Initiatives designed to reverse climate change generally lack funding. Yet there are investors with large pools of money who are increasingly interested in the space. How do we bridge that gap and promote impact investing? How do we support regenerative agriculture projects that will restore the soil and reduce the amount of carbon in our atmosphere?
Full Transcript
Alexsandra Guerra: You’re listening to the Reversing Climate Change podcast by Nori, the world’s first carbon removal marketplace. Here are your hosts, Ross Kenyon and Christophe Jospin.
Ross Kenyon: Hello and welcome to the Reversing Climate Change podcast with Nori. I’m Ross Kenyon. Paul Gamble and Christophe Jospe joined me. We were in Oakland the other day and I really wanted to do the Invisibilia opener. Have you guys ever listened to that? It always starts with, and here we are in beautiful downtown Oakland on Radio Row. Have you ever heard And then we were in Oakland the other day and I missed my chance to do it.
Unknown speaker: I heard it here first. But we’re in Berkeley. We’re in a bungalow. Close enough, yeah.
Christophe Jospe: Sitting across from us is David Hodgson. Have to give credit to LinkedIn for how I know David. I... Saw an article that he shared and then I clicked his profile and there was a subline that said something about accelerating the flow of capital into landscape regenerative something. Something about telling people how to spend their money and put money to places where it’s needed to solve climate change. Yeah. And I felt, wow, this is a guy that I’d like to know. And I sent him a note and we connected and had a very nice chat over LinkedIn and over Skype rather.
And something hit off. It felt like, okay, let’s stay in touch. And here we are. Now we’re having a podcast together. So... David came from one part of life into another. You sort of had a career at Microsoft and Sony and Electronic Arts. And now you’re trying to put money into things that can solve climate change. How did you get to where you are? And why are you sitting here in this table on the Reversing Climate Change podcast?
Ross Kenyon: Sometimes these get so accusatory. Like, why are you...
David Hodgson: Why am I here? That is a good question. And the answer is, so I had a midlife crisis. So yeah, I mean, I was a software engineer for the first half of my life. Well, hopefully that wasn’t quite half of my life. But yeah, I was a software engineer. My father was diagnosed with cancer and I... And I was writing games at the time, which is why electronic arts and whatever else. And that made me realize that I should be doing something a bit different with my life. So I ended up going back to college, getting an MBA in sustainable business stuff.
I read Paul Hawkins’ Ecology of Commerce. And that was the first book they had us read. And my life has never been the same since. And then, yeah, spent the last seven years or so trying to really figure out what needed to be done. And every direction that I turned in, I found that people were going, we don’t have enough money, we don’t have enough money. And at the same time, on the other side, it was quite obvious that there were large pools of money that were starting to become very interested, particularly in climate-related activity, but it wasn’t quite...
The connection hadn’t quite been made. And I’d like to try to figure out how to solve problems as a general rule. So I was just like, okay, how do we help? Or how can I help that money get moving into the places that it really needs to get moving into and realize that land regeneration was kind of the, at least the thing that seemed to make the most sense to me.
Ross Kenyon: Was the focus on the term for this is impact investing, but I know some people just want these projects to be justifiable economically on their own terms too. Are we approaching this point or is it sort of still a quasi charitable endeavor to give money to these projects?
David Hodgson: It’s, well, there’s this, yeah, the concept of blended finance, which is where you are trying to bring together capital that is both Market rate return seeking as well as capital that is more philanthropically oriented. Less interested in return or less interested in financial return. Blending those two things together. There are a lot of projects now that can make it on their own. But there’s still quite a significant subset that does require a form of philanthropic underwriting. Particularly because the space is still so new. That fiduciary responsibility for big pools of capital just requires a very, generally likes to see a very long track record so that it can feel really, oh, I can put money there and I know exactly what’s going to happen.
And that history just doesn’t exist yet sufficiently to really unlock massive flows of capital.
Ross Kenyon: I would love to have enough money where I was like, I don’t care about the return. Just do a good thing.
Unknown speaker: I’m pulling for Nori to work. Sounds fun to me.
Christophe Jospe: I’m pulling for it too, but you bring up some really good points there, David. There are different flavors of capital and you’re talking about blending them all together. I mean, on the one hand, you’ve got grants, which can get things going. On the other hand, you’ve got philanthropy. We only have two hands, but I’m going to keep using other hands.
Unknown speaker: You’re an octopus.
Christophe Jospe: On the next tentacle, you have different pieces of first lost capital, and then maybe the venture capitalists want to come in and see a much larger return. All of that is part of private equity, where maybe someone wants to own a piece of land and see the returns of that land over time. And you’re throwing it all into the blender and making a smoothie and saying, drink this because it’s going to restore the health of the planet. And it’s a coordination challenge. And if we drink this, we can actually do it.
We can actually solve climate change. Is that about right?
David Hodgson: Yeah, that’s about right. Each one of those types of money and the people managing each one of those types of money think very differently from one another. So there’s a real challenge in... Getting them all in the same room.
Ross Kenyon: Do you ever have a case where you have someone who cares a lot about returns and then other people care a lot about the impact of this investment and then you take some of the returns from the people who care about impact and give it to the person who cares about returns to make a deal? Does that happen?
David Hodgson: That does happen. That’s pretty common.
Ross Kenyon: Did I just rumble you? I know how this works now.
David Hodgson: It happens and Yeah, it’s tricky because one group of people definitely ends up feeling slightly, can, you know, emotionally end up feeling slightly exploited.
Ross Kenyon: Like, oh, well, you just care about the impact, right? So we’ll just take a couple of points off that. Yeah. Yeah, no problem.
David Hodgson: Yeah. But then that’s why thing, you know, carbon market type activity where there’s ways to monetize Other ecosystem service production is actually really important, right? Because that can help plug those capital gaps so that extra money, so you can get market rate return back to the mainstream investors, doesn’t need to come philanthropically. If it can come through monetizing water, carbon, whatever, that’s really helpful.
Christophe Jospe: I’d like to get into the weeds, literally and figuratively, because we’re talking about landscape regeneration. That is going to be the first supply of the carbon removal marketplace that we’re setting up. Let’s use some hypotheticals. It’s called Farmer David. Farmer David has a plot of land. He’s been practicing certain practices which have depleted the soil health. He plows it year over year. He’s spending a lot of money on fertilizer. And he wants to make more, but he also wants to do the right thing. But oh, he doesn’t own his land.
Here comes investor Paul. And Paul says, okay, farmer David, I’m going to buy up this land from someone else. And I’m now going to tell you, you have to do these certain things that are going to restore your health. Is that a deal that we might see in the future? Can we start to see some of these landowners and landholders and farmers all working in parallel, kind of working toward a regenerative and restorative restoration of some of the farmland, which has really depleted the health of our planet?
David Hodgson: The simple answer is yes. And there are people doing that right now. So I hope Craig Wishner actually responds to that email, a very terse email I used to introduce you guys the other day. Farmland LLP is basically, that’s their model. They’re buying up degraded, conventionally farmed land that has of us degraded and instituting... Yeah, new financial, new management, land management practices on it that are regeneratively oriented so that the land does regenerate. Yeah, he’s been quite successful so far is my understanding. Yeah, so that’s it. I mean, it’s a good model.
And we are seeing that starting to emerge. I mean, he’s on his third fund, I think, second, third fund. First fund was $100 million fund buying up land. Then they They’re managing the land. Who’s actually doing the direct farming? I’m not quite sure.
Christophe Jospe: Right. Here we are in the Bay Area. And if I want to make a lot of money, I’m not going to invest in a farm. I’m going to invest in the next delivery app or the next Uber of whatever. Right. So we’re talking about capital that has to be much more patient than the traditional sources of wealth generation that we have. So what are some of the challenges that we run into in this space and how do you address some of that?
David Hodgson: Most of us come from more of the technology world, so we’re used to dealing with venture capitalists. A majority of the money that is being managed out there, VC is a minority of the money that exists. Pension funds and whatever else are by far the largest capital managers, and they are generally seeking 7%, 8% returns. Craig with Farmland LLP, I think he got a 13% return on his first fund, 13%, 14%.
Ross Kenyon: Pretty good. But they mostly buy bonds and very conservative investments and stuff like that.
David Hodgson: Well, but they generally have a certain proportion of VC money actually comes from pension funds. So most pension funds, they have a very diverse asset allocation where there’s super high risk VC at one end. If you’re a general partner and a VC, you’re still only expecting 5% return across a fund of funds or something, 7% return, whatever. You’re not expecting... Those high returns. If you look at the returns from the VC business as a whole, yeah, you get these occasional hits, right? But in aggregate, the return on capital put into it is not the hundred times.
Ross Kenyon: It is still like You have like one you expect to go 30x or whatever, and then you have most of them that will probably fail. Like the next dog delivery photo, whatever amalgamation of app ideas that you see, many of those will fail.
Christophe Jospe: I think we should probably pivot Nori into a dog delivery photo sharing app immediately. Do you approve Paul?
Ross Kenyon: Paul hates this too, by the way. I heard him rant the other day on this.
Unknown speaker: This is my rant about the Bay Area is that there’s a lot of focus on kind of things that aren’t meaningful towards solving world problems. And no, my answer would be no.
Christophe Jospe: Okay, so glad that’s settled. Nori is sticking on its mission to try to reverse climate change. And it very much aligns with David’s mission of accelerating the flow of capital. Let’s talk about the flow of capital. Where is it today? And how do we crank it up? And at Well, I don’t want to put words in your mouth. Let’s start with that question.
Unknown speaker: Sounds like you’re going to do it anyway.
Christophe Jospe: I’m going to do it. So there’s a follow-up to my question. But let’s talk about really accelerating the flow because that’s what’s needed here, right?
David Hodgson: Yeah. Yeah. So I like mapping systems as a former software person. So I’m a big systems person. So yeah, I went looking for where the big pools of capital actually were and realized that they were inside And that these pension funds do some number of trillions of dollars in pension funds collectively, which if you look at the total aggregate world wealth amount, quite a few very large asset managers, right, who are managing, I mean, BlackRock is the largest, I believe, and they’ve got, what, $4 trillion of assets under management or something?
And yeah, there’s a few others who are sitting on similar size pools of capital. And obviously they have very diversified capital allocation strategies. But overall, if you can move, that’s the money we want to be moving. And the divest invest folks have done a really good job of investing. Persuading people that they should be, these large asset managers, that they should be, and their clientele, that they should, for university endowments, for philanthropic endowments, or whoever else, who mandating these asset managers to allocate their capital, they’re the ones who are going, look, we don’t want to be in carbon.
We don’t want anything to do with carbon. And we would actually quite like to see carbon reduction, biodiversity increase, and water. So my understanding is, There’s a mandate out there from large pools of capital to the asset managers to go, can you actually do something that’s going to fix the problem, please?
Christophe Jospe: Right. So just for our listeners, define divest. That means move your money away from things that continue fossil fuels and those ultimately become stranded assets. Because when we do the math around climate change, we can’t continue to freely emit carbon dioxide into the atmosphere. There’s already too much greenhouse gases in the atmosphere. So there’s a real urgency to slow down the flow of the greenhouse gases, stop the flow with renewable sources of energy and actually remove those excess greenhouse gases through various land management and other practices. I hear what you’re saying and all this makes sense.
But if I’m a pension fund, I’ve got a whole lot of money and I write checks with many commas behind them. And I’m not looking for kind of a one off farm. And one of the other points also is there are no unicorns in farms. We can kind of take a global average and some do better than others, but no one is going to give me a 30x return. So you need the kind of, okay, I’m happy with this year over year steady increase. One of the arguments that I like is to say, okay, you’re not investing in things that will become stranded assets.
You’re actually investing in things that will make you more resilient, right? So here we’re talking about farms and by practicing regenerative agriculture, your farms suddenly become more drought resistant, which makes them more reliable to sort of expect that we can still produce food where we counted on producing it before. So that’s a good thing. I’m still not convinced. We’ve got a large pool of capital. We’ve got kind of small farms. You’re a systems guy. And so you clearly think about how to coordinate the flow of this capital into these different farms.
What are some of the roadblocks along the way?
David Hodgson: Intermediaries, kind of the investment banking function that normally then deals with all the fund managers who then take those pieces of capital and decide what to do with them, they generally can’t justify their business model. The search costs there seem quite high. Yeah.
Ross Kenyon: Find those people and monitor them for very little money. Seems probably hard to do that. If you bundle them all together, maybe at some point it becomes worthwhile, but it does seem logistically complex.
David Hodgson: Yeah, it’s logistically complex. And that’s bumped into that issue in various conversations I’ve had with people. I mean, it’s the reason the World Bank likes to create mega dams rather than whatever else, because it’s just... Way easier to manage the financial piece of writing a $5 billion check than it is a whole bunch of $50,000 checks. I think that technology is one of the key things that can help solve that, especially potentially blockchain related things. I’ve heard of that.
Christophe Jospe: We didn’t even put those words in your mouth. Yeah.
David Hodgson: Looking at developing country contexts where there is digital banking, because people have leapfrogged M-Pesa, whatever. On one end, I’ve seen some really interesting blockchain land registry stuff, because quite often in many of these contexts as well, there’s no smallholder... There hasn’t historically been very strong land tenure, right?
Ross Kenyon: Is this the country of Georgia? They’re doing this, right?
David Hodgson: They probably are.
Ross Kenyon: I think there’s probably a couple other ones, too.
David Hodgson: Yeah, there’s a few. But if you’ve got the digital banking piece, you know, phone-based banking, digital tenure... And some kind of satellite or some version of remote sensing that can say, yes, these ecosystem services have been produced or this activity has occurred, then you should be able to greatly reduce a lot of those kind of aggregation and transaction costs. At least it’s part of one of my theories. We get hung up on that quite a lot.
Ross Kenyon: That’s a hard problem.
Christophe Jospe: I think it’s a good theory. I think it kind of speaks to economies of scale versus economies of numbers. And if you can automate the numbers, then you meet that economies of scale. Is that maybe the inspiration behind a thousand landscapes? Because if I add up a thousand landscapes, maybe I get to something that is indeed a million, hundred million dollar check.
David Hodgson: Oh, hopefully a thousand landscapes would hopefully get to a several billion dollar check is the idea there.
Ross Kenyon: We can’t give you that.
David Hodgson: Don’t come to us asking for it. Hopefully somebody can. Yeah. So the international development community came up with this. They’ve been pushing this, what they call landscapes. And... However, in the normal world, as I’ve been discovering, as I’ve been talking to people here in the Bay Area in particular, most people hear the word landscape and they think, oh, my garden or whatever it is, right? But in the international development community, a landscape is a very, very large area. It could be tens of hundreds of square kilometers, I mean, significant pieces of land where these NGOs have Kind of gone, oh look, we’ve got palm oil production, we’ve got sugarcane production, we’ve got cocoa production, whatever.
All these different agricultural value chains and they’ve brought together all the players across all those value chains whose activities currently are generally leading to land degradation. And then they’re going, oh, it’d be really nice if we stop doing that because, you know, The soil loss up there is screwing the water availability downstream. And everybody is currently suffering from that land degradation. And it’s having an economic impact on their businesses. So they’re willing to come together to identify how they can collectively shift those practices. And often these are smallholder collectives. So people have already aggregated themselves together, right?
Generally co-ops. And so out of that, you can then identify all these different opportunities to change basically the agricultural production across a region into a form that is regenerative and carbon capturing. And if you can aggregate all of those potential deals, which is kind of the core intent behind this whole thing, then you end up with, oh, look, We do this project in northern Honduras right now, and I don’t know how much money is currently needed for this, but the idea behind it is they’ve identified all these things. We think there’s at least $100 million needed for that.
Ross Kenyon: It’s palm oil, right? Is that what they do over there?
David Hodgson: Palm oil, sugar cane, cocoa, coffee, bananas. Historically, it was the original banana republic.
Ross Kenyon: Yeah, I remember we talked to Dave Montgomery and he was saying that there’s some, is it like 3% or 4% of like the carbon content? Or no, even just like the topsoil is going away, the quality of the soil is just disappearing. And that was a 3% to 4% loss of productivity every year. Is that the statistic I’m misremembering? Something ugly, whatever it is, but it adds up pretty quick.
David Hodgson: I wouldn’t be surprised.
Ross Kenyon: You wouldn’t be surprised?
David Hodgson: Sounds about right.
Ross Kenyon: I kind of butchered that one, but you got me.
Christophe Jospe: So on that fact alone, Ross, I mean, I think there are all these really important reasons to start changing our practices, to start thinking about how to use the soil and the land in a regenerative way. And what Nori hopes to do is to add one additional incentive to that, which is to say, many of these farmers are not getting paid today for putting carbon in their soils, but they could be. And we could pay them by creating a direct way between buyers and suppliers of carbon removal credits. And now you have one more way to pay these farmers.
So let me try something out on you. I’m a farmer and no, no, you’re the farmer. So we’re still more of these horrible analogies and metaphors. I know this whole chip in San Francisco. We’ve just done like 12 or 13 metaphors now. I won’t do a metaphor on this. I promise. Okay. So. David, the farmer, is removing carbon in his soil. And he wants to get paid, but he wants to get paid in cash. And Nori, the software platform that is backed by a blockchain and uses a token as a medium.
The medium of exchange to pay for carbon removal comes in and says, hey, David, we want to pay you. We have data from satellites and other imagery and other Internet of Things devices which can help measure and verify that the carbon actually has been removed in year over year. You’re going to get paid. And you, David, the farmer said, well, I don’t understand cryptocurrencies or tokens, so give me cash. Enter Paul, the investor, who says, that’s fine. I’ll take your carbon removal credits, David, and I’ll give you cash. And then suddenly a new exchange happens where David is getting paid and Paul is holding on to the token, which hopefully is worth it for Paul.
And Paul is able to see the price of the token and make determinations based on that risk profile. Now, David, you, not the farmer, should have picked another name, is able to come in and look at the deal from a whole new perspective because he can now see, okay, this is also going to make investors money from a more holistic approach. How does that resonate?
David Hodgson: That would be awesome.
Ross Kenyon: Interview over. We got what we needed here. Mic drop. Quoted out of context forever.
David Hodgson: Yeah, no, that would be absolutely ideal. I don’t know if you’ve met David Bank yet who runs Impact Alpha, but he’s been actually on the kind of, he believes that smart investors, I don’t know if there is a set of smart investors out there yet who are looking at carbon futures in that way. He believes somebody can make a lot of money by doing exactly that. Right.
Ross Kenyon: Maybe they’re going to listen to this podcast and then start thinking in that way. You mean like a derivatives market for carbon?
David Hodgson: Oh, yeah. Buying up carbon credits now at the current price, you know, from whichever market, because they have a strong belief that in 10 years time, carbon is going to be priced or, yeah, people will want those carbon credits in some form or another.
Ross Kenyon: I guess we have the luxury. Well, the token gets reused in our platform, but when the credits are actually bought, separate from the token, and that credit is immediately retired. But we also talked to Alden on our team about the possibilities of a futures opportunity. Yeah. You would probably want to buy as early as you could because you think they might go up to $30 or $50 and you’ll be able to get quite a discount on removing carbon. But we love thinking about how the financial market will work and how they will facilitate this and how people will plan, especially big funds, That adds up pretty quickly compared to you or I doing it.
So I imagine these derivatives markets would be quite useful. So that’s the kind of thing that I like to talk about and think about too. It sounds like a smart play. You’re also assuming a fair amount of change for the regulatory regime and what happens with various treaties and then you assume the tech. Do you buy any offsets now? Do you ever do that?
David Hodgson: I have done on flight. Primarily when I fly places, I have just minimal offset.
Ross Kenyon: That’s the one that we whip on the worst because I’ve been offered that and I never want to do it because I don’t know what’s actually happening there. So I’m hoping a lot of those problems come through in ourselves here in the near future.
David Hodgson: Well, just talking about the regulation thing for a second. So the... The British government, there was some report that I just saw go by this morning where the British government had become very worried about soil health. So I’m not quite sure exactly, I didn’t read through the report yet, exactly what they’re planning on doing, but it’s the first time I’ve seen, they’re planning on making some kind of concerted action to restore soil health across the UK.
Ross Kenyon: Just by policy? At the policy level, yeah. Oh, okay.
David Hodgson: Which would then imply regenerative farming activity becomes, they’re going to incentivize, strongly incentivize that. And then the French government was there, what is it, 50 ppm? Which was also around soil, carbon stuff. The Secretary General of the Commonwealth, Patricia Scotland, is it? The Commonwealth were, which is the biggest voting bloc at the UN, I believe. Yeah, they’ve got, there’s a strong interest there too around soil stuff. So, you know, whatever the Chinese government are doing, which is pretty impressive, at least at the environmental regeneration level, I would be, I think we’ll be quite surprised over the next five years, especially as Americans, even though my accent might not sound like it.
Yeah.
Unknown speaker: It’s a Jersey accent, right?
David Hodgson: Yeah. While US policy regime may not shift too much, the rest of the world is not the US.
Ross Kenyon: We like to forget about that. I always say we’re babied by two oceans and we’re just sort of doing our own thing. Don’t have to pay attention to anything else. Everyone speaks English and that’s what’s very convenient. But also we get kind of locked into our own little world over here. I think we’re all citizens of the world. Which which hostel were you saying at when? Hey, it’s Berkeley, man. If I heard someone say that, like traveling, I’d be like, I got to go.
Christophe Jospe: I don’t want to get into this thing. So just because we really like to define things and you got an MBA in sustainability and now you’re talking about regeneration. And there’s some distinctions between those two ideas. Can you spell that out for us, please?
David Hodgson: Maybe. Also, as part of my MBA, we had to watch this Bioneers talk from Bill McDonough, which was from about 15 years ago, I think, where he was railing on the fact that who wants a sustainable marriage? You don’t want a sustainable marriage. That doesn’t sound like much fun, was the analogy he was using at the time. And if you look at the macro economy as a whole, any single piece of sustainability, nothing out there right now, no corporation is actually, they may be taking actions to move towards sustainability, but even if they were sustainable, it just means we’re not increasing the damage that’s already been done.
So sustainability, just as a concept, is somewhat of a weak concept. And we have done... Some damage to the environment. So yeah, I mean, so at a macro level, if you look at the relationship between human civilization and the biosphere, right now that is a degrading relationship and we need it to be a regenerative relationship. So, you know, regeneration means that whatever action you take makes things better rather than just leaving them the same. And then, so, you know, What we’re looking for is actions that make things better, particularly make the biosphere more productive.
One of the good markers for that is soil water retention, which amounts to carbon in the soil, is one of the key indicators. Because once you have water productivity in an area and the water carbon interaction occurring, then that leads to Yeah, a productive biosphere. Then you start getting into, okay, but what are the practices that do that? And that, you know, I prefer to stay at the more philosophical, I guess, the more conceptual level, and let the let other people worry about what the actual practices are that sit on top of that, that leads to those results.
Christophe Jospe: Right, you’re only a farmer in our hypothetical example. You’re still David, the guy who tells impact investors how to spend their money, and other sources of capital. Yeah, great. I love the marriage analogy. Yes, let’s have a happy marriage. Let’s not just try to make it less bad.
Ross Kenyon: Or just tolerable. You’re just going through with it. Not an ideal outcome. I could make a comment about my parents at that point. Oh, well, you’re English, right? This is just like years of resentment and quiet passive aggression. Do I have you pegged?
David Hodgson: No comment.
Christophe Jospe: Moving on. I mean, we’ve covered a lot of ground so far. I’m really curious to kind of think about, oh man, it’s another metaphor, but it’s the domino effect. Dominoes are going to fall. This is going to happen. We are optimistic that we are not only going to solve climate change as a humanity, but we’re going to do it in our lifetimes. And in order for that to happen, a whole suite of things need to play out. So, describe to us how you see it going.
Ross Kenyon: You’re not going to ask him if he’s king of the world? What does he do?
Christophe Jospe: Do you want to be king of the world? You can either be king, you can also be sort of consigliere to the philosopher king, if you must.
David Hodgson: Wow, that’s quite a large question. So it does seem, so yeah, five years ago I felt like crap around a bunch of this stuff, maybe seven years ago. I probably was curled up in a corner somewhere going, oh my God, what the hell is happening? And somebody, a friend of mine used an example of, he’d been around when the computer, I can’t say the computer was being invented, but in the early days of the software industry. And it was, oh, somebody over here was just focused on creating fast memory. Somebody over here was focused on doing something else.
And at a certain point in time, And each one of those people didn’t necessarily know the other people were doing whatever. But across time, what happens is all of that activity integrates and a whole new set of things become possible. You end up with the internet and now, well, I’m not sure the internet’s the best example to use right at this precise moment, given what our current political situation is. But there’s all this independent activity that is occurring that we don’t know about. And then it starts to become visible. Everybody starts to become visible to everybody else.
And then you can go, oh, if we put this thing together with this thing together with this thing, then this is possible. And the whole thing stacks up in that way. What I’m seeing right now, especially around regeneration, the uptake of the regeneration concept, while it’s not visible on Google search, seems to be Very large and very widespread. And I think we’re in this phase right now of, okay, people have spent the last 20, 10, 15 years figuring out how to do impact investing and developing these different financial instruments and whatever else.
There’s another bunch of people who’ve been creating scientific tools, models to understand how ecosystem services and whatever are produced. There’s a bunch of people who’ve created sensors. And now all of these things have reached a level of maturity Whereby when they integrate, or as people start playing at that next level of the stack, start putting those things together in novel ways, then we’ll be very surprised at what will actually happen as a result of that. So that makes me feel much better. Because I think things can move much more quickly than we believe is, than we would, well, at least than I used to believe was possible.
Yeah.
Ross Kenyon: We’re also approaching it from the direction of people being able to monetize new services and create new financial instruments that have not existed yet. So if you’re able to use ecosystem services and have that be something that was previously unmonetized, now you can make money from doing it. Seems like a lot of people would want to do that. I’m sure plenty of these farmers who have used conventional agriculture for a long time, they’re now seeing their productivity decline and growth. It’s probably an easy sell for you a lot of these times to work with farmers or they want to be involved.
I know a lot of these people care about their land quite a bit too. Sometimes people get real hung up on the Monsanos of the world and think that people involved in conventional agriculture don’t care about their land. But in fact, I’m sure when you’re working with them, they’re probably very excited about what you’re doing and what you’re helping to fund.
David Hodgson: There’s this relatively new friend of mine called Abe Brown. And he’s got a thing called Land Map. He’s a cattle grazing guy. And he’s actually developed this sensor system to measure ecosystem service production on farms, particularly to help grazers so they can move their cows around to the right place at the right time when there’s low water. Less rainfall or whatever. Measures aquifer recharge. There’s all sorts of interesting things. And yeah, I mean, he’s finding exactly that. That farmers, especially because it’s a low margin business, and they do care about the land, but they also care about their profitability.
And doing a lot of this stuff means, okay, we’re paying less for inputs and Our cattle aren’t going to die because they’re not getting enough grass, whatever it is, or we’ll get higher prices in the marketplace. So it actually works for them in many different dimensions. So it’s always good if you can align the financial. Yeah, and he’s seeing there’s a lot of farmers who really would like to be doing things very differently. I mean, he’s primarily focused in the US. But yeah, I mean, his colleague, who’s Gabe, Gabe, somebody or another, who’s one of the really famous kind of carbon farming cattle grazing people, he gets 4000 letters a week from farmers who want to understand what it is that he’s doing.
Yeah, you guys should talk to Abe, by the way.
Ross Kenyon: That sounds fun. Do we get to wear hats? We either wear hard hat ones, maybe a cowboy hat this time?
Christophe Jospe: That would make us a soil carbon cowboy.
Ross Kenyon: Carbon Wranglers?
Christophe Jospe: Yeah, we met Julio Friedman, the carbon wrangler, but also Peter Bick has filmed a documentary about soil carbon cowboys, which turned me on to this whole concept several years ago. And I just thought it was so fascinating because it’s a healthier way of producing meat as well, because they’re now kind of not factory farmed and all stuck in one spot, but they’re moving around and eating the grass or the whatever... At the height of that grass, and then it makes the whole land way healthier, and it saves them money. And hey, wouldn’t it be cool if this were one more incentive that said we can measure how much carbon is being stored in those soils, so we’ll pay you to do this as well.
And so we’re really excited about that concept, kind of fitting in the general methodologies that we’re building on the Nori platform. I just want to pick up one thing that you brought up earlier and call out our CTO of Nori, who is a software engineer. And Felt hopeless about dealing with climate change. He has these skills and doesn’t know how to apply them. But now, as you sort of describe these different bubbles coming together, that software engineers such as yourself as well can figure out ways to insert themselves in this collective problem.
And I think for us, that’s really exciting. So I’m going to throw you with one final question, David. Maybe there are some impact investors listening and some Two, three, maybe four comma club type people. What message do you have to them on how they can start to put their money in places that will maximize their returns and also generate an impact on the environment?
David Hodgson: That’s an unfair question.
Christophe Jospe: We always save the gotchas for the end.
Unknown speaker: Yeah, we trapped you now.
David Hodgson: Yeah. What is the... That’s a really good question, actually. Most of the... Well, in the regenerative space, let’s say, generally, that’s still emerging as an impact investing focus. And there’s some really good people doing some very good thinking around that and starting to set up fund structures to do that. Um, and there’s a conference coming up here in San Francisco, May the first, oh yeah, I guess I should give Kevin Jones a plug for the, uh, Regen 18 conference on May the first and second, where we’re looking at bringing together, uh, Investors and people doing things that need investment across the regenerative spectrum.
And that promises to be a really interesting conference, looking at quite a wide spectrum of activity. And then there’s Slow Money has been doing really good work for the last, I don’t know how long, Slow Money has been around now in terms of Investing in local food system activity around the US. They could be outside the US too. Yeah, so those would be the kind of two primary things. Because otherwise now the spectrum of impact investing opportunities as a thing... There’s a couple of people I know who are running ETFs, one of which is Change Finance, Donna Morton.
That’s an ETF, I think, that’s primarily, I’m not quite sure what the exact criteria are. And then Ian Monroe with Etho Capital. And that’s an ETF that’s focused around carbon. So they filter companies into that based on their carbon intensity, I think.
Ross Kenyon: An ETF is an exchange-traded fund. It attracts certain classes of assets.
David Hodgson: Yeah. And so, you know, from a retail investor perspective, there’s stuff that’s starting to emerge. Then, you know, from the smaller investor perspective, yeah, it’s things like slow money and whatever else. And then there are, well, Craig Wishner with Farmland LLP. There’s a broad range of things now that are available to accredited investors. And finding the one, you know, for cover, again, a very large gamut of activity. And what’s Tim Freundlich? Impact Assets. Impact Assets would be a good place to go to understand some of that. They kind of have a list.
Basically, they have the Impact Assets 50, I think it is, which is what they think of as the Top 50 impact investing funds that are out there that are open to, I don’t know if it’s all accredited investor stuff, but on the regenerative end in particular, there’s nothing yet that’s really focused just on that, as far as I’m aware.
Ross Kenyon: It’s a surprisingly hard question, actually, as you got into it.
Christophe Jospe: I thought you answered it very nicely. And it seems like there’s one takeaway, which if you’re an impact investor, you should probably book your ticket to San Francisco to be there on May 1st for Regen 18.
Ross Kenyon: Yes, you should. Sounds quite fun. I’d like to add a brief errata section because it’s actually 99% invisible in Roman Mars. It wasn’t invisibilia. And it would haunt me forever if I didn’t say it on air. I was just Every time this went out, I’d be like, there’s a direct air at the very beginning of this podcast. So sorry, Roman Mars. I like your podcast. David, thanks for being here.
David Hodgson: Thanks.
Ross Kenyon: How do you like that socially anxious closeout?
David Hodgson: Makes me feel right at home. Thanks a lot. This has been fun. Thank you. Thank you. Yeah, this was cool.
