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💸 "Green Tech Investments, Greenwashing & SPACS"

The Interchange

Photo by Frank Busch / Unsplash

Host: David Banmiller
Guest: Matthew Nordan | General Partner | Azolla Ventures
Category: 💸 Investing | Green Tech

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Podcast’s Essential Bites:

[2:11] “[Azolla Ventures] is an impact first initiative. […] It really all comes down to the evaluation criteria that we have that enable investments to move forward in our pipeline. The first one is gigaton scale climate impact. So we only invest in companies in solution areas that we could see half a gigaton cumulative of CO2 equivalent mitigated by 2050. […] The second one is the one that makes us weird: it's a principle of additionality, which means we only invest in cases where the round is unlikely to come together, but for our participation, either as a lead or as a participant. So we do the opposite of chasing hot deals. […] We're really looking for neglected opportunities and underestimated companies. […] Third, we only invest in cases where we can see kind of bullet point level seed milestones that, if achieved, could cause a company to kind of graduate from that additionality principle and have access to capital more broadly.”

[15:40] “There's a big difference in how long we think it may take for a company to reach an exit and be out of the fund and return capital to limited partners, versus when we think it can start making inroads toward climate impact. The latter horizon, if that's 10 years or more, great. […] But the horizon to be able to get in, begin deploying, and achieve commercial traction, we think of that as being a 5-7 year timeframe. We've had companies that have done it in 1 or 2.”

[26:31] “I worry about the greenwashing element, […] because it results in a misallocation of capital. We don't have capital going towards its highest and best use for impact or for long term sustainable value creation. […] [The] opposite issue, if you get more stringent measurement and verification that's required, does that raise the friction, raise the cost of capital, etc? I think at a macro level, yeah. And it's probably a good thing. If that ends up sort of mitigating the ability to have fake or kind of climate positive or green efforts masquerading as something else, I think that's a correction of a different kind and very positive.”

[38:57] “I think the SPACS thesis for really big ideas that are less well worked out, but have large capital requirements […] definitely fill a hole for being able to finance some of these companies. Unfortunately, […] anytime you introduce a new financial innovation, there will be defraudment of grandmas. And the question is what level of grandma defraudment are we going to have?”

[41:16] “We should price the externality. Whether the externality of greenhouse gas emissions is priced through a revenue neutral carbon tax, or a price through a cap and trade mechanism, […] pricing the externality would solve a very, very, very large number of problems. […] I'm personally a cynic, about the ability of regulatory policy to affect long term change. I don't think we're very good at it in this country.”

[45:47] “If you look at where […] you have the biggest impact on climate, if you could pick one sector, you would pick agriculture. […] [It’s] somewhere in the 20% range of contribution to net greenhouse gas emissions, and the largest single driver behind that is food waste.”

Rating: ⚡⚡

🎙️ Full Episode: Apple | Spotify | Google
🕰️ 49 min | 🗓️ 06/24/2022
✅ Time saved: 47 min

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