Climate Tech and Adaptation Strategies

Jannik De Winter 0:01

Unfortunately , we see that all the efforts in decarbonizing our economy seem to not be sufficient to actually stop , or at least slow down climate change . So 2024 was again the hottest year on record , with over 1.5 degrees above the pre-industrial level . So the famous Paris Climate Agreement goal of 1.5 degree limitation was already breached last year . And don't get me wrong we still have to work with all the efforts we have on climate mitigation , because every temper of a degree is very important in terms of the effects on us and the environment . But obviously we need to focus also more on adaptation .

Ryan Grant Little 0:44

Welcome to another Climate Tech podcast interviews with the people trying to save us from ourselves . Yannick De Winter is part of PT1 , a climate tech VC largely focused on the built environment . He just put out a white paper on the concept of adaptation tech technologies that account for the fact that the climate is already changing and we've blown past targets like 1.5 degrees . We talked about the size of the opportunity , what the different technologies look like and what needs to happen for it to take shape . I reached Yannick in Berlin . I'm Ryan Grant Little . Thanks for being here , yannick . Welcome to the podcast . Yeah , thanks for having me . You work at the Berlin-based VC firm PT1 . Can you talk a little bit about the firm's investment thesis and who it invests in ?

Jannik De Winter 1:32

Yeah , definitely so . Our thesis is that the built world environment is under massive change through climate change , but also the lack of qualified workforce on construction sites and overall different use of land by different trends . Like COVID , we saw different use of office space , but also land use is very different . We see a lot of renewables on agriculture land , so a lot of change also in that part and therefore our investments go into . We call it transformative technologies for real assets . Sounds quite technical , but what it means is we look for startups who help to transform infrastructure the renewable sector , energy sector , but also the real estate and construction sector . So these are our focus areas .

Ryan Grant Little 2:22

And so this is what you mean by the built environment , and can you give maybe an example of some of the types of investments that you've made ?

Jannik De Winter 2:30

Yeah , sure , so for the construction sector , for example . So usually we are very early , which means pre-seat to seat , stage wise , and also we are one of the fewer VCs also investing in hardware-related startups . For example , from the construction sector , we invested in a Berlin-based company called EcoWorks which is doing a serial renovation by prefabricating the second skin for buildings , which reduces the time on the construction side immensely while allowing the tenants to stay in the buildings . So that's something we'd like to invest . Another example from the energy sector is a company called Voltfang , also from Germany , from Aachen . They are using EV batteries and give them a second life as they bundle them into larger battery storages for the real estate sector . So that's what we like , as they first of all have a positive impact with circular economy using EV batteries which are no longer eligible for the high performance part in the EV sector but still eligible for buildings . And obviously battery storage is a very important part .

Ryan Grant Little 3:41

That's cool . So you're taking it basically like off the racetrack and putting it out to pasture where it's still serving a purpose like that , just imagining these batteries that are in like you know cars , like accelerating really quickly and then , as they reach towards kind of later in their life , like actually I'm just going to retire but I've still got some energy in me and I can be part of this like farm . So literally out to pasture .

Jannik De Winter 4:05

Yeah , that's a good analogy . Exactly .

Ryan Grant Little 4:08

I was interested to see that . I mean , I guess a lot of VCs have a network , but you're really vocal about your expert network that you have of 100 or more people that you work with . I looked at that list . I recognize a lot of the names from my time living in Berlin . I wonder what does it mean to have this expert network within the fund ? What's their involvement and how is this different from some of the other funds ?

Jannik De Winter 4:35

So , as you said , we're very vocal about our network . One big pillar of this network is our venture partner network . These are all LPs which are also invested in the fund but also do some kind of advising us in validating business models , as they usually like serial founders or industry veterans from the industry sectors I already mentioned . Obviously , as a small VC , we can't catch up all the trends and all the business models into the last detail , so this is very important . That's one pillar .

Jannik De Winter 5:09

Another pillar is also from our corporate network , lp wise and also generally , because most of the business models we are looking at are b2b rather than b2c , so obviously they are a good candidate for pilot projects or first client ideally , and this first of all , also helps in validating the overall business , but then also accelerating it once we validated it . So this is very helpful . And another big part which ramped up in the last few weeks is the political network . Actually because we are heavily involved in some associations focused on the industry sectors we are acting in and just with the upcoming german elections , we also invited a lot of politicians from various parties into our office space , have some some discussions with other VCs , startup industry to really push our general ideas , and this also obviously helps to promote our ideas on what a better future might look like .

Ryan Grant Little 6:15

It's a genius business model .

Jannik De Winter 6:16

So I'm imagining , instead of having a whole bunch of analysts on the payroll sitting there , you have these DECA and Centumo millionaire exited founders who are doing the deal flow analysis for you I like it and investing in you I mean , obviously it's the first part still on our hand , but for the very detailed things , and it's always good to have a , let's say , best practice experience , because on paper things look always different as they are working out in practice I mean , the reality is also that a lot of exited founders miss , you know , looking at startups and being involved in the space , so I think you probably have a number of very willing candidates there .

Ryan Grant Little 6:58

Absolutely , I wanted to talk to you today because you've just put out a white paper about climate tech for resilience , which you are calling adaptation tech , and my first thought was that VCs have enough work on their plates between deal flow and portfolio companies , and I wonder where you found the time for this and why you do it now . I think I understand now with your deal flow set up , but so why the pressing need to put this out as a white paper now ?

Jannik De Winter 7:26

Yeah . So first of all , I think you already have a very good point in your question , because you are talking about climate tech for resilience . We are referring to it as adaptation tech and this raises like the first point why we want to talk about it because there seems to be startups out there , technologies out there , helping to make our planet and especially from our perspective , the urban environment , more resilient , but it's still not that acknowledged by the whole industry that there might be a new vertical coming up . So we see it's very important first of to have some groundwork in labeling these important technologies , because it's obviously helpful for them in terms of fundraising and promoting their ideas and business models . And the bigger part why we have to deal with it from our perspective is , unfortunately , we see that all the efforts in decarbonizing our economy seem to not be sufficient to actually stop or at least slow down climate change .

Jannik De Winter 8:28

So 2024 was again the hottest year on record , with over 1.5 degrees above the pre-industrial level .

Jannik De Winter 8:36

So the famous Paris Climate Agreement goal of 1.5 degree limitation was already breached last year . And , don't get me wrong , we still have to work with all the efforts we have on climate mitigation , because every tenth of a degree is very important in terms of the effects on us and the environment , but obviously we need to focus also more on adaptation and , just looking a few weeks back , the LA wildfires have shown with what energy that the planet can fight us , and I think that's , unfortunately , again a great example on the need for adaptation . And that's how we started it . Just looked at the , let's say , the stats and for us it was quite obvious that there must be something out there which can help to speed up the adaptation , and obviously startups usually , or innovators , are always helpful in speeding up initiatives . So that's why we felt the need to write about that and it was actually well received , also by the VC industries . We see a lot of upcoming papers and articles dealing with the topic , so that's , for us , great to see that this seems to get some more attention .

Ryan Grant Little 9:51

Can you give some examples ? I mean , I think I have an idea of what an adaptation tech solution looks like , but can you just give some examples of some of the more interesting ones that you've seen ?

Jannik De Winter 10:01

Yeah , definitely so . Again , just from our expertise in the built environment , we are very deeply looking into what is called urban adaptation . So this is obviously our focus , but it's also important to mention the whole agriculture tech part is very , very important when it comes to climate adaptation . One example here is climate resilient crops , because we have different weather patterns , etc . I just always want to mention it because it's often missed out in our discussions as we have this industry focus , but it's very , very important when we are considering this topic overall .

Jannik De Winter 10:37

But in the urban space adaptation , I personally like the topic of water . Water seems quite generalistic , but it's a double-edged problem because , on the one hand , in the summer , when we have excessive heat , we have a scarcity of water , and then there are interesting solutions when it comes , for example , to desalination , leakage detection , because , for example , in Italy , we have a loss of roughly 40% of water in the pipes , which is terrible , enormous . This is something very interesting . Wastewater management , re-usage of gray water , for example . So that's what I personally like as an area . But also we start from the whole data gathering part , which comes mainly from satellites or IoT devices . So this is a totally new basis for all the analytics and this is also currently one of the biggest parts , the whole analytics part .

Jannik De Winter 11:36

We're talking about climate risk assessments and that's actually also one of our portfolio companies , climatex from London , now also very active in the US . They have advanced models in assessing the individual risk , but also portfolio risks for asset managers , banks , insurances , and they also provide ideas on how to adapt these spaces because it's very important for the asset owners . In the end , because we're talking about risk management and I think that's a bridge . Every finance guy or woman can understand that it's important to talk about risk and having some , let's say , kpis , financial numbers , which makes it more realistic and plastic to talk about , rather than having a high level discussion about climate change in general .

Ryan Grant Little 12:22

I'm with you on water . I always find the water-based solutions the most kind of interesting . I had Brian Sheng who , together with his brother , eric , founded a company called Aquaria in Los Angeles and they're basically taking water out of thin air and like they can like rebuild municipal water supplies out of thin air through condensation and are launching their first pilot in Hawaii right now . And I think these kinds of things and , as you point out , through piping and gray water , there's so much water that's wasted and we have to kind of move away from that .

Ryan Grant Little 13:00

We live in this era now of like there's either too much water or too little water , and usually not the right amounts , like this period of fire or floods . You know Germany sees lots of floods , los Angeles just saw fires and it's something that we really need to master and it's just something that we take very much for granted and don't think a lot about kind of every day , and certainly not as a not very much in the climate tech space , where people are generally more interested in the electrification of everything .

Adaptation Tech and Nature-Based Solutions

Ryan Grant Little 13:27

Exactly , you mentioned that . You know your focus as a firm and I think a lot in the white paper was on kind of the industrial and urban side of things . But then you brought up as well the role of agriculture . Goes one step kind of past agriculture as well and look at kind of like nature based solutions and biodiversity and I wonder what roles those you know out of the agricultural space , but what role does nature-based solutions have in adaptation ?

Jannik De Winter 13:57

Yeah , it's a very big role and , I would argue , also larger than the tech part . Biodiversity , nature-based solutions are not very eligible for having VC-orientated investment schemes and returns , so this is when we are looking at adaptation measures . We also usually have to be driven by the initiative , by the biodiversity initiative , with the reduced amount of losses .

Ryan Grant Little 15:03

Right . So that's not piquing the interest of the insurance companies , but maybe it is at the legislative level . I mean , are you seeing governments stepping in and looking at adaptation tech solutions that involve biodiversity , involving some of these things that are maybe not as financially viable for private markets ?

Jannik De Winter 15:20

Yeah , so we see a lot of legislation , including nature-based solution , when it comes to the whole urban planning sector , and also here we see a lot of startups providing solutions for urban planners on how to adapt urban spaces on a larger scale , not on a single building perspective , but whole new districts , for example .

Jannik De Winter 15:42

And here nature-based solutions are very important when it comes to greener areas , providing more cooling effects , having areas to save some water in times of excessive rain , for example , and this is part of legislation on a European level .

Jannik De Winter 15:59

So we have a nature restoration law here which requires states , but also private projects , to include the biodiversity aspects , for example , and climate resilient effects in their projects . And also , on a German level , we were kind of progressive with having one of the first climate adaptation laws worldwide which requires every larger city or other municipalities to first of all have climate risk assessments and then , based on that , drive their decisions on how to adapt . So I think legislation , especially in Europe and in Germany , is quite ahead in a global comparison , which is also why I think , coming back to the tech sector , that there is good groundwork already done from a regulatory point of view . Groundwork already done from a regulatory point of view and also , again Germany-focused . We have a lot of very well-qualified engineers . We're talking about hardware solutions , which is why we believe there is a very good basis here to work on these kind of solutions .

Ryan Grant Little 17:06

It sounds more progressive than drill , baby drill and one of the parts of the white paper . You're talking about AI , not surprisingly , and it feels to me like AI probably has a really , really big role to play here in everything from the examples you give are early disaster detection , climate risk modeling I guess that includes municipal planning and building away from flood plains and that type of thing . It feels like AI is really well-suited to this . Can you talk a little bit about how AI is working with adaptation tech ?

Jannik De Winter 18:29

Yeah , so you mentioned the disaster warning part . I can give you one example . There was a startup called Aurora Tech from Munich and they are working with satellite image data real-time data and they trained their model to detect wildfires from the satellite data . Why is this important ? With wildfires , every minute counts . This sounds very dramatic , but it's true if you see at the speed for example , again Los Angeles at what speed the wildfires expanded . Every minute helps to slow down the effect or even to minimize the effects of these wildfires , because you are more efficient in allocating the firefighters to the right places , and this is very , very helpful in reducing the impact of these wildfires , for example , oh , wow , so I mean even at like the dispatching level that furs , for example .

Ryan Grant Little 19:20

Oh , wow . So I mean even at like the dispatching level , that makes a lot of sense . Yeah , exactly .

Jannik De Winter 19:26

So disaster warning is a huge part of AI development , white furs especially , but also when it comes to the floodings . So you often see the TV pictures of the destroyed areas and it's very hard to see the effects because it's so chaotic . But from space again , satellite data it's way better to see the actual extent of some catastrophes , what roads are still available to get help , to dispatch resources . This sounds quite normal to me to have these ideas , but usually we were lacking these data . And even if we have the data available , if you have to have humans in front of a desk to check every possible way , this obviously takes some time and here also , ai is very helpful in speeding up the research for right solutions to help as fast as possible yeah , so taking all of that information that's out there from satellites and everything and then turning it into like a little actionable packet of information that a dispatcher or someone at a desk can use .

Jannik De Winter 20:34

Exactly . And also when it comes to climate risk modeling . We are talking still about future developments , which are clear to a certain extent , as we all know the different paths , looking at a two degree scenario , three degree scenario , but still looking on an individual , more granular level of land , where you want to know the possible effects of climate change . It's very helpful to have AI in simulating various scenarios to know what's the worst case , best case , and this is way faster than we could do it with previous algorithms , etc . And also , what I think is the more important part is also in thinking about adaptation measures , because you could calculate hundreds and thousands of variants to adapt these spaces , including financial investment and possible returns , in a matter of minutes or hours , rather than having a three-month project on different ideas on how to adapt certain areas .

Ryan Grant Little 21:40

The white paper highlights a funding gap of about a trillion dollars per year . That's needed globally , and so this is not just for the tech side , but for the entirety of adaptation . What amount of that , would you say , needs to be invested , you know , or is investable from an adaptation tech perspective , and what are some of the barriers to getting that capital to flow ?

Jannik De Winter 22:06

Yeah , so we estimated that roughly $44 billion so still a quiet number , not as high as a trillion , but still very high would be needed to actually promote the tech part on a level which would be appropriate to actually have some impact on climate resilience and adaptation . The big barrier mainly is to have a deeper understanding that we are talking about actual investments , because currently it's often considered as development aid , especially for poorer countries in the global south which are more affected by climate change than the developed countries are . So this was also a big part of the discussion at the last COP in Baku , where adaptation fortunately got on the agenda of many participants , but still they were haggling about a few million euros from Saudi Arabia and China who didn't want to invest at all . At the end they decided to invest some money , but still this is often considered just as development aid and not actual investment . And this is something I think represents the biggest barrier in terms of allocating money and adaptation in general . For the tech part , we already discussed in the first part that it's still often unclear what is actual adaptation tech or climate tech for resilience , and I think labeling a sector like that could be very , very helpful in allocating money . Because if we look at big institutional pockets when they have to report on their investments , it's very hard for them to say I've invested in water solutions . It would be way easier for them to say , okay , we invested in climate adaptation technologies in general and have a better overview on what that actually means . So I think labeling here is very important as well .

Jannik De Winter 24:03

And a third thing what comes to my mind when we're talking about barriers is the huge hardware focus . So we also see this in the , let's say , general climate tech part . We are talking a lot about big facilities , first-of-a-kind facilities which need to be financed , and we still don't know exactly how we can achieve this funding for these pilot projects . And same is here with the adaptation tech part . We need hardware-based technologies which need to be produced , which need way more funding than software-as-a-service solutions in ramping up . And I think this is also a big barrier when you're looking from a VC perspective . You have a limited timeframe of your fund's lifetime and you need to see some progress within that lifetime and also the potential returns are obviously lower than with a highly scalable software solution .

Ryan Grant Little 24:59

Very concerning . When you think of adaptation as a development aid issue , when you consider what's happening with the new administration a development aid issue . When you consider what's happening with the new administration basically in the US , basically freezing or dissolving USAID still kind of TBD Are you getting ? I mean , germany has got a very active and very large development organization with GIZ Are you getting pickup and attention from them with this paper ?

Jannik De Winter 25:23

Not yet , as it's really more been recognized by the VC and startup community , but I think working together with them in the future will be the next step to get the public sector more involved , because we see they play such a crucial role in adaptation , but usually they are slower than the private sector sector , which is why we need to pick them up on the way to to join forces definitely and so now you have the paper out there , as you said , you've got lots of pickup from other vcs and some startups and getting some feedback .

Ryan Grant Little 25:59

What are the next steps from your side ? Is it kind of job done you've catalyzed the conversation and let things go or are you going to be ? Is there an you know , an event planned around this ? Is there more work to be done as kind of like the , the stewards of this movement ?

Jannik De Winter 26:15

yeah , actually we are planning an event on the 25th of february in berlin on climate resilient technologies , where we want to invite insurance companies , asset managers , but also VCs and startups , educating on that sector and deepen the discussion about the current status quo and potential further development . This is something we are working on . We also have our own podcast on that topic , where we are dealing with , let's say , one problem each episode . So the next episode will be around the water topic . We also discussed and , yeah , we still want to promote that topic in general , as work is definitely not done Again the definition of what we actually define as adaptation tech , I think , is crucial and still needs a lot more of attention and also joint discussions with the industry representatives . So that's something we definitely will continue working on for the foreseeable future . So I think it's hard to say a certain period of time . We are investing in that because I feel it will accompany us on a longer time .

Ryan Grant Little 27:29

Listeners can check the show notes if they want to find ways to get involved with this work and to get in touch with Yannick . Yannick , thank you so much for this great conversation today . Really cool work that you're doing .

Jannik De Winter 27:38

Thank you , ryan , it was a pleasure .

Ryan Grant Little 27:40

Thanks for listening to another Climate Tech Podcast . It would mean a lot if you would subscribe , rate and share this podcast . It would mean a lot if you would subscribe , rate and share this podcast . Get in touch anytime with tips and guest recommendations at hello at climatetechpodcom . Find me , ryan Grant Little , on LinkedIn . I'll be back with another episode next week . Bye for now .