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Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, an S&P Global podcast, where Esther and I take you inside the environmental, social and governance issues that are shaping the rapidly evolving sustainability landscape.

In last week's episode, we talked about the challenge of getting nature on companies' balance sheets. Our guests in that episode, Paul Bodnar, is Director of Sustainable Finance, Industry, and Diplomacy at the Bezos Earth Fund. And he said this needs to happen in order to unlock financial flows for nature.

Esther Whieldon: In this episode, we explore how to unlock those financial flows with 2 guests who spoke on this topic at the GreenFin Conference in New York last week. GreenBiz Group hosts the event and S&P Global Sustainable1 was the sponsor.

Today, we'll hear about the current landscape from Dr. Carter Ingram. She's Managing Director at nature and climate change investment and advisory firm, Pollination Group. 

And we'll also hear how venture capital firm At One Ventures is investing in a world where humanity becomes a net positive to nature by supporting early-stage technology. For this, we'll talk with Tom Chi, Founder and Managing Partner at At One Ventures, which has about $0.5 billion in assets under management.

Lindsey Hall: As we'll hear today, many companies depend on the services nature provides. At the same time, global biodiversity is already in rapid decline due to human activity and climate change. 85% of the world's largest companies have a significant dependency on nature across their direct operations. That's according to S&P Global Sustainable1 research, and we'll include a link to that in our show notes, if you'd like to read more.

Esther Whieldon: First up, let's hear from Carter, who starts off by describing what Pollination Group does and her role there.

Jane Carter Ingram: Well, thank you for having me. My name is Carter Ingram. I'm a Managing Director at Pollination. I lead a lot of our work on nature, including conducting major risk assessments with our clients, helping our clients set nature strategies, and exploring nature finance opportunities. I work with a lot of companies in the food, fiber and ag space as well. 

And Pollination more generally is a nature, a climate change investment and advisory firm. We have a joint venture with HSBC in which we've committed to raising $1 billion to invest in opportunities that deliver financial returns and also deliver outcomes for biodiversity and for climate.

Then we have Pollination Capital Partners, where I sit, which is where our advisory business is located. We also have other investment funds, venture capital funds, in which we're investing in nature and climate tech. 

We also have project development funds where we support implementation of nature-based projects related to climate change mitigation. For example, Delta Blue Carbon, which is one of the biggest blue carbon projects in the world. 

We also have a foundation in which we work very closely with community groups and Indigenous Peoples to support nature-based solutions and their engagement with environmental markets, and we also have a law firm.

And our unique structure allows us to work across the ecosystem of actors and stakeholders who are important for driving the transition to net zero and supporting outcomes that are positive for nature. And that is core to our mission. We are focused on catalyzing the transition to net zero and supporting a transition to a nature-positive future.

Esther Whieldon: I asked Carter to explain what a transition to a nature positive future means for Pollination. You'll hear her mention the TNFD. That's the Taskforce on Nature-related Financial Disclosures. Okay. Here's Carter.

Jane Carter Ingram: Yes. So there's a big focus on nature positive right now and we want to support that transition and the efforts to generate outcomes that are positive for nature. I think we're careful not to say that a specific organization can be nature positive, but we can all contribute to a nature positive future. 

And there are still a lot of efforts underway to define exactly what nature positive is and what that means exactly. We are focused on delivering outcomes that will deliver uplift for biodiversity, will help restore and conserve biodiversity through the clients we work with and through the investments that we make.

Esther Whieldon: Thank you. So what is the current state of the global nature of finance landscape?

Jane Carter Ingram: That's a great question. So there have been a lot of different studies on this recently, and there were several sessions on this at GreenFin. There's definitely been an uptick in interest and awareness and there's been a growth in investments in nature-based solutions more recently, but there's still a significant gap and it still lags significantly behind climate finance. 

What is really important, and this came up a lot at the conference as well, while there's growing financing available for nature-based solutions, the amount of money that's going into subsidies that degrade, that result in the degradation of nature, far outpaces the amount of financing going into nature.

So we need to address both increasing financing for nature that will support some of those positive outcomes for biodiversity through restoration and conservation and sustainable management, but also direct harmful subsidies away from activities that degrade or destroying nature.

Esther Whieldon: So earlier you mentioned how the amount of money that's actually going into nature is quite small compared to the impacts that other financing is causing. What are some of the ways to solve that problem? What needs to happen to get the investments scaled up for nature?

Jane Carter Ingram: Yeah, that's a great question. And there's so many different components to it. There's a policy in regulatory dimension. We need policies that basically incentivize positive actions for nature: activities, management activities, development projects, farming practices that support positive outcomes for nature. And currently, a lot of our policies don't do that. So we need a policy and regulatory environment that supports and incentivizes practices that generate positive outcomes for nature.

In addition, we need corporate action on nature as well and some of the recent frameworks like TNFD, science-based targets for nature, are providing practical guidance and frameworks on how companies can better understand their impacts and dependencies on nature and how those translate into financial risks for the company, for the business and for society more broadly. 

And despite the fact that the awareness of the importance of understanding impacts and dependencies on nature by business has been growing, very few companies actually understand what their impacts and dependencies on nature are. That is really important for businesses to take actions on nature. 

And the TNFD provides excellent guidance on how to do that. And that's important because one of the things we need to do that hasn't existed historically is understand the value that nature plays in our economies and for businesses. And so being able to understand the degree to which changes in your dependencies or impacts on nature can have a financial impact on your business or on the economy is really important. 

There have been an increasing number of studies to basically understand the value that nature provides to economies globally and it was mentioned at the conference that we need more of those. Several countries have done studies like that recently, and we need more studies like that, so that governments also understand the value that they have at risk, if nature is lost. And the opportunity, the economic opportunities that come from protecting nature. 

There are efforts underway to create natural capital accounts that will, at the government level and corporate level, integrate the value of nature on to government and corporate balance sheets, which should also support that as well. And in addition, we've had the voluntary carbon markets and the nature-based carbon markets, which have provided an incentive to support conservation and restoration of forests that store sequestered carbon and that is an important source of financing for nature.

There's also new opportunities that are emerging like biodiversity credits. There are other financing mechanisms that exist that could be scaled up or enhanced to have a bigger impact in more locations like debt-for-nature, nature swaps, and blue bonds, for example. And then there's opportunities to integrate the value of nature into existing products and mechanisms like insurance or loans, for example. 

Even though there are some examples of that happening globally, it still is not mainstream. So I think integrating nature into our existing financial system and economic system is really important in addition to those markets that are explicitly focused on nature, either the carbon market or the biodiversity credits or our conservation easements or things like that, that were mentioned quite a bit at the conference.

Esther Whieldon: Great. So I think you've touched on quite a few themes you heard at GreenFin, was there anything you didn't get to or you wanted to talk about before we close out our discussion?

Jane Carter Ingram: A few things that were mentioned that I think are really important is that we tend to invest in things that are often easy. There is a great keynote that said a lot of times we invest in things that are easier to invest in when it comes to climate change. 

For example, it's an easier investment case when you think about like a decarbonization plant versus he used a great example of investing in beaver dam reconstruction, where beavers are amazing at creating these structures that can take sediments in waterways and basically bury them and store away all of that carbon for long periods of time. But we don't know how to pay for that or invest in that even though that can be an incredibly effective way to address some of our climate change problems.

And so this mismatch between what is currently possible to invest in, but what can give us the biggest impacts for nature and climate, is a challenge I think we all need to address and bring some of our best minds around the table to try to solve.

Esther Whieldon: That keynote speech Carter just mentioned was given by our next guest, Tom Chi, Founder of VC firm At One Ventures. 

In the keynote, Tom said, "The things that are easily financed and enclosed are things that are tradable." And he went on to say that people are sometimes investing in expensive low-carbon projects when nature can provide that same service. 

For example, he estimated that about 200 beavers could do the job of a large direct air capture project that is being built in Texas. But as Tom and Carter noted, it's harder to figure out how to encapsulate the financing for a budget beavers building dams. With that, let's turn to my interview with Tom, who starts off by describing the firm and his background.

Tom Chi: I'm Tom Chi, Managing Partner of At One Ventures and [the] purpose of the firm is to help humanity become a net positive to nature.

Esther Whieldon: And then you have a scientific background, right, in engineering?

Tom Chi: Yes. So I have both science and engineering background, so I'm trained in physics and electrical engineering. I was a working physicist for 6 years. I did astrophysical research on active galactic nuclei star-forming regions, published papers, did peer reviews, all that kind of thing and then moved into the engineering side and built lots of things in terms of hardware, software, mechanical systems. My electro-engineering specialty is in robotics and signal processing. I am named inventor on 77 patents, patented maybe 3% of what I built, yeah 4%, something like that.

Esther Whieldon: So quite busy.

Tom Chi: This stuff is just really inter[esting] -- I find like solving problems and inventing things like very fun to do.

Esther Whieldon: So can you give us a sense of what At One Ventures, what's your size, kind of where do you focus your investments in and that kind of thing?

Tom Chi: Sure. Yes. At One Ventures does early-stage investments. Our first fund was $150 million. Second one is $375 million. We also have a follow-on fund that we're aiming to be between $100 and $150, just did first close on it. 

Yeah, I guess altogether, we have a bit over $0.5 billion in terms of assets under management. And yeah, the goal is to go use that to go and find the companies that have the kind of tech that can rewrite how entire industries work, right? 

Because the name of the game is not just getting a useful product out in the world, which is actually fine for regular venture. Regular venture, you get a useful product out in the world, a bunch of people use it, you make money off of it. Life goes on.

If the purpose is to help humanity become a net positive nature, well, the way that we do it is: Nature to us, the physicality of nature can be described in 4 physical subcomponents: air, water, soil, biodiversity. And then within each of those subcomponents, we can stack rank the industries that are currently doing the most damage to that subcomponent. 

So for example, over 90% of global water pollution comes from just 4 industries: agriculture, textiles, paper and pulp, oil and gas. The agriculture one is the biggest one by a lot, but those are the 4.

Now if you wanted to go deal with more than 90% of global water pollution, all you need to do is change how the unit economics of how those 4 industries relate to water. The way that we change it is through something that we call The Triad. The Triad is a disruptive deep tech, which ushers in radically better unit economics, paired with radically better environmental economics, that package of all 3. 

And man, there's a lot to say about this already, like there's this mistaken belief that if something is economically better than it must be ecologically worse and vice versa. And what we've seen from looking at -- we have screened about 6,000 - 7,000 companies at this point to build our portfolios between the first 2 funds. What we've seen is that about 85% of the time, that's not true. 

An example of The Triad is we invested in a company where the deep tech is a new type of textile dying machine because textile dying is where a lot of the water pollution from textiles come from. It has 2x to 3x better OpEx. So instead of costing $0.28 to $0.35 to go dye a standard length of fabric, it costs us $0.09-$0.15, which actually means if you're not doing it our way within 10 years, we'll probably be putting you out of business.

But notably, instead of generating multiple metric tons of wastewater per day, our system generates about 1 to 3 ounces of wastewater a week. So this would take textile dying from being one of the largest polluting industries in the planet to basically zero. 

And to the point that I was just making, the reason that the unit economics are better is the exact same reason that we have less water pollution, which is if you look at the cost structure of textile dying, most of the cost structure goes to heating up water. So if you use way less water to do textile dying, it turns out that you also make it way cheaper.

It turns out that you can't actually change textile dying by changing the labor fraction of the cost, because textile dying happens in places in the world where people are commonly paid like $50 to $70 a month. So there's kind of nowhere else to cut.

Esther Whieldon: Can't go any lower.

Tom Chi: Right. Relative to labor cost and not to say that, that should always be the solution. And actually, this is what's great about the way that we are approaching things because unlike a lot of venture where it's almost kind of like what's the flavor of the month, what are the new deals that are coming down the line, where you are not able to build a deeply accretive base of knowledge. Then for us, like we know exactly what it is about textile dying, which is causing the problem, which means we can get deeper and deeper at that thing. We can analyze the cost structure of that in a way where it makes it apparent to us, the types of technologies that could dramatically change that cost structure in a way that would also improve our relationship to nature.

Esther Whieldon: So you become experts in these industries.

Tom Chi: Yeah. We're able to get unusually deep on things. And it is not a commonly used term outside of the industry, but I have some colleagues that call it "venture brain", which is almost like a variation on ADHD where it's like, "Well, yesterday, I was looking at glow in the dark shoelaces and, tomorrow, I'm looking at generative AI for dogs. And you don't end up getting that deep when your pace of work is like that. 

For us, the industries that have been damaging our relationship to nature are kind of the same ones for the last 50 years. It is these industries that we make the physical world out of. And it is time for us to go back to that and actually do the hard work again. We got to do the industry's different foundationally. It's not just a -- well, if I put a little enterprise SaaS layer or...

Esther Whieldon: And SaaS is?

Tom Chi: Software as a Service. It's a type of software that's easily funded by Silicon Valley. And that's the reason that they're choosing to do that, not because the enterprise SaaS or software broadly is going to take care of 90% of climate. I think optimistically, it might address 5%. I don't know if you fudge it and you account in weird ways, maybe 10%. 

But that's basically not the main game. I'm not against the idea of that, of any companies being funded in that space, but they're highly out of proportion right now, which basically shows that, yes, we're not really thinking through and investing in a way that looks like we're trying to win the game, right?

Like sometimes you see some folks playing a sport and it's like, "Oh, no, they're not really playing to win. Look at that, look at the behavior, like look at how they're dribbling, look at the passing game," like whatever. It's chaos. And we're kind of there, right? We say that we're trying to go hit the de-dimensionalized goal of carbon, where we're fully missing it. And then we're killing a lot of things beyond that, that because we have overly concentrated in this game.

Esther Whieldon: Does your organization -- does it focus primarily on nature? Or does it include a climate component as well? Or is that considered to be part of the same thing?

Tom Chi: Yes, climate is part of nature. I think that like -- I don't have any like deeply visceral negative reaction to using the word climate instead. But the one thing I would push back on is a lot of people use climate as a synonym for carbon. And I was like, "Oh, this is a de-dimensionalization of the work that is so intense that it is going to impair your work, right? So sometimes you state a problem and you want to simplify it a little bit to be able to communicate it, and that's kind of fine. But there's levels to which you can simplify a thing where you have simplified it so much, you're now working on the wrong problem.

And I was just, you mentioned, in my talk about like, "Hey, people apparently care about carbon. Because of that, we're willing to go fund these multibillion-dollar direct air capture plans." When, honestly, there's a lot of stuff in nature that would surpass its capability and the example I gave was beavers. 

But that's us like fully missing it because we've de-dimensionalized the game into just one metric that we got to move. And then we ask ourselves, like, okay, what are the things around that are the most obvious mechanical this than that. And once you're down that route, you're down the wrong route, right?

So I started my talk today by saying like we're losing the battle really badly. When I say that, a lot of times people immediately move to, "Yes, because we're already over 1.5 degree C." And that's true. But that, to me, is an example of the de-dimensionalization where the actual examples I gave instead of that was that WWF basically said we've kind of cleared out 70% of the wildlife on planet earth in the last 50 years. And recent reports on coral reef bleaching basically shows almost half of the corals on planet earth have died in the last 1.5 years.

We're really, really failing outside of the singular metric of carbon, and we're still failing at the carbon metric, too. And this is why I push back a little bit on the de-dimensionalization, the denuancing of things that require nuance to succeed.

Esther Whieldon: We're at the Green Finance conference, what message do you want financial institutions to come away from, from what you said today and, in general, for those listening in on this? What do they need to do differently?

Tom Chi: I don't know if this is too radical a concept, but one thought is that there actually is no such thing as an externality, it just means that you drew your system lines wrong. And if one wants to keep the idea of an externality, I would actually flip it around, which is the economy is an externality to nature, right? 

Like nature is way, way bigger than the economy in terms of the energy that it uses, the productivity that it creates. The human economy is like a tiny subset of that productivity, a tiny subset of that energy, right? Like we, as a civilization, use 0.6 exajoules of energy per year right now. But the things that we've done to the climate have already added 400 exajoules of energy to the ocean.

So think about 0.6 compared to 400, that's like almost 100x difference in terms of the energy that humanity actually uses in its tiny little feeble economy versus the scale of damage that we're doing in the ecosystem because of it and the type of energy that's in the ecosystem, right? 

It's a very egoic position to be like, well, look, how important we are and the global economy is the most important thing. And how do we deal with this little side issue of nature. It's like, no, no, no. Nature, number one, is going to outlast us. It's really just a question of whether we leave a big pockmark in the history of life on earth, whether we drive the sixth mass extinction and wipe out 90%, 95% of biodiversity in planet Earth.

And then the fossil record will eventually show that it will recover over about 10 million years of re-evolving different species and all that kind of thing. But it would actually kind of suck because we might lose 5 million, 10 million, 20 million years of biodiversity in earth's history on a planet that doesn't have forever to go express all the life that it's going to express before the sun swallows up the planet.

Esther Whieldon: We have like 2 minutes left here. Can you give us a couple of more examples of where you invested?

Tom Chi: One of the ones that people like to talk about a decent amount is we backed the first vaccine to protect honeybees. And we took it from pre-approval to now USDA approved and rolling out. And we are seeing, it improves the health of a hive broadly even before an outbreak, but it absolutely protects against outbreaks of some bacterial diseases for bees. Also protects against a deformed wing virus.

But that's an example of a thing you're not even going to think about if you're focused just on the carbon metric. Because how much does the bees change the carbon metric? Well, not that much directly. But a thing to go know is that the majority of biomass on planet earth is plants and the majority of plants on planet earth are angiosperms, they're flowering plants. That's about 80% of all plant species are angiosperms.

And angiosperms are obligate mutualists, they require pollinators in order to go and exist in the world and bees and flies and some birds and rodents and all sort of thing like -- and bats, are the pollinators. And when you go and wipe out that type of population, actually, you are affecting the carbon balance of the plant earth, but it requires a little bit more nuanced understanding of what becomes what as opposed to, well, how does this become a carbon metric? I don't understand how bees are carbon, and it's like, "Well, you would if you just understood a little bit more about biology on planet earth."

Esther Whieldon: So any last thoughts before we close out?

Tom Chi: You know, what I would say is that we need to prepare like given what time it will actually take, even if we can magically snap our fingers and have everything repaired today, atmosphere back to what it was before in the industrial revolution, all sort of thing, it would still take 70, 80 years for the icecaps to refreeze. 

So I think we need to think about the repair of planet earth as a multigenerational project that will take a couple of hundred years. The purpose of our firm is to help humanity to become a net positive to nature. I think the most realistic time frame that we could actually achieve that mission is between 200 to 500 years.

Now that said, it doesn't mean there isn't important stuff right now. Actually, right now, we are basically setting the rules of the game as to whether it's going to take a couple of trillion to solve the problem, $10 trillion, $100 trillion to solve the problem, right? 

If we do the wrong things in the next 10, 20 years, it's going to cost hundreds of trillion, and we'll get to the point where we just don't even want to pay for it, we'll just say, well, nature will die because it's too expensive to save nature. If we're able to do a lot of the important things that we are meant to do in the next 20 years, then it might just be a couple of trillion [dollars].

And in fact, you might save money on it because more than trillions of dollars of infrastructure would be damaged if you hadn't headed it off. And I think we're right at that cusp right now where the cost of not doing it is actually starting to substantially exceed the cost of actually fixing these problems. And it means that this is a really critical moment in history. We can still fix it. We can still turn this trajectory. And right now, it would be cheaper to fix it than to allow $1 billion or $10 billion of storm damage or fire damage or flood damage or mud slides or heat domes.

Like everything that we're experiencing right now, every single time one of those events happen, oh, that estimated another $5 billion of damage. Well, that's real money. So the idea that like a $5 billion can just like disappear because we didn't adapt right and the heat dome like melted a bunch of infrastructure. You're like, "Oh, gosh, we are spending the money right now." And we're spending the money to end up with a damaged world as opposed to spending the money to end up with a repaired world, and a world that's on trajectory for humanity have a lasting relationship to nature, where we get to be part of earth's history for a good long time. We're not on that track right now.

Esther Whieldon: Great. Well, thank you so much for talking to me.

Tom Chi: Yep. Thank you.

Esther Whieldon: Today, we heard how At One Ventures looks for early-stage technologies that can rewrite how entire industries work. One example he gave was how they significantly reduced how much water is needed to dye textiles, which also cuts the cost of the process. 

Tom also said that the decisions we make in the next 10 to 20 years will determine whether we are spending money to end up in a damaged world or one that can repair itself over time.

Lindsey Hall: And we heard from Carter how companies are increasingly aware that they need to understand their impacts and dependencies on nature. This is an area that S&P Global Sustainable1 has been working on, to help companies understand and measure. We will include a link where you can find out more about our data in our show notes.

Esther Whieldon: And please stay tuned next week as we explore more key themes that I heard at the GreenFin Conference.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. If you like what you heard today, please subscribe, share and leave us a review wherever you get your podcast.

Esther Whieldon: And a special thanks to our agency partner, The 199. See you next time.

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