through the kind of the first vehicle and then which led to the, the, the flagship funds, which is what we're investing out of now. That is a vehicle where we're aiming we haven't done our final close yet, but that we're aiming that to be a kind of 150 million vehicle And we also have a fund of funds and kind of out of which we're investing. So overall, we're kind of building this 300 million investment platform for early stage context.

Ryan Grant Little: 6:00

It's such a great name and a great story that goes with it, so okay, so it's about decarbonization. What's what size deals are you doing? What geography types of companies is that kind of broad, or do you have a pretty specific thesis on that?

Ryan Grant Little: 6:14

So, Hello and welcome to another Climatech podcast Conversations with the People Trying to Save Us From Ourselves. In this episode, i talked with Carlota Ochoa. Nevin Dumont, climatech investor at Extantia. I reached Carlota in London to discuss investing in giga-corons, which are companies that can offset or prevent a gigaton of carbon release each year, which industries can have the biggest impact in carbon reduction and why many bankers are getting into Climatech. I'm Ryan Granthil. Thanks for being here, carlota. Welcome to the podcast. Great to have you here.

Carlota Ochoa Neven Du Mont: 1:17

Great to be on the podcast. Thank you so much, Ryan.

Ryan Grant Little: 1:20

So I'm fascinated because I know a lot of people in the Climatech space these days, whether they're entrepreneurs, investors. A lot of them seem to have a banking background. Can you go back a little bit? How did you get into banking and how did you make the transition up into today as a Climatech investor?

Carlota Ochoa Neven Du Mont: 1:36

Yeah, sure. So I think my pathway into banking wasn't necessarily intentional. I won, together with some students in my undergrad, we won a stock picking competition which got me an internship into Marilinch. Didn't really have, hadn't really foreseen that, but then spent a summer on the trading floor and got pretty excited by what I saw. So joints Marilinch in the sales and trading scheme out of university into the commodity space, because I thought that I kind of liked the fact of having something tangible to work with, did that for about three years with a focus on European energy and through that kind of had exposure to the early versions of today's carbon markets. It was a really interesting overall, really interesting sector. But I think, like many of my fellow former bankers, didn't really enjoy the atmosphere, the lifestyle and all everything else. That kind of was working at an investment bank and then left to the much sexier startup scene, joined an early tech, an early stage startup, and that was a fantastic, fantastic experience through kind of the pre seed stages. But we ultimately ultimately failed And then I kind of was left thinking with where, where, what I want to do with my life, where I want to go, and then thought kind of like I think, as a lot of people come to that conclusion. That venture is that really kind of nice intersection between between finance and startups.

Carlota Ochoa Neven Du Mont: 3:12

Did did an MBA. Throughout my MBA kind of started getting a little bit on the in the background, anxious about what was going on with our climate, but kind of I think it was at that stage it was a little bit too early. You didn't really have this second round of climate tech 2.0 funds that I would say. So initially joined to my MBA a B2B SaaS fund and at the end started in the background kind of to advise other funds and founders on their strategies around commercialization pathways, using, using carbon markets in in climate tech. And that's how I kind of ultimately initially met the, the extantia guys who at the time kind of operating a small fund. So after my MBA to doing kind of a little bit further work, covid. Covid happened So I pivoted into into Amazon for a very short period of time but kind of was in the background advising on climate tech with, with, with extantia, i joined them as a venture partner And then when they decided to raise their second kind of large institutional round, I joined them full time.

Ryan Grant Little: 4:22

Okay, And so who is extantia, Who's, who's behind it? What, what's, what are the focuses of of it And what's the? when you say it's a bigger institutional round, how big is that?

Carlota Ochoa Neven Du Mont: 4:32

It's a decarbonization funds with a mission to back technologies that can reduce green, that are solving gigaton emissions problems.

Carlota Ochoa Neven Du Mont: 4:40

The, the meaning, the meaning of extantia is is extant, which is kind of refers to a state of existing and rising above, which is probably best understood in the context of the antonym, which is extinct, which kind of to some extent defines are underlined mission, which is to invest in companies that solve gigaton emissions problems and help us as humanity to continue thriving, as opposed to creation, the creating the conditions of our own extinctions.

Carlota Ochoa Neven Du Mont: 5:05

Basically, initially we tested the market in with the smaller funds to try to understand what are there. Are there enough interesting companies that are in that are importantly, investable from a VC point of view, where I kind of the tech has been, has been de-risk to some extent, so that you can really kind of commercialize and scale up these technologies within your typical 10 year fund lifecycle. Tested that through the kind of the first vehicle and then which led to the, the, the flagship funds, which is what we're investing out of now. That is a vehicle where we're aiming we haven't done our final close yet, but that we're aiming that to be a kind of 150 million vehicle And we also have a fund of funds and kind of out of which we're investing. So overall, we're kind of building this 300 million investment platform for early stage context.

Ryan Grant Little: 6:00

It's such a great name and a great story that goes with it, so okay, so it's about decarbonization. What's what size deals are you doing? What geography types of companies is that kind of broad, or do you have a pretty specific thesis on that?

Carlota Ochoa Neven Du Mont: 6:14

So In terms of geography, it's Europe plus now the UK and Israel. Just because that's what we're based on, we tend to prefer to lead an investment, that we want to be involved with our portfolio companies And if we're very far removed locationally wise, we find that difficult. So we can consider all the geographies, but the focus is very much Europe, europe, uk and Israel, and other than that, really it has to be early stage. So seed and series A is our sweet spot And really our mandate is to invest into gigaton emissions problems. So the first question, as long as kind of the stage and the geography is right, the question that we ask ourselves is is this a gigaton emissions problem? Has the company, can the company, can we attribute to that specific company in the long run, emissions reductions of at least 100 megatons per annum, which is huge right? We currently pollute about 52 gigatons per annum. So if the answer to that is yes, then we're really excited.

Carlota Ochoa Neven Du Mont: 7:22

And then, in terms of sector, we're more interested in the more underfunded sectors of climate tech, which I think there's a larger opportunity set because there's a larger, i guess, market for the taking. We really we kind of also invest at the stage where the technology has been largely de-risked And it's so we prefer taking kind of scaling and engineering risk as opposed to fundamental technology risk, which means that which is difficult to find at the early stages in deep tech. So a lot of what we invest in invest into our spinouts out of out of university universities or founders who have otherwise been able to get significant amount of grant funding to fund the underlying research and are now at the stage where they can actually go, start building demo plans, getting first contract with customers and really start scaling. That's really ideally where we like to come in.

Ryan Grant Little: 8:16

Fascinating. And so what are these underserved industries or less visible industries that have that possibility? I'm thinking that food mobility, construction, these types of things.

Carlota Ochoa Neven Du Mont: 8:29

Yes. So I think, to set the context, what I mean with underfunding right. So I think, if I remember the figures to be correct, i think it's something like in the 2021, we had kind of the sectors that are responsible, kind of 85% of the emissions, only get about 40% of the investments, that I think that that that gap has been narrowing right. But funders that are sectors that are very kind of overfunded relatively the size of the emission problems are generally energy, transport and mobility, and sectors that are relatively underfunded is carbon removals, food, agriculture in industry and generally. I mean all of these sectors could use more funding, right. But I'm just talking kind of on a relative basis, although also within the energy space there are things that are also relatively underfunded, such as like generation of baseload electricity.

Carlota Ochoa Neven Du Mont: 9:25

So that's why we kind of we like geothermal a lot. There's also, i think there's a lot of work to be done on on the grid and really expanding the capacities of our grids. We're currently trying to electrify everything yet and we kind of expected increase in demand on grid. Your resources is going to rise by 50% of the next decade. There's no chance it's going to happen without some fundamental investments happening, both on managing these scripts on a software level, but also in terms of hardwires into the ground.

Ryan Grant Little: 9:54

Yeah, transmission, distribution, all these things are.

Carlota Ochoa Neven Du Mont: 9:57

Exactly.

Ryan Grant Little: 9:58

And we I mean, i think, you know, as a society we still expect just that you plug something in and everything works. And there's a lot, needless to say, that that underlies this. And I ran a biogas company in the mid 2000s And one of the best things about it is that it's baseload, you know, and most renewable energy, whether it's wind or solar, doesn't have kind of that advantage And it's kind of the wind blows when it blows and the sun shines when it shines. And being able to kind of find these ways to provide baseload, to control when the energy is produced, is really fundamental and a big challenge that we're facing.

Carlota Ochoa Neven Du Mont: 10:31

Exactly So that, i think, within, whilst there's lots of investments going into energy, overall, these sectors, I think, still require more funding and present really interesting investment opportunities.

Ryan Grant Little: 10:43

Also in food.

Ryan Grant Little: 10:44

I mean, there was a report a little while ago that I keep citing and I keep forgetting if it's BCG or Bain that did this, together with the Guardian, but one of the two that put basically said that the carbon impact of every dollar a year or whatever invested in the food industry or food tech, from a carbon perspective, food is so much better than mobility or built environment in terms of the attribution or the impact that comes out of that.

Ryan Grant Little: 11:12

I think people are surprised to hear about that And we know kind of instinctively. Or there's a lot of talk about what a hamburger looks like compared to a flight or something, but the third rail or the people are getting really excited about Teslas and these kinds of things. But a lot of times it's things that are really fundamental and kind of a little less sexy, like the food industry, where I'm saying this as an investor in 27 alternate proteins companies, so I've drunk the Kool-Aid on it, obviously. But I'm glad to hear that this thesis is also about looking at some of these underserved industries that aren't always looked at as necessarily climate tech. Right, a lot of people don't think of food as climate tech.

Carlota Ochoa Neven Du Mont: 11:54

Well, i think exactly. But I think there's also kind of a change in thinking happening at the moment where it's like and climate tech is generally probably not the best description for our field because it's like, i

Carlota Ochoa Neven Du Mont: 6:43

So seed and series A is our sweet spot And really our mandate is to invest into gigaton emissions problems. So the first question, as long as kind of the stage and the geography is right, the question that we ask ourselves is is this a gigaton emissions problem? Has the company, can the company, can we attribute to that specific company in the long run emissions reductions of at least 100 megatons per annum, which is huge, right? We currently pollute about 52 gigatons per annum. So if the answer to that is yes, then we're really excited.

Carlota Ochoa Neven Du Mont: 7:22

And then, in terms of sector, we're more interested in the more underfunded sectors of climate tech which I think there's a larger opportunity set because there's a larger, i guess, market for the taking. We really we kind of also invest at the stage where the technology has been largely de-risked And it's so we prefer taking kind of scaling and engineering risk as opposed to fundamental technology risk, which means that which is difficult to find at the early stages in deep tech. So a lot of what we invest in invest into our spinouts out of out of university universities or founders who have otherwise been able to get significant amount of grant funding to fund the underlying research and are now at the stage where they can actually go, start building demo plans, getting first contract with customers and really start scaling. That's really ideally where we like to come in.

Ryan Grant Little: 8:16

Fascinating. And so what are these underserved industries or less visible industries that have that possibility? I'm thinking that food mobility, construction, these types of things.

Carlota Ochoa Neven Du Mont: 8:29

Yes. So I think, to set the context, what I mean with underfunding right. So I think, if I remember the figures to be correct, i think it's something like in the 2021, we had kind of the sectors that are responsible, kind of 85% of the emissions, only get about 40% of the investments, that I think that that that gap has been narrowing right. But funders that are sectors that are very kind of overfunded relatively the size of the emission problems are generally energy, transport and mobility, and sectors that are relatively underfunded is carbon removals, food, agriculture in industry and generally. I mean all of these sectors could use more funding, right. But I'm just talking kind of on a relative basis, although also within the energy space there are things that are also relatively underfunded, such as like generation of baseload electricity.

Carlota Ochoa Neven Du Mont: 9:25

So that's why we kind of we like geothermal a lot. There's also, i think there's a lot of work to be done on on the grid and really expanding the capacities of our grids. We're currently trying to electrify everything yet and we kind of expected increase in demand on grid. Your resources is going to rise by 50% of the next decade. There's no chance it's going to happen without some fundamental investments happening, both on managing these scripts on a software level, but also in terms of hardwires into the ground.

Ryan Grant Little: 9:54

Yeah, transmission, distribution, all these things are.

Carlota Ochoa Neven Du Mont: 9:57

Exactly.

Ryan Grant Little: 9:58

And we I mean, i think, you know, as a society we still expect just that you plug something in and everything works. And there's a lot, needless to say, that that underlies this. And I ran a biogas company in the mid 2000s And one of the best things about it is that it's baseload, you know, and most renewable energy, whether it's wind or solar, doesn't have kind of that advantage And it's kind of the wind blows when it blows and the sun shines when it shines. And being able to kind of find these ways to provide baseload, to control when the energy is produced, is really fundamental and a big challenge that we're facing.

Carlota Ochoa Neven Du Mont: 10:31

Exactly So that, i think, within, whilst there's lots of investments going into energy, overall, these sectors, I think, still require more funding and present really interesting investment opportunities.

Ryan Grant Little: 10:43

Also in food.

Ryan Grant Little: 10:44

I mean, there was a report a little while ago that I keep citing and I keep forgetting if it's BCG or Bain that did this, together with the Guardian, but one of the two that put basically said that the carbon impact of every dollar a year or whatever invested in the food industry or food tech, from a carbon perspective, food is so much better than mobility or built environment in terms of the attribution or the impact that comes out of that.

Ryan Grant Little: 11:12

I think people are surprised to hear about that And we know kind of instinctively. Or there's a lot of talk about what a hamburger looks like compared to a flight or something, but the third rail or the people are getting really excited about Teslas and these kinds of things. But a lot of times it's things that are really fundamental and kind of a little less sexy, like the food industry, where I'm saying this as an investor in 27 alternate proteins companies, so I've drunk the Kool-Aid on it, obviously. But I'm glad to hear that this thesis is also about looking at some of these underserved industries that aren't always looked at as necessarily climate tech. Right, a lot of people don't think of food as climate tech.

Carlota Ochoa Neven Du Mont: 11:54

Well, i think exactly, but I think there's also kind of a change in thinking happening at the moment, where it's like and climate tech is generally probably not the best description for our field because it's like, now it's climate tech is starting to become everything that we do, everything that we do amidst CO2, because we're based on a kind of carbon-based economy, what I think? whereas this field is going, in five years' time, no one's going to be talking about climate tech. It's just going to be tech, because really, everything that we do as humanity has a climate or angle, because most of the things that we currently do pollute. Yeah, it encompasses everything.

Ryan Grant Little: 12:37

I'm just launching this podcast, and so does that mean I already have to change the name? Give me a couple of years. No, no, no.

Carlota Ochoa Neven Du Mont: 12:43

I mean we call ourselves, we're a climate tech fund right Hundreds of times. But I think it's similar to kind of the dot-com funds of the 2000s.

Ryan Grant Little: 12:51

Right, They're no longer dot-com funds.

Carlota Ochoa Neven Du Mont: 12:52

They're not just tech funds.

Ryan Grant Little: 12:53

No one calls themselves an internet company anymore. Really right, Exactly.

Carlota Ochoa Neven Du Mont: 12:57

And the ones that do. I do see that sometimes in a pitch deck and it raises a few eyebrows, Yeah.

Ryan Grant Little: 13:03

And so I mean you've been involved in carbon from the market side for a long time. Carbon is, i mean, every time in this sector. It's everywhere right, and especially with all these net-zero goals from cities and corporates, it's attracting a lot of attention. What's happening in the carbon markets? Can you just give maybe a little overview of kind of what is the carbon market right now? What's the price of carbon? What does the outlook look like?

Carlota Ochoa Neven Du Mont: 13:35

I mean. So I think it's not the easiest question to answer, because I mean, i think I mean what we try to do in general. We try not to look at kind of short-term fluctuation in the prices of the assets. Obviously, the price of carbon is a super important part of our investment thesis. Right, because we believe we are starting to put a price on carbon, either through taxes, through tariffs or cap and trade systems, and now increasingly through voluntary carbon markets, through stakeholder pressures that we believe, or I believe, have a fairly high chance of becoming mandated in the next decade or so. So I think where we're going is that every corporate, at least in the developed world, is going to have an internalized price of carbon, depending on the different regimes and the jurisdictions that they're working Now in mandated carbon markets. So, for example, the EU ETS, the prices have been writing significantly, i think don't quote me on the number, but I think we're just under 100 euros a ton now, and the reason that is is because the system is fundamentally designed to curb the supply of these credits as we approach net zero. And now, on the other hand, you have the voluntary carbon markets where there is no price as such because it's all over the counter and really depends on the quality of the different credits. So you can get a removal ton confeture price north of $500, whereas some kind of nature-based in parentheses low quality credit may be in the single digits. So there's a huge variety in prices.

Carlota Ochoa Neven Du Mont: 15:37

Now what we believe is that there is, as the different tools are built, to really kind of understand the risk associated with all of these different projects and the likelihood that a ton of credit will actually result in a ton of removal. That's going to create pricing signals. So the higher quality credits will fetch a premium relative to the lower quality of credit. So one of the investments that we've made is into B-Zero. They do just that. They're a carbon ratings agency and they help their customers to understand the risk profile and the quality of their credits so that they can then have to give them that price signaling. So yes, i think we will see, continue to see, a flight towards quality Carbon removals. Credits now have a fetching really high prices because they're generally considered to be the higher quality projects. But yeah, it just depends a lot on a project by project basis.

Ryan Grant Little: 16:39

So I think that's interesting.

Carlota Ochoa Neven Du Mont: 16:41

So I could ramble on about this.

Ryan Grant Little: 16:44

But it's interesting. I mean, i understand the underlying point, which is that you don't really need to look at the day-to-day prices or kind of understand it minute to minute. You just take it as a given that there is going to be a mandated price and voluntary is going to possibly shift to kind of mandated over time, and so anything that your investees are doing to remove carbon, this is going to be priced in more and more as those companies grow and as time passes.

Carlota Ochoa Neven Du Mont: 17:13

Exactly, and I just think that kind of, at these really expensive levels of carbon removal credits, which are kind of the highest quality ones $500 a ton plus there's a limited market because it then becomes much cheaper to actually do the mitigation in your supply chain as opposed to purchase these credits, except for the kind of the really really difficult to a bait sector. So I think there's going to be a market for that, for things that are very difficult to decarbonize in the supply chains and the actual companies. But as the prices of these removal credits come down, as different CDR technologies mature, that market is going to start increasing where companies might actually. So you're just looking at the marginal cost of abatement, right? Is it cheaper for me to decarbonize my operations or do I just purchase these high quality removal credits? I understand that's where the market will find its equilibrium.

Ryan Grant Little: 18:08

Interesting, and I think it's a very good bet also to be investing in a ratings agency. We're seeing all kinds of stories about large companies airlines that have offset programs And one day it turns out that the accounting shows up that these are actually worthless credits. Where people are paying into the gas pump or on a flight, they're paying into CO2 compensation that ends up not basically doing what it's supposed to do and potentially just landing in the pockets of the companies.

Carlota Ochoa Neven Du Mont: 18:39

Exactly Right. So it's really kind of about understanding and most of these corporates right, They just don't understand the quality of exactly. And now, as I'm sure as you may have seen, there was this damning series of articles in The Guardian claiming that all of these credits are worthless.

Carlota Ochoa Neven Du Mont: 18:56

This is all greenwashing, which is, in my opinion, one of the most unhelpful pieces of journalistic work that has set the entire market, which is doing something great back by a couple of years by just kind of destroying buyer confidence. But we're just kind of, i think. But the tools are being built by companies such as Be Zero to help kind of us navigate, to help corporates navigate their environment and understand the quality of the assets that they're purchasing.

Ryan Grant Little: 20:23

So, speaking of terms like mandated, I've seen in some of the pieces that you've written or posted. You've written. You talked about the need for a public policy to step in and help to develop some of the climate tech solutions out there. So why aren't the markets alone up to this challenge?

Carlota Ochoa Neven Du Mont: 20:40

I think, well, it's got to do with part of the things. I mean. I studied economics, so I'm kind of I fundamentally believe in the power, free markets, but I'm also kind of very aware of its shortcomings. I don't know if you're familiar with the concept of the tragedy of the commons.

Ryan Grant Little: 20:59

Yes, so this is where you have cows overgrazing the grass that's available for all the cows to graze.

Carlota Ochoa Neven Du Mont: 21:07

Exactly So. It's like it's kind of an idea where individuals within a group make rational decisions between themselves in the short term which ultimately ends up to the depletion of a common resource, causing harm to everybody else involved. And really what's happening kind of with global warming, that's kind of a prime example of that phenomenon on a global scale. The reason why that happens is because free markets are not perfect and they're very bad at doing a number of things And, most importantly, a kind of pricing negative externalities And the emissions is a perfect example of a negative externality that isn't correctly priced, because a lot a number of agents do interactions that pollute, yet that the cost of that pollution isn't internalized in the cost of the transaction that those two people make between themselves. So this is kind of a clear shortcoming of the free market and where governments can really help with a lot of as long as it's good thought out good thought out policies and internalizing the cost of that externality. Ie putting a price on carbon through be it cap and trade systems, through tariffs, through taxes. I think this is absolutely somewhere where governments can intervene. The other thing is the other thing that free markets kind of assume that everybody is rational and people aren't necessarily perfectly rational. We have a lot of kind of hyperbolic discounting where people, for example, if you have to spend money today for a larger saving at some point in the future, you're not necessarily going to make that decision because you just really discount that future benefit so much more relative to your current expense And what that means is that, for example, people don't invest into heat pumps, into solar panels, just because it's an upfront expense that gives you a benefit later on. So this is another thing, i think, where government policy can come in to kind of subsidize customers and consumers in helping them buy these products, making really attractive finance available to kind of overcome this hyperbolic discounting problem.

Carlota Ochoa Neven Du Mont: 23:19

And I think that maybe final is the final one is we have a timing issue, right, we don't have a lot of time to fix the planet. So if we just net the free market do its thing, then the best technologies kind of will survive. Lots of them will fail in the progress. But I don't think we have that luxury. So really we need to finance as much of these solutions as possible and get them kind of through the funding valley of death, which is where a lot of startups fail, and this is specifically difficult on climate tech because, at the end, co2 is a molecule, so we need hardware solution that big plants, big hapex projects.

Carlota Ochoa Neven Du Mont: 12:10

Now it's climate tech is starting to become everything that we do, everything that we do amidst CO2, because we're based on a kind of carbon-based economy. What I think? whereas this field is going in five years' time, no one's going to be talking about climate tech. It's just going to be tech, because really everything that we do as humanity has a climate or angle, because most of the things that we currently do pollute. Yeah, it encompasses everything.

Ryan Grant Little: 12:37

I'm just launching this podcast, and so does that mean I already have to change the name? Give me a couple of years. No, no, no.

Carlota Ochoa Neven Du Mont: 12:43

I mean we call ourselves, we're a climate tech fund right Hundreds of times. But I think it's similar to kind of the dot-com funds of the 2000s.

Ryan Grant Little: 12:51

Right, They're no longer dot-com funds.

Carlota Ochoa Neven Du Mont: 12:52

They're not just tech funds.

Ryan Grant Little: 12:53

No one calls themselves an internet company anymore. Really right, Exactly.

Carlota Ochoa Neven Du Mont: 12:57

And the ones that do. I do see that sometimes in a pitch deck and it raises a few eyebrows, Yeah.

Ryan Grant Little: 13:03

And so I mean you've been involved in carbon from the market side for a long time. Carbon is, i mean, every time in this sector. It's everywhere right, and especially with all these net-zero goals from cities and corporates, it's attracting a lot of attention. What's happening in the carbon markets? Can you just give maybe a little overview of kind of what is the carbon market right now? What's the price of carbon? What does the outlook look like?

Carlota Ochoa Neven Du Mont: 13:35

I mean. So I think it's not the easiest question to answer, because I mean, i think I mean what we try to do in general. We try not to look at kind of short-term fluctuation in the prices of the assets. Obviously, the price of carbon is a super important part of our investment thesis. Right, because we believe we are starting to put a price on carbon, either through taxes, through tariffs or cap and trade systems, and now increasingly through voluntary carbon markets, through stakeholder pressures that we believe, or I believe, have a fairly high chance of becoming mandated in the next decade or so. So I think where we're going is that every corporate, at least in the developed world, is going to have an internalized price of carbon, depending on the different regimes and the jurisdictions that they're working Now in mandated carbon markets. So, for example, the EU ETS, the prices have been writing significantly, i think don't quote me on the number, but I think we're just under 100 euros a ton now, and the reason that is is because the system is fundamentally designed to curb the supply of these credits as we approach net zero. And now, on the other hand, you have the voluntary carbon markets where there is no price as such because it's all over the counter and really depends on the quality of the different credits. So you can get a removal ton confeture price north of $500, whereas some kind of nature-based in parentheses low quality credit may be in the single digits. So there's a huge variety in prices.

Carlota Ochoa Neven Du Mont: 15:37

Now what we believe is that there is, as the different tools are built, to really kind of understand the risk associated with all of these different projects and the likelihood that a ton of credit will actually result in a ton of removal. That's going to create pricing signals. So the higher quality credits will fetch a premium relative to the lower quality of credit. So one of the investments that we've made is into B-Zero. They do just that. They're a carbon ratings agency and they help their customers to understand the risk profile and the quality of their credits so that they can then have to give them that price signaling. So yes, i think we will see, continue to see, a flight towards quality Carbon removals. Credits now have a fetching really high prices because they're generally considered to be the higher quality projects. But yeah, it just depends a lot on a project by project basis.

Ryan Grant Little: 16:39

So I think that's interesting.

Carlota Ochoa Neven Du Mont: 16:41

So I could ramble on about this.

Ryan Grant Little: 16:44

But it's interesting. I mean, i understand the underlying point, which is that you don't really need to look at the day-to-day prices or kind of understand it minute to minute. You just take it as a given that there is going to be a mandated price and voluntary is going to possibly shift to kind of mandated over time, and so anything that your investees are doing to remove carbon, this is going to be priced in more and more as those companies grow and as time passes.

Carlota Ochoa Neven Du Mont: 17:13

Exactly, and I just think that kind of, at these really expensive levels of carbon removal credits, which are kind of the highest quality ones $500 a ton plus there's a limited market because it then becomes much cheaper to actually do the mitigation in your supply chain as opposed to purchase these credits, except for the kind of the really really difficult to a bait sector. So I think there's going to be a market for that, for things that are very difficult to decarbonize in the supply chains and the actual companies. But as the prices of these removal credits come down, as different CDR technologies mature, that market is going to start increasing where companies might actually. So you're just looking at the marginal cost of abatement, right? Is it cheaper for me to decarbonize my operations or do I just purchase these high quality removal credits? I understand that's where the market will find its equilibrium.

Ryan Grant Little: 18:08

Interesting, and I think it's a very good bet also to be investing in a ratings agency. We're seeing all kinds of stories about large companies airlines that have offset programs And one day it turns out that the accounting shows up that these are actually worthless credits. Where people are paying into the gas pump or on a flight, they're paying into CO2 compensation that ends up not basically doing what it's supposed to do and potentially just landing in the pockets of the companies.

Carlota Ochoa Neven Du Mont: 18:39

Exactly Right. So it's really kind of about understanding and most of these corporates right, They just don't understand the quality of exactly. And now, as I'm sure as you may have seen, there was this damning series of articles in The Guardian claiming that all of these credits are worthless.

Carlota Ochoa Neven Du Mont: 18:56

This is all greenwashing, which is, in my opinion, one of the most unhelpful pieces of journalistic work that has set the entire market, which is doing something great back by a couple of years by just kind of destroying buyer confidence. But we're just kind of, i think. But the tools are being built by companies such as Be Zero to help kind of us navigate, to help corporates navigate their environment and understand the quality of the assets that they're purchasing.

Ryan Grant Little: 20:23

So, speaking of terms like mandated, I've seen in some of the pieces that you've written or posted. You've written. You talked about the need for a public policy to step in and help to develop some of the climate tech solutions out there. So why aren't the markets alone up to this challenge?

Carlota Ochoa Neven Du Mont: 20:40

I think, well, it's got to do with part of the things. I mean. I studied economics, so I'm kind of I fundamentally believe in the power, free markets, but I'm also kind of very aware of its shortcomings. I don't know if you're familiar with the concept of the tragedy of the commons.

Ryan Grant Little: 20:59

Yes, so this is where you have cows overgrazing the grass that's available for all the cows to graze.

Carlota Ochoa Neven Du Mont: 21:07

Exactly So. It's like it's kind of an idea where individuals within a group make rational decisions between themselves in the short term which ultimately ends up to the depletion of a common resource, causing harm to everybody else involved. And really what's happening kind of with global warming, that's kind of a prime example of that phenomenon on a global scale. The reason why that happens is because free markets are not perfect and they're very bad at doing a number of things And, most importantly, a kind of pricing negative externalities And the emissions is a perfect example of a negative externality that isn't correctly priced, because a lot a number of agents do interactions that pollute, yet that the cost of that pollution isn't internalized in the cost of the transaction that those two people make between themselves. So this is kind of a clear shortcoming of the free market and where governments can really help with a lot of as long as it's good thought out good thought out policies and internalizing the cost of that externality. Ie putting a price on carbon through be it cap and trade systems, through tariffs, through taxes. I think this is absolutely somewhere where governments can intervene. The other thing is the other thing that free markets kind of assume that everybody is rational and people aren't necessarily perfectly rational. We have a lot of kind of hyperbolic discounting where people, for example, if you have to spend money today for a larger saving at some point in the future, you're not necessarily going to make that decision because you just really discount that future benefit so much more relative to your current expense And what that means is that, for example, people don't invest into heat pumps, into solar panels, just because it's an upfront expense that gives you a benefit later on. So this is another thing, i think, where government policy can come in to kind of subsidize customers and consumers in helping them buy these products, making really attractive finance available to kind of overcome this hyperbolic discounting problem.

Carlota Ochoa Neven Du Mont: 23:19

And I think that maybe final is the final one is we have a timing issue, right, we don't have a lot of time to fix the planet. So if we just net the free market do its thing, then the best technologies kind of will survive. Lots of them will fail in the progress. But I don't think we have that luxury. So really we need to finance as much of these solutions as possible and get them kind of through the funding valley of death, which is where a lot of startups fail, and this is specifically difficult on climate tech because at the end CO2 is a molecule.

Carlota Ochoa Neven Du Mont: 24:01

So we need hardware solution, that big plants, big hapex projects that can often kind of fail in that process of building their first plans because early-stage venture capital investors don't necessarily have kind of the amount of funding required and don't want to fund with equity multiple hundred million plans, as in when it comes to, for example, for a DAC, or building massive arc furnaces for a decolonized way to make cement or for steel manufacturing, and at the same time your traditional debt players don't or infrastructure financing players don't necessarily want to take the risk of financing such a large plant when it's the first of a kind and the technology hasn't been proven. So there I think there is really a need for governments there to step in and provide grants and provide match funding for these companies so to enable as many as possible of them to get through the funding value of death, so that we can commercialize and try to commercialize as much of these technologies.

Ryan Grant Little: 25:03

I couldn't agree more. So, as we're talking right now, it's a week before the official beginning of summer, and if the summer is going to be anything like the winter was, where we saw basically heat waves, records were set of 4.5 degrees, and records should usually be set by about 0.5 degrees. So if the same thing happens in the summer, we're going to be really facing quite a crisis. I mean, as we're talking now, the skies in New York City are orange from wildfires coming down from Canada. Do you think this is the summer that people finally wake up and this stuff hits home, or is it going to be business as usual?

Carlota Ochoa Neven Du Mont: 25:40

I mean, i think it depends. I don't know what the weather patterns are going to be this summer, but I think everyone generally has their moments when they realize, when they get, i mean, i don't know if it's going to be the summer, right. But I often have conversations where people are like, oh, it's so warm and it's like bittersweet, because they can't wait. They're like, okay, it's early June and it's really warm, which is fantastic, but at the same time it's like it just makes the problem so much more in front of mind. So I think people are generally, attitudes are shifting and they're realizing that it's not necessary always a good thing.

Ryan Grant Little: 26:17

I remember when seeing Al Gore's inconvenient truth in the cinema and thinking, okay, this is going to be the moment when was that the mid-2000s, the aughts thinking this is going to be the moment that people really get it, and still, you know, there was a kind of a blip then and things kind of reverted back to the mean after that. But hopefully some of these things that finally you know are are hitting home in, yeah, and developed countries and on people's doorsteps. A lot of the people who control the money are making these decisions. My hope is that this finally kind of the roosters have come home or the what is it? the birds have come home.

Ryan Grant Little: 27:02

Hope to hatch Something's come home.

Carlota Ochoa Neven Du Mont: 27:07

No, i think, I mean I definitely. I mean maybe I'm, maybe I live in a bit of a bubble. I definitely think that the roosters come home to hatch or whatever it is, and it is so front of mind in every conversations that I have, from whether it be personal business, i mean on a never level, which kind of also makes me a little bit more optimistic about the future.

Ryan Grant Little: 27:30

Someone's going to send an email both with what that correct expression is Yes, something the hands will come home to roost.

Carlota Ochoa Neven Du Mont: 27:36

I don't know something like that. Something will galvanize the comments.

Ryan Grant Little: 27:40

Yes, okay, yeah, let's do it that way. Okay, the hardest question now who is your hero? Who? It's hard, right, it's harder than talking about carbon markets and predictions for the carbon market.

Carlota Ochoa Neven Du Mont: 27:53

It is maybe to tie it in with a point that we just made right. I think this there's. I think there's kind of there's a number of things that are happening that are getting people. I think it's super important to get people galvanized. The one thing that's I think the one thing that's currently already getting people galvanized is the fact that now there's a shareholder, shareholder and government pressure to get to net zero and it now makes commercial sense.

Carlota Ochoa Neven Du Mont: 28:24

It now makes commercial sense to get to net zero because of carbons getting priced in green premium are coming down and that's getting a lot of people and entrepreneurs, people with commercial mindsets, into climate tech, which we ultimately need. But then there's these kind of other angle that we need people to firstly be optimistic about the road ahead and we need to get the new generation, new policymakers coming in, new people kind of working on different ideas, to come into the space and think of exciting pathways to decarbonize. And I think that probably the two people who I would say are kind of blood above my heroes, who have done the most on this So I'm going to say two people is I'm here in the UK David Attenborough, who has with his whole, i think, with his documentaries that. I don't know how it is where you live, but here in the UK it's just like everybody watches his documentaries.

Ryan Grant Little: 29:24

Everybody recognizes his voice, for sure.

Carlota Ochoa Neven Du Mont: 29:27

Everybody recognizes his voice and I think he's had the effect that Al Gore wanted to have with an inconvenient truth by kind of really appealing to people's hearts with what's happening in the animal world. So I think he's a little bit of a personal hero. And then I think the other personal hero is probably Greta Thunberg. You may agree or disagree with the message and the method, as a lot of people, i think, kind of do but I think it's so impressive how a teenage, a young teenage girl, can drive such a large message on a global scale and the guts with which she has done that, and obviously rubbing a lot of people in the wrong way is also. It takes a lot of courage. So I think that's a little bit of a hero.

Ryan Grant Little: 30:22

Those are two very solid picks. Arlotta, thanks a lot for joining. This has been really interesting.

Carlota Ochoa Neven Du Mont: 30:28

No worries, it was a pleasure. Thank you, ryan.

Ryan Grant Little: 30:33

Thanks for listening to another Climate Tech podcast. Please take five seconds to send this episode link to a colleague or friend who you think might be interested. Reach out to me anytime at hello at climatetechpodcom. As you can probably tell, this episode was produced, edited, directed, stage managed, boom operated and everything else by me.

Carlota Ochoa Neven Du Mont: 30:54

Subscribe to hear many more conversations still to come with the world's real climate tech heroes that can often kind of fail in that process of building their first plans because early-stage venture capital investors don't necessarily have kind of the amount of funding required and don't want to fund with equity multiple hundred million plans, as in when it comes to, for example, for a DAC, or building massive arc furnaces for a decolonized way to make cement or for steel manufacturing, and at the same time your traditional debt players don't, or infrastructure financing players don't necessarily want to take the risk of financing such a large plant when it's the first of a kind and the technology hasn't been proven. So there I think there is really a need for governments there to step in and provide grants and provide match funding for these companies so to enable as many as possible of them to get through the funding value of death so that we can commercialize and try to commercialize as much of these technologies.

Ryan Grant Little: 25:03

I couldn't agree more. So, as we're talking right now, it's a week before the official beginning of summer, and if the summer is going to be anything like the winter was, where we saw basically heat waves, records were set of 4.5 degrees, and records should usually be set by about 0.5 degrees. So if the same thing happens in the summer, we're going to be really facing quite a crisis. I mean, as we're talking now, the skies in New York City are orange from wildfires coming down from Canada. Do you think this is the summer that people finally wake up and this stuff hits home, or is it going to be business as usual?

Carlota Ochoa Neven Du Mont: 25:40

I mean, i think it depends. I don't know what the weather patterns are going to be this summer, but I think everyone generally has their moments when they realize, when they get, i mean, i don't know if it's going to be the summer, right. But I often have conversations where people are like, oh, it's so warm and it's like bittersweet, because they can't wait. They're like, okay, it's early June and it's really warm, which is fantastic, but at the same time it's like it just makes the problem so much more in front of mind. So I think people are generally, attitudes are shifting and they're realizing that it's not necessary always a good thing.

Ryan Grant Little: 26:17

I remember when seeing Al Gore's inconvenient truth in the cinema and thinking, okay, this is going to be the moment when was that the mid-2000s, the aughts thinking this is going to be the moment that people really get it, and still, you know, there was a kind of a blip then and things kind of reverted back to the mean after that. But hopefully some of these things that finally you know are are hitting home in, yeah, and developed countries and on people's doorsteps. A lot of the people who control the money are making these decisions. My hope is that this finally kind of the roosters have come home or the what is it? the birds have come home.

Ryan Grant Little: 27:02

Hope to hatch Something's come home.

Carlota Ochoa Neven Du Mont: 27:07

No, i think, I mean I definitely. I mean maybe I'm, maybe I live in a bit of a bubble. I definitely think that the roosters come home to hatch or whatever it is, and it is so front of mind in every conversations that I have, from whether it be personal business, i mean on a never level, which kind of also makes me a little bit more optimistic about the future.

Ryan Grant Little: 27:30

Someone's going to send an email both with what that correct expression is Yes, something the hands will come home to roost.

Carlota Ochoa Neven Du Mont: 27:36

I don't know something like that. Something will galvanize the comments.

Ryan Grant Little: 27:40

Yes, okay, yeah, let's do it that way. Okay, the hardest question now who is your hero? Who? It's hard, right, it's harder than talking about carbon markets and predictions for the carbon market.

Carlota Ochoa Neven Du Mont: 27:53

It is maybe to tie it in with a point that we just made right. I think this there's. I think there's kind of there's a number of things that are happening that are getting people. I think it's super important to get people galvanized. The one thing that's I think the one thing that's currently already getting people galvanized is the fact that now there's a shareholder, shareholder and government pressure to get to net zero and it now makes commercial sense.

Carlota Ochoa Neven Du Mont: 28:24

It now makes commercial sense to get to net zero because of carbons getting priced in green premium are coming down and that's getting a lot of people and entrepreneurs, people with commercial mindsets, into climate tech, which we ultimately need. But then there's these kind of other angle that we need people to firstly be optimistic about the road ahead and we need to get the new generation, new policymakers coming in, new people kind of working on different ideas, to come into the space and think of exciting pathways to decarbonize. And I think that probably the two people who I would say are kind of blood above my heroes, who have done the most on this So I'm going to say two people is I'm here in the UK David Attenborough, who has with his whole, i think, with his documentaries that. I don't know how it is where you live, but here in the UK it's just like everybody watches his documentaries.

Ryan Grant Little: 29:24

Everybody recognizes his voice, for sure.

Carlota Ochoa Neven Du Mont: 29:27

Everybody recognizes his voice and I think he's had the effect that Al Gore wanted to have with an inconvenient truth by kind of really appealing to people's hearts with what's happening in the animal world. So I think he's a little bit of a personal hero. And then I think the other personal hero is probably Greta Thunberg. You may agree or disagree with the message and the method, as a lot of people, i think, kind of do but I think it's so impressive how a teenage, a young teenage girl, can drive such a large message on a global scale and the guts with which she has done that, and obviously rubbing a lot of people in the wrong way is also. It takes a lot of courage. So I think that's a little bit of a hero.

Ryan Grant Little: 30:22

Those are two very solid picks. Arlotta, thanks a lot for joining. This has been really interesting.

Carlota Ochoa Neven Du Mont: 30:28

No worries, it was a pleasure. Thank you, ryan.

Ryan Grant Little: 30:33

Thanks for listening to another Climate Tech podcast. Please take five seconds to send this episode link to a colleague or friend who you think might be interested. Reach out to me anytime at hello at climatetechpodcom. As you can probably tell, this episode was produced, edited, directed, stage managed, boom operated and everything else by me. Subscribe to hear many more conversations still to come with the world's real climate tech heroes.