May 19, 2022 · 44m · catalyst
How will the downturn affect climate tech?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Host Shail Khan and Galvanize Climate Solutions partner Saloni Multani evaluate how macroeconomic headwinds and rising interest rates impact climate tech investing, contrasting today's dedicated capital ecosystem with previous downturns to highlight the sector's structural resilience.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 42.7% of the talking time here. How this is scored →
Shayle as informed peer 6.1 Guest teaching 3.6 Guest disagreement 1.3 Shayle pushing back 1.6
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 13:30 Refusal of 'over our skis' premise
Saloni directly pushes back against Shayle's premise that climate tech was uniquely overextended, attributing valuation corrections to broad macro risk-off rotations instead.
Hardest push from Shayle ▶ 25:31 Pressing the vulnerability of the green premiumShayle pushes hard on the assumption that voluntary green premiums will hold up during a recession, using sustainable aviation fuel to challenge market optimism.
Biggest teaching moment ▶ 32:25 Offtake spread dynamics in infrastructure financeSaloni explains how rising power offtake prices preserve project equity returns despite rising interest rates, prompting Shayle to acknowledge and summarize the insight.
Shayle holds their own ▶ 41:25 Structural difference between Cleantech 1.0 and todayWhen asked by the guest, Shayle leverages his historical experience to detail why modern dedicated fund pools create structural durability absent during the Cleantech 1.0 era.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Hook and State of the Tech Market | 6 | 0 | 0 | 0 | Shayle opens with a detailed solo macro market breakdown, citing precise NASDAQ drop metrics, de-SPAC performance, and tech sector layoffs before introducing Saloni. | |
| Historic Climate Capital Flows and Cheap Money Dynamics | 7 | 3 | 1 | 2 | Shayle jumps in to sharpen Saloni's point about low interest rate dynamics by contrasting high-capex/low-opex renewables against thermal fossil generation. | |
| Valuation Impacts Across Infrastructure and Growth Assets | 6 | 4 | 1 | 1 | Saloni explains inverse yield-valuation mechanics across infrastructure and pre-revenue growth companies while Shayle frames the secular versus cyclical nature of the market. | |
| Market Dislocation and Shifting Investor Risk Profiles | 5 | 5 | 4 | 3 | When Shayle asks if climate tech got out over its skis, Saloni pushes back against the premise, clarifying that the dislocation is a broad macro risk-off rotation rather than a climate-specific bubble. | |
| Macroeconomic Shocks: Inflation, Supply Chains, and Rates | 4 | 4 | 1 | 1 | Saloni recaps cumulative macro supply chain shocks, Ukraine commodity impacts, and the looming risk of a Fed hard landing in an agreeable, scene-setting exchange. | |
| Climate Tech Insulation vs. Broader Tech Contagion | 6 | 5 | 2 | 2 | Shayle frames the core collision between macro headwinds and ESG capital stickiness; Saloni distinguishes resilient real-economy climate fundamentals from pandemic tech stocks like Peloton. | |
| Mid-Roll Sponsor Break: Bloom Energy and Engie | 7 | 3 | 1 | 3 | Following the mid-roll ad read, Shayle challenges assumptions regarding the durability of voluntary corporate 'green premiums' such as sustainable aviation fuel during downturns. | |
| Clean Infrastructure Financing in a Rising Rate Climate | 7 | 7 | 2 | 1 | Saloni walks through power project finance mechanics, explaining how higher power offtake prices offset rising debt service costs, which Shayle synthesizes with geopolitical context. | |
| Investment Committee Adaptations and Downturn Opportunities | 5 | 4 | 1 | 2 | The two trade perspectives on investment committee discipline, comparing current conditions to the 2008 crash and early-stage opportunities like YC investing in Airbnb during downturns. | |
| Structural Advantages: Cleantech 1.0 vs. Climate Tech Today | 8 | 1 | 0 | 1 | Saloni asks Shayle to compare the current market with Cleantech 1.0; Shayle delivers a definitive breakdown of dedicated climate LP capital pools versus the generalist venture dabblers of the 2000s. |
Statements from this episode (10)
Multani: Decarbonization is fundamentally a capital stock turnover problem
“Climate is at its core a capital stock turnover problem where we need to deploy Ultimately, pretty low-cost capital. The corpus of it needs to be in order to turn over our brown infrastructure and make it green.”
Multani: Pre-revenue climate startups raised public capital at low costs
“These early stage companies that might be pre-revenue, certainly pre-cash flow, they were able to raise money to fund those cash flow losses in the public markets, also at very low effective costs of capital as well.”
Multani: Market downturn reflects macro risk-off rotation, not climate-specific dislocation
“So you see this, you know, this dislocation in the market is not a climate tech dislocation. It's a it's candidly going from, like, risk on to seeing a lot of those, you know, risk on bets pull back. I mean, you're seeing it hit Everything from, you know, our …”
Multani: ESG fund flows have been more resilient than conventional flows
“The ESG fund flows, the ones that can go back and forth, have actually been more resilient. Look, everything is down, right, but have been more resilient than conventional fund flows.”
Kann: Airlines buy sustainable aviation fuel despite it remaining cost uncompetitive
“You look at the procurements that airlines are making for sustainable aviation fuel, none of which is cost competitive with traditional jet fuel today, but it's happening at fairly significant volume already just with bio-based sustainable aviation fuels”
Multani: The downturn will test corporate willingness to pay green premiums
“The appetite to spend to internalize an externality that you're not forced to through some regulatory regime, right, inevitably through some policy regime, I think will absolutely get tested.”
Multani: Higher power prices offset rising interest rates for clean energy projects
“The reason why I think the impact won't be as big is as you think about the contracts that get struck, right? It's a function of your ultimate spread is a function of your offtake minus your input costs. And so, and one of your input costs is going to be cost …”
Kann: VC firms that paused deployment in March 2020 missed major returns
“Same conversations were being had in March of twenty-twenty by a lot of these firms, right? And like the ones who really slowed down, kind of missed out on quite a ride over the past couple of years.”
Khan: Climate tech does not yet feel capital scarcity in mid-2022
“I will say, from my side, it doesn't quite yet feel like scarcity. In climate tech world, it may be. Soon, you know, it's hard to predict. We're not quite there yet, though, I don't think”
Kann: Dedicated capital makes halting climate tech investment harder than Cleantech 1.0
“So I think it would be much more difficult for the broad swath of investors who are investing in, in Climate Tech Solutions now to just sort of turn the dial off than it was then. There were exceptions, obviously, like Kleiner had the Green Growth Fund but tha…”