Welcome to the inaugural episode!
Our first guest is Daniel Hullah. Daniel is a longtime cleantech investor, who has seen it all, yet is still smiling. We had a great convo about some of the history of cleantech investing/innovation, where some of the biggest opportunities are, the role of strategics vs startups in pursuing that innovation, and how it all fits into our broader climate change problem.
Tune in, and enjoy!
You can find me on twitter @jjacobs22 and email at firstname.lastname@example.org, where I encourage you to share your feedback on episodes and provide suggestions for future guests or topics you'd like to see covered on the show.
Links for topics discussed in this episode:
Blackrock’s Report on climate-related risks in the market: https://www.blackrock.com/us/individual/literature/whitepaper/bii-physical-climate-risks-april-2019.pdf
Jason Jacobs: Hello everyone. This is Jason Jacobs, and welcome to My Climate Journey. The show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.
Jason Jacobs: In this episode, we talk about human psychology and the potential dangers of getting people to dwell too much on the scary math of the climate problem, the differing attitudes and viewpoints on the topic in the US versus the UK, the role of social norms in changing consumer behavior, the role of big strategics and how to get them to move, how much carrot versus how much stick, and how climate change is under priced in current markets. Daniel is as professional as they come and a jolly fellow, and I appreciated the candor and optimistic perspective and energy, no pun intended, that he brought to this discussion. I hope you enjoy listening.
Jason Jacobs: Daniel, hello. Welcome.
Daniel Hullah: Thank you. Glad to be here.
Jason Jacobs: I'm glad that you're here as well. So our mutual friend, Kent Bennet over at Bessemer's, who put us in touch. And that was pretty early in this whole journey of mine. And you've actually, not only have you been super helpful in the journey, but you may or may not feel the same, but I would call you a friend.
Daniel Hullah: Well, thank you very much. First of all, it's good for both of us to be friends of Kent. I think he's a good human being and I'm glad that he was able to make the connection. So yeah, it's only a few weeks or months, but I already got to know what you're up to and likewise. It's great to continue this relationship.
Jason Jacobs: I agree. And it's funny because fortunately there's a growing interest in this weird journey that I'm on, but it seems like you've taken a particularly keen interest, and I don't know that I can figure out quite why. So maybe we can start there. What is it about this kind of crazy process that I've been going through that has been drawing you in?
Daniel Hullah: One of the answers to that is that you bring both a fresh perspective and a zeal to this topic and in this process. It is easy to get very deep into the weeds of the subject and get a little bit lost. You can't see the forest for the trees. What I've really enjoyed about our conversations is you're coming in with a blank piece of paper.
Jason Jacobs: Beginner mind, I think they call it.
Daniel Hullah: It's a valuable thing to have, and you can only get it once in this journey so you sort of make the most of it. Coming in with very open eyes, very eager to make connections and sort of just rediscover from my perspective and learn along the way maybe the things that I have overlooked or that I had not thought about in a long time. But that's just because of the depth that I'm already in, in the subject. So it's great to see you sort of coming in at pace, with intent, with zeal, with a very clear mission to really understand. And as an entrepreneur, with an entrepreneurial gene in your body and the zeal in your spirit, I think it's great to see you applying those things to this incredibly important space. So that's really why I think it's been so interesting so far, and obviously this is only the very beginning of the journey.
Jason Jacobs: Well thanks, Daniel, and thanks for being helpful as well. You let me use your name when I approach some people and tell them that you sent me, and the hit rate by mentioning that Daniel Hullah sent you is really good. So I guess one important question I have is, I mean, will that work at the nightclubs as well?
Daniel Hullah: [crosstalk 00:03:48] that one, but I'm glad to hear that. Not to be too philosophical, but it's all we really have is our reputations and our friendships and our network. So I'm glad that it was able to help. I think it's very important, and I think it does reflect on the community that exists around this topic. It's a strong, very positive community. So I'm glad that that happened, those introductions happen.
Jason Jacobs: There is definitely a collaborative spirit here that is more so than in other industries that I've worked in historically, so that's been really enlightening. But getting right into it, one place maybe we could start is, so when you say this topic or this problem space, for me that means deep de-carbonization given the existential crisis we're facing as a planet and as a species. I'm wondering if that's how you define this topic as well. You're a longtime energy investor, so when you say this topic, I guess, what do you mean?
Daniel Hullah: The deep de-carbonization and our response as human beings to the threat of climate changes is the ultimate issue here. It's the key issue at the top of the page. But when I say this topic, I really mean probably a larger ball of wax because in addressing that topic you bring in almost all of human activity. So everything that we do every day, the food we eat, the houses we live in, the businesses that we go to, the schools that our children are educated, the way we get around, the way we manufacture and move products, it's an enormous ball of wax, so where deep de-carbonization absolutely clear goal. The topic though, when you start to go to the next layer becomes extremely large and complex subjects, and there are people working on it from different aspects that are all trying to achieve the same goal. But they consider themselves in different silos, but undoubtedly the same objective.
Daniel Hullah: The other aspect that I would highlight is sort of revolution versus evolution here. Whether we're talking about the evolution of energy system, our transportation system, our agricultural system, whether we're talking about revolution in those spaces. So that's a sort of nuance and we can get into that later. But just going back, deep de-carbonization if we don't do it, we're all not here as a species and as a planet. So it's a serious topic.
Jason Jacobs: I mean, you know the math better than me, but I think energy is something like 60% of global emissions. Correct?
Daniel Hullah: Yeah. We can pull the numbers. The percentages move around depending on how much you put into that pie chart. But yeah, it's the line share of what we need to decarbonize. Not everything though.
Jason Jacobs: It's only one out of several sectors that need to get decarbonized in our economy, but it is the biggest. So I guess one question for you as an energy investor is, I mean, by definition non concessionary capital is a business and it's a business that's driving towards returns, and those are financial returns. Right? And so where does emission fit in as a financial energy investor and how do you, and I don't know if you can generalize, but how does the energy investment community think about that topic?
Daniel Hullah: The way I think about that is the end result has to fit in with the financial sustainability of investments. So absolutely the return generating activity to drive the solutions where there are gaps in the capital chain along the way, where businesses do not exist because of perceived risk or complexities that the market isn't able to price. That is often a place where impact capital plays, and it plays an important role. But ultimately, I think of this very practically. If it doesn't make somebody a lot of money, it's unlikely to scale given we're living in a market based economy. And if it doesn't scale, it's not really relevant. So you have to drive towards those large outcomes. We're seeing them biggest flows into the impact capital world and often in their very early stages of companies, companies that wouldn't be created without that. You can think of it as credit support almost through impact capital, but ultimately we have to fit into the market structure and unlock returns and unlock the vast amounts of capital that ultimately will be needed to solve the problem.
Jason Jacobs: Just for context, so I started this discussion today talking about this existential crisis that we're facing that threatens the future of human life and other life on this planet. Do you agree that that's where we are? Or how do you think about climate change?
Daniel Hullah: This is a really important point. I can't disagree with any of the numbers, the severity of the problem, the timescales involved, the situation that we're in. What I am extremely concerned about though is the impact that can have on sort of the human psyche and our ability to solve problems and to find solutions to the problems that are embedded in that challenge. So I think it's a relatively rational human response, if you fully understand the scope of climate change, to sort of be frozen in place, to sort of never get out from under the covers of your bed because you realize that we're in trouble deep and there's really nothing much we can do about it.
Jason Jacobs: But that second point, do you believe that?
Daniel Hullah: I don't believe that, but I think that's a rational response actually. Right? It's not the response we want, but I think people will do that. They go, "Well, I can't do anything to help."
Jason Jacobs: But that second part, at least in my research so far, I don't believe at all that to be the truth. I think there are things we can do, and not only that, we know what they are, but the challenge is actually getting the world to do them.
Daniel Hullah: 100% and that's that's where I am in my climate journey. I am conscious of if we are overbearing in the articulation of the problem statement, it can potentially squash activity and it can cause people into inaction. It'll cause them to not to act. What we need is solutions. We need solutions that scale and the things that I'm driving for, but I realize that you have to be careful. When you tell people that they have a very severe illness, sometimes people will say, "Okay, well nothing I can do about that. I'll just enjoy the rest of my life, and that'll be that." So you want to take the scope and the scale and the severity of climate change and use it as a catalyst for action, not as an issue. You have to stay optimistic, I guess is where it all nets out. You have to stay optimistic. And if you stare at the climate figures all day long, I can see how people can lose optimism. So we cannot lose optimism in our ability to solve the problem.
Jason Jacobs: Those are all fair points. The challenge is how do you keep optimism, but at the same time instill urgency?
Daniel Hullah: You can do that, and that's just kind of where the interface of my worker is in the investing space and in the startup space. People embrace innovation, they embrace great products, they embrace great solutions. They want things. They want their lives to be better, they want to have access to new and exciting things. And I think that drives things forward. So maybe it's a little convoluted path, but the solution to climate change is not in my mind a Jimmy Carter style let's turn down the thermostat and put on a sweater. It has to be positioned as these are products that enhance everyone's life and they enhance the economy and the future that we're building for the next generation. So it's a subtle point, but it can't be seen in a negative spin.
Jason Jacobs: But here's the issue, I think what I'm hearing from you, and to be honest, what I'm seeing in the world, so it's not that I disagree, right, is that the way to make progress is to find ways to make progress without having to make sacrifice. And here's the issue, the scientists know what to do. They know what's needed, at least for a lot of it, maybe not for all of it, but for a lot of it. That's not yet happening today or not going anywhere near the pace that it needs to. But what they don't know how to do is how to figure out how to do that and at the same time have things perfectly aligned so that there's no sacrifice at every step of the way for every single human on this planet from wherever they are. And it's a huge systems problem because everything has consequences. If you do something over here, it has ripple effects and unintended consequences over there.
Jason Jacobs: So I'm confident, actually I'm hugely optimistic that we can get there. I'm not hugely optimistic that we can get there if we only allow ourselves to get there through the things that don't require any short term change or sacrifice.
Daniel Hullah: So the two different words, change and sacrifice, very different things. We've shown the ability to solve smaller climate challenges in the past, and I think it's worth thinking about how we did that. If you take the way the ozone and SO2, sulfur dioxide problems were addressed, was there sacrifice in those scenarios? Yeah, probably a little bit, but it was felt at the level of increased prices at the things that we buy in the world.
Jason Jacobs: Is flying less sacrifice?
Daniel Hullah: I think what we'll have to do is invent something that makes flying look stupid, that makes flying look old fashioned and why on earth did you do that? This is maybe the cutting edge of the issue. If we have to ration everybody's flight and say you can only take three fights a year or one flight a year or no flights a year, that's a hard road to go down.
Jason Jacobs: But do we have any choice? Because you said that it's easy to lose optimism the more you stare at the math. Well, the reality is that the reason it's easy to lose optimism when you stare too long at the math is because the math is fucking scary.
Daniel Hullah: Totally agreed. So the question is, do you tell people not to fly, or as I said, do you make alternatives that mean that they don't want to fly?
Jason Jacobs: When I was a college kid, when you went out to the bar, I never smoked cigarettes in my life. Right? Except if I was at the bar and I had a few drinks in me, I might smoke a cigarette just because they were there and because I had lower inhibitions because I had a few drinks in me. Right? I never smoked another cigarette after they outlawed smoking in bars. So telling me smoking's bad for you, don't smoke. Right? You know you should really smoke less. It didn't work. They outlawed smoking in bars. I never had another cigarette. So in a drought, what do we say in a drought? We say, you can't water your lawn. We're in a drought. We're conserving water. You can't water your lawn. How is this any different?
Daniel Hullah: There's great examples and they've been much studied. Let's take the flying as an example. It's very hard to say that you can't fly. That's really people's mobility and their ability to see their family and their friends. I think what you can do is introduce barriers, either societal barriers or economic barriers, where it's not as an acceptable thing to do as it used to be. I think there's a lot of examples. Drink driving is an interesting one. I think if you go back several generations, it was barely socially unacceptable for people to drive while they'll be over the limit. Right? If you go back 30, 40 years, and now it is socially unacceptable to drive when you've had a drink.
Daniel Hullah: We may end up in a place and we have to end up in a place where if you're going on a flight, there better be a darn good reason why you're going on that flight because you understand the cost, the environmental cost of that action and that there are alternatives that you could take advantage of to avoid going on that flight. So it's like do you want to stop people going from Boston to California on a plane? I don't think so.
Jason Jacobs: But how do we change that consumer perception? Because to me, of course it would be helpful if consumer perception change, but pretty please is not a strategy.
Daniel Hullah: But it's the way we live in the economy and the market and the country that we have. I think it's a very, very hard thing to constrain that mobility.
Jason Jacobs: That is why I am not a pessimist on solving the problem based on the technologies that exist and on knowing what to do and on having the capabilities to deploy them at scale. I am a pessimist when you factor in human behavior.
Daniel Hullah: Maybe I'll give you some optimism for that.
Jason Jacobs: Please, because I'm not sleeping well at night. So I want to believe that we will shift as a society. Enlighten me.
Daniel Hullah: Yeah. No, maybe you're not enlightenment. But, so I come from England.
Jason Jacobs: I couldn't tell.
Daniel Hullah: [inaudible 00:16:34] couldn't tell. 20 years in the States has left me with this probably slightly mid-Atlantic accent, but anyway.
Jason Jacobs: Or the Boston twang.
Daniel Hullah: Yes, and then listen to my children, you'll really get the answer. The attitudes towards this issue in the UK are just fundamentally different. So you look to see how people think about their own personal consumption. My friends, not talking about people on an environmental fringe, people in mainstream society, they think about, "Oh, you went to the Maldives on holiday. Right? You flew to a little Island off the coast of Africa in a long haul plane with your family for a week." And that actually signals that they have burnt a lot of carbon to get there. And in conversations, around dinner party conversations, that is something that people will know. They'll say like, "I'm not sure that's so cool to go on that long haul holiday when you could go to the Southwest of England on a train, right, or in your car and have a much lower environmental impact." You've also got climate protesters gluing themselves to the stock exchange in London just this morning.
Jason Jacobs: How did this come about and why are we so far behind in this country?
Daniel Hullah: How long ago did you buy this [crosstalk 00:17:47].
Jason Jacobs: Besides the obvious thing, which is the stance of our current federal government, but I think it's deeper than that.
Daniel Hullah: I think a lot of, in terms of these sort of the windows of acceptable behavior, I'm maybe you're using the phrase correctly, but the sort of overton window things, that are acceptable-
Jason Jacobs: I've been using that word a lot lately.
Daniel Hullah: So I think it's really important. You can look at environmental discussions, you can look at attitudes towards violence and gun ownership, all sorts of issues that other countries are in very, very different places. What you are looking for is to bring some of those norms to the US, and you have to bring them at scale, at speed to our society. America's a very unusual place. I've been here 20 years and it's the size of the country, the relatively low population density outside the main metropolitan areas on the coasts actually change the norms in the country and the way the country was founded a couple hundred years ago. So I think it's going to be a real challenge in the US, but I was wanting to use the UK examples.
Daniel Hullah: This has become, in the UK certainly, climate activism is happening all the time. It's shutting down the tube. It's shutting down the stock exchange. Now whether radical extension, their motives and their means are going to achieve anything, I don't know. That's a different discussion, but they're broadening the window. Right? They say we want no carbon by 2025, which is in six years time. No one's saying that in this country.
Jason Jacobs: Although, there's some of that. Right? With sunrise movement and some of the fervor that's coming around the green new deal. And the other thing is, I thought it was really interesting in the last few weeks was that letter that the current Amazon employees put together to try to turn screws on Amazon to step up their game. It'd be great if that ... I mean these are just baby steps. We need a lot more of it, but there's a spark there. Whether it turns into a flame, I think it remains to be seen. But for example, imagine if the current employee ranks at these large companies demanded, with the majority of the employees, that the companies step up their act and not only adapt and do the right thing, but step out and play a leadership role the way that someone like Mark Benioff at Salesforce is doing on the social issues that he believes in.
Jason Jacobs: And not only that, imagine if the college kids graduating from the top universities, for example, that are most sought after and recruited by those organizations won't go to the ones that don't step up their game and play a leadership role. So I think just potential in that kind of grassroots, it's not the only thing. Right? We need innovation, we need policy, we need the right elected officials in place, et cetera. But it's one that I wouldn't have thought that I would be as interested in, but it feels like we're going to need it.
Daniel Hullah: I think we absolutely need it. I think we absolutely need it. I was at MIT yesterday talking about recycling with some people at the MIT media lab, and I'll bring this back around.
Jason Jacobs: Bring it home.
Daniel Hullah: Yeah. So we have attitudes towards recycling now. Again, this is another social norm. If you have something and you put it in the trash barrel, rather the trashcan, garbage can, rubbish bin, whatever you want to call it, rather than recycling it, that's not quite socially acceptable across society. You should recycle everything you can. How did we get there? We got there through a huge ... It took a long time of raising awareness around the issues, around the energy and the resources used to make the things that we use and that how we need to minimize waste and minimize the energy that's required and the effort that's required to dispose of those things. So that took a long time, but I think it's now built into even grumpy old people like me. In the generation behind the generation that is in grade school or in middle school now, and I can speak personally, the issues around climate, they aren't as cut and dried as you could have possibly imagined them to be. And maybe I live in a bubble and maybe it's not the same if you go across the country, but this is not.
Jason Jacobs: And the narrator said, "And it wasn't the same if you want to cross country."
Daniel Hullah: This is past the point of debate. So the question is now, what are you going to do about it?
Jason Jacobs: When you got into energy investing, how many years ago was that? I know it was a long time ago.
Daniel Hullah: 2006.
Jason Jacobs: Not that you're old.
Daniel Hullah: 13 years, a long time.
Jason Jacobs: Okay. So 13 years ago when you got into energy investing, how much was climate on your mind then and how does that topic look today on your mind versus when it did 13 years ago when you came in? Is it the same or how has it evolved?
Daniel Hullah: I think it was awareness of climate was growing across institutional investors, this is back in 2006, and some corporations, but at a relatively low level. So the types of capital and the numbers of people that were investing in the energy industry, it was relatively cottage industry. And to be absolutely clear, the reason for deploying venture capital was that there was some kind of disruption happening in a very large industry. And some of that was motivated by the oil and gas industry, and some of it was motivated by the beginnings of the solar industry or the emergence of the solar industry. And some of it was driven by policy, the beginnings of policy in reaction to climate change. But, I would say it was a relatively weak driver.
Daniel Hullah: It was more interesting that a technology, let's say solar, was going to become radically cheaper in a meaningfully short amount of time and there was an opportunity that to find companies that would be very valuable, less that we wanted to count tons of carbon abated or mitigated or do something that was explicit climate objectives. It was always in the background. I guess that's how I'd summarize it. As I've gone to different roles, I worked at National Grid, so a utility company, a very large actor in this space.
Jason Jacobs: Why was there no descriptor in front of that actor in the space? Was it a positive actor?
Daniel Hullah: Well, I think it's very two-sided. National Grid is articulated as a very clean pathway or clear pathway, set of pathways to de-carbonize the energy system of which they are the delivery agents. Right? They're not the generator, but they're the delivery agents. And it's very, very important that they play that leadership role. And I have nothing but respect for the people who've put that together. But at the same time, in fulfilling their utility mission that we as citizens of Massachusetts and through the department of utilities, we charted them to keep the lights on, keep the bills down and keep electricity available to everybody. That is what their job is. And in doing that, they find themselves sort of caught sometimes between radical movements that could possibly result in de-carbonization and incremental things to keep the system that they're in charge of running together.
Jason Jacobs: Should the big institutional investors be divesting from fossil fuels?
Daniel Hullah: I think they should. I think we're already seeing it. I personally don't, in my personal investing and investments that I have on behalf of where I'm a trustee or I have a fiduciary responsibility, I've divested from fossil fuels to the extent of name by name. If I have a tracking fund of the S&P 500, I might still invest it in fossil fuels, yes. But I am no longer owning shares of ExxonMobil, I just name check.
Jason Jacobs: So in order to achieve this deep de-carbonization that is required, is it getting the existing players to adapt and evolve or is it burning them down?
Daniel Hullah: This is a really, really big question and I've been on both sides of it. I've been on the burn it down side and on the evolution side-
Jason Jacobs: You have, which by the way, is one reason why I thought you'd be a super interesting guest. Right? Because you've been helping the startup innovation ecosystem flourish and now you're doing the same, but on behalf of a big strategic.
Daniel Hullah: Yeah, exactly.
Jason Jacobs: You played that role before as well at National Grid.
Daniel Hullah: This is not a wimp out. I come out on the side of threaten, but collaborate with the existing rather than burn them down. I think there's too much positive value, positive climate value. And let's say the electricity system, let's say the grid that we all use every day, if you went and was like, "We need to burn the grid down because the grid is an impediment to deep de-carbonization of electricity usage and transportation," whatever. That would be so shortsighted and so misguided in my opinion. That asset, that delivery system is absolutely critical.
Daniel Hullah: Now, who decides what electricity goes in one end and and how it's used on the other end? That could change in a number of ways. And I think the business that National Grid is in or other utilities are in could change radically and the way they earn money and the charters that they have could change radically, but they play a really, really important role and you have to keep them. Whether you like it or not, the existing players, if they start to act with the scale that they already possess and the resources that they already possess, can go very quickly.
Jason Jacobs: So with consumers, you were advocating earlier in this discussion that mandates shouldn't be the case and that it's about shifting social norms and things like that. Do you take a similar view when it ties back to getting these big strategics to move? And I guess what I'm asking is how?
Daniel Hullah: Part of my day job is to highlight the implications of the transition that's happening to the organization in which that I'm a part of. So let's take the alternative energy sector, or the renewable energy sector, no longer alternative. That's a slip of the tongue. So we have-
Jason Jacobs: Coal is alternative energy.
Daniel Hullah: Right. But the development of large scale renewables, whether it be wind or solar or the further de-risking of the next generation of resources including storage and other renewables, it's a very important discussion. I come out on bring them on side because of scale and scope, expertise and money that they already have. And you find ways to make them move more quickly as opposed to replacing and starting from zero. I don't think we have the time. Now, that doesn't mean to say that very, very disruptive companies don't play a role there. Very disruptive companies may end up catalyzing change in larger companies so you sort of accomplish both things, and so you end up with both a bit of burn it down and a bit of bring them along. But, that's where I come out on that one.
Jason Jacobs: When we say burn it down or bring them along, I guess how much carrot and how much stick and what form does that take?
Daniel Hullah: Reflecting on this for consumers, I think you need carrot. You attract more flies with honey than vinegar, on the consumer side. On the corporate side, given that it is really about the industrial companies and the energy companies and their shareholders and the institutional capital behind them, then it's really about the risks embedded in not acting and we're starting to see a lot of very interesting work on that stuff, but that's where you can use stick much more.
Jason Jacobs: Bringing it back around, by divesting do you see the ability to have any sort of input into that process?
Daniel Hullah: Absolutely. As a consumer, if I'm not at an individual shareholder on that. But going back to, while not being a shareholder, find companies that will disrupt the existing economy and of course interact. Absolutely. I don't think you need necessarily to solve this one. You need to be at the annual general meeting.
Jason Jacobs: So if BlackRock divests, that might turn screws. But then if that entity still carries on and we need them in the transition, would it be better if BlackRock didn't divest? I didn't make this up, someone brought up this point to me. I don't know what the answer is, but I bring it up now because I'm still trying to sort through it.
Daniel Hullah: I think it's going to happen in steps. So there will be opportunities where these early signals that are already been received around divestiture from fossil fuels that are happening in different parts of the economy around the world, this is sort of now an opportunity for large companies to react. I understand if you withdraw ... Ownership of a company is not providing them with new capital, understand it drives the share price through supply and demand of the shares. But I think that very much on the side of the divestiture, I think that's the clearest and cleanest signal to make.
Jason Jacobs: What about market forces versus regulatory forces? So price on carbon for example, where does that fit in? How important is it? Do we need it? What form should it take?
Daniel Hullah: I think we absolutely need it. As an anecdote, I have been in meetings with extremely high level executives from people talking about climate change-
Jason Jacobs: That's a humble brag. You just wanted to work that into the discussion.
Daniel Hullah: So I'll tell you why I was shocked, but nice pick on the humble brag. There were well meaning people addressing climate change, representing billions and billions of dollars of market capitalization sitting around the room and thinking about what they can do. Can they increase the amount of renewables that they deploy? Can they change their supply chains and reduce carbon? And I said, "Well, what about a carbon tax?" And the reaction was, "Oh no, no, no. That's too difficult. We can't do that." You can want it, but you can't make it happen. So the things that they can make happen are within their control.
Jason Jacobs: Because why?
Daniel Hullah: Because that feels like I need to go and convince a bunch of senators who don't want it to want carbon tax. And it's just not something that is politically feasible in this short time frame.
Jason Jacobs: This is back to the initial where we started the discussion, right, of are we optimistic that it can happen with just strictly math versus are we optimistic that can happen versus things like the current political landscape and more human behavior and psychology factors?
Daniel Hullah: Yeah. [inaudible 00:31:27] of this actually from Wall Street. Very, very interesting places to start. And you mentioned BlackRock before. BlackRock's analysis of risk is extremely important, and there are a couple of papers that they put out recently around underpricing of climate risk in the bond market today. They used in municipal bonds as an example, so I strongly recommend people to read this paper.
Jason Jacobs: Do you remember the name?
Daniel Hullah: BlackRock and municipal bonds climate will get you there on Google for sure. Essentially, municipalities are issuing debt. Well, there's sort of credit risk debt, but there's also what about if their infrastructure is destroyed through weather events that are linked to climate change and whether this is being priced in or not. Essentially, this is uncovering the risk of climate change. And I think something like a carbon tax, it's a mechanism to equalize the playing field and address this risk and cause capital to flow into the things that will minimize the risks that we're already are facing.
Jason Jacobs: So you think it should happen, but just not confident that it will happen? Is that what I'm hearing?
Daniel Hullah: Yeah, that's what I'm saying
Jason Jacobs: Yeah. Gosh, I mean that sounds like ... I'm coming across a number of those things in this journey where it's like, well, should it happen yet? Yeah, it should happen, but it's too hard. So I'm going to focus on other things. It's like but you just said it should happen and we need it. So I really wrestle with that one because you don't want to go against the headwind if it's too strong. But if it's the right thing and we need it, we need to fight for it. And so how do you reconcile those two things?
Daniel Hullah: I struggle with the same thing. It's interesting to observe the behavior of the oil and gas companies who already have been using cost of carbon in their analysis for many years. So would they be happy if carbon was taxable? Probably, if given the truth serum, they'd say no. But what they really want is certainty of the longterm economics, and so they're more adept at using the cost of carbon than pretty much any part of the economy actually for the long term planning. That doesn't mean to say they want it, but they want to know what it's going to cost them, what their margins are going to be in the longterm. I think we're back to pretty much where we started, is that you take some aspects of the solutions to climate change that are very hard to access, whether it be a carbon tax or some of the aspects of radical and deep de-carbonization and you want them to happen, but we're lacking mechanisms to affect that change.
Jason Jacobs: First of all, this discussion has been great. It's been lively. There's been some debate. I've learned a bunch just from hearing your perspective, so thank you. But I guess one closing exercise that might be fun, so put aside your day job and just look completely objectively specifically at the de-carbonization challenge. If you had $100 billion and you could put it anywhere, you could put it into R and D, you could put it into innovation, you could put it into policy, you could put it into advocacy, you could put it wherever, something totally different that I'm not thinking about, where does it go to have the highest impact on the problem?
Daniel Hullah: I think directly addressing climate change, the bottleneck that I see is there's some bottleneck in innovation, but the real bottleneck is in replacing and transitioning end use. So I'd probably spend a lot of that money in the regulatory and policy environment. If direct expenditure can lead to policy change, which is a whole different discussion.
Jason Jacobs: Incentivizing consumers or what? What's the goal of the policy initiatives that you think would be most impactful?
Daniel Hullah: Yep. No, incentivizing consumers would be a big part of it.
Jason Jacobs: I didn't mean to lead you.
Daniel Hullah: No, no, no, no, absolutely. But I think that the incentives that have worked to create markets and create opportunities and create categories, we can do more of that with that investment.
Jason Jacobs: Have there been any successful examples in adjacent areas that you think about as a model?
Daniel Hullah: For seeding markets?
Jason Jacobs: For the incentivization of consumers. Has it been successful in other categories that we could apply as a basis to start the discussion for how we might do it in this one? And also which categories is another whole question. Right? That's why I said this one, but which category are we talking about? Because this touches everything.
Daniel Hullah: I don't know. I'd have to think about. That's a good thing for me to think about. Our behavior has been changed by incentives across the economy and many times. I'm just trying to think of a really good example. I can think of one off the top of my head, but let me think about that.
Jason Jacobs: The reason this podcast is called My Climate Journey is because there is no one discussion that's going to deliver the answers. The purpose is to untangle these knots over time, do it in a transparent, collaborative way, and to keep pushing the discussion forward. And I very much think that this discussion did that today, at least for me, hopefully for our listeners as well. Any parting thoughts that you would like to get out while we've got you that I didn't ask about or that you think our listeners should know?
Daniel Hullah: I would reiterate maybe something that I maybe touched on it before, which is to remain optimistic. We have to remain optimistic in the face of a lot of dissonant information. The facts around climate change, the speed of action, the things we see in our world. But if we lose that optimism, that is a really, really tough thing. And as a venture investor, you have to have optimism that the entrepreneur's you're backing are going to change the world. And we have to believe that we can solve this problem and maintain and spread that optimism. It's incredibly important, and it's the root of everything that I think about.
Jason Jacobs: Well, amen to that. So I think this is a good breaking point. But Daniel Hullah, you've been a terrific guest. Thank you so much for coming on the show.
Daniel Hullah: Thanks a lot. Enjoyed it.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note, that is dot C. O., not dot com. Someday we'll get the dot com, but right now dot C. O. You can also find me on Twitter at @jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers maybe say that. Thank you.