The Exchanges

Q on how I'm using it. But I'm also probably putting it there to deal with proactive outages the PG&E is going to implement as a result of wildfires. Presumably that function is an adaptation function if you believe that increasing wildfires is a, uh, an outcome of climate change, right? So can you have the same thing be a mitigation thing and an adaptation thing depending on how it's used?

A Hundred percent. I think that this question hits on one of the most exciting things for me, having entered the resilience and adaptation space for mitigation, is that there are, like, a bunch of different examples of technologies from the mitigation space, like the example you provided of energy storage, that are producing co-benefits. They're lowering greenhouse gas emissions while enabling society to be more resilient to climate change. Um, so you've got energy storage and microgrids. You could argue that, like, the four million or some odd folks that signed on for residential solar in twenty-twenty-three are absolutely achieving resilience for their homes, you know, like off-grade energy or energy independence. Um, and then you also have stuff like wildfire tech, wherein if you're able to prevent a wild land from lighting a fire, you're reducing emissions, right? So you're doing both. Um, the same could be said for some natural carbon solutions that are Enabling soil carbon to just be trapped in the soil instead of released. So we have, like, myriad examples of these solutions producing co-benefits, and I actually think that if you accounted for all of the incidences of these co-benefit-creating technologies, the numbers in terms of technologies we see today as being adaptation and resilience would be far, far higher than we currently know.

AI assessment note: “Hundred percent. I think that this question hits on one of the most exciting things”

Q a bit of a definition, I guess. When I think about climate adaptation, you know, you can define it so broadly, I think, as to have it lose some of its value. There's like some risk of that as we talk about this, and I know you've been spending a lot of time thinking about it. So how do you define what fits into the category of climate adaptation technology?

A Great question. So I will first heartily agree with you on this. There are a lot of definitions floating around. There's a lot of confusion. Um, there are also a lot of people that insist on using the term resilience instead of adaptation. So at Tailwind, we kind of, we believe that these definitions need to be hybridized because being resilient systemically, whether it's like ecologically or socially or economically to climate hazards is super important, but you also have to be able to adapt. You have to be able to like Adjust to those hazards as they occur. So we created kind of our own joint definition of what we call A&R solutions, so like adaptation and resilience solutions. And these for us are any products or services that helped predict, prevent, mitigate, or enable recovery from climate hazards. And those could be like wildfire, heat, extreme weather, flood, etc. And we think that that allows us to really balance this idea of Systemic functional integrity over a long period of time, also while recognizing the fact that these systems are, like, actively adjusting to some of these hazards.

AI assessment note: “any products or services that helped predict, prevent, mitigate, or enable recovery”

Q that. We're working on one to five year time horizons typically, but climate change, really the big effects are felt over a longer time period. And I think that applies fairly broadly as well. So how do you think about the, in general, finding investable categories where you can imagine the inflection point for a product or a technology taking place faster, perhaps, than the inflection point of climate change?

A Such a great question. So I'll say where this is concerned, I think there are kind of two major buckets. There's like the sort of, um, bleeding edge side of things, which is where is stuff being adopted like right now, and where are their venture size returns right now? And as you pointed out, that's totally in the climate risk and intelligence and analytics space, and that's been in part driven by the massive crisis the insurance space has been in, Um, you know, we've just seen absolutely insane losses. We had a hundred billion dollars worth of insured losses in 2022 in this country alone. Um, and we know that insurers are exiting markets, they're increasing premiums, they're lowering coverage, like it's a total five alarm fire right now. Um, and so both those insurance firms, as well as the most highly exposed industries, um, utilities being a critical example, They need these insights into, like, how do we leverage the best geospatial data and other data platforms to determine, like, where are our assets at the highest risk, and how can we determine our own internal risk thresholds based on that high-quality climate data? So we see companies like Jupiter and ClimateX and First Street, like, really taking advantage of that, like, house-on-fire demand. Then in terms of, like, reaching the inflection point across some of these other themes, Um, at least in, even in the last, li…

AI assessment note: “I think there are kind of two major buckets.”

Q with adaptation, because I guess you have to look it through the opposite lens, which is basically, where are the impacts? What sectors are the impacts felt most strongly? And thus, where is their technology to be applied to, to make those impacts less severe? So I don't think we're going to talk through all Core themes, and then we could talk about a couple of them in more detail.

A Yeah, that sounds good. So, you're exactly right in the sense that, you know, as we're sort of, our heat-seeking missile in this exercise was definitely not greenhouse gases, right? We're primarily looking at two things. One, where are we gonna have, um, major negative consequences in terms of, like, human health, so, like, physical human assets? Um, and then secondarily, where are we gonna have major value at risk when it comes to economic assets? So you can think of those two things as, as tools that we're using, sort of like our metal detector for the major areas we wanted to focus on here. And to your point about the eight sectors, we essentially landed on the following ecosystems, infrastructure, social systems, which I'll say includes things like defense and, um, also migration and other hot topics like that. Health, which of course rarely shows up in, in the mitigation space as its own call out, uh, water and sanitation, uh, Cities and settlements, which includes buildings, industry and commerce, and food, agriculture, and forestry. So those are, like, hot topic areas, and I'm happy to talk through a few of those.

AI assessment note: “to your point about the eight sectors, we essentially landed on the following”

Q is there a way, presumably you can, at the macro level, you can, like, compare to some counterfactual and say, what was the impact on GDP or human health of Having a bunch more of X product out there, but you know, presumably you're thinking about measurement of success here and probably have to define it to LPs and so on. Are there metrics that you think we can use?

A It's a great question. So I will say that, generally speaking, you could think about measuring, or at least this is how we think about it right now, you could think about measuring adaptation, first of all, as a very spicy meatball, to your point, like, no, just to be clear, no answer exists, no one has kind of a monopoly on this space yet, and I think it's a really important place that we need to come together on as an ecosystem. You could think about it in two different areas. One is Value at risk. And where that's concerned, in terms of, like, quantifying, like, what happens to this data center? You know, what happens to this community space? What happens to this group of people if the worst occurs? Like, that is something that to varying degrees is difficult to quantify, but you can quantify, especially when it comes to economic assets. Um, and there are a lot of different engineering firms like RWDI and Arup and others that are stepping in to, like, provide some of those calculations that I think the broader investment space will probably end up using, and that's something we'll do more work on. And then you have like this squishier idea of how do you ensure adaptive capacity? So there's sort of like a little continuum. This is what UNEP says about measuring adaptation, that you could have like absorptive capacity, which is basically the lowest bar. Like, are you coping wi…

AI assessment note: “You could think about it in two different areas. One is Value at risk.”

Q investment category. Now, mitigation as well, you know, I've, I've, Periodically said, I'm not sure climate tech really is a sector. It's just a common theme amongst a bunch of different sectors. That's probably true of adaptation resilience too, but to the extent that we're going to group it as an investment category, you know, of those themes, where do you see most of the investment dollars going so far?

A That's a great question. So I'm happy to talk a little bit more about the different demand factors that we're seeing, because one of the reasons we started Tailwind is we were like, wow, there is so much latent demand from governments and corporates. Why is that signal not super clear to investors and startups? We'll talk a little bit about what we're seeing there, and then I can get further into kind of why that demand should exist and does exist. But yeah, in terms of what we're seeing, I mean, this is not going to be particularly shocking to you, um, you know, having been in this space. We see a lot of individual investment ecosystems that have popped up over the years to tackle innovation within ag, within health, within water, within infrastructure. Like, each of those communities has its own sort of freshly minted investor crew and posse and ecosystem that comes with it, and what we're seeing is that some of those communities, like the health tech community, are getting what we call resilience curious. So they're starting to look at new vector-borne illnesses, or they're starting to look at heat as a serious new disease, chronic disease, um, and they're extending the work they've done around regular health tech into those spaces, and as, as I'm implying, the same can be said for ag in a lot of respects. Um, what we're not seeing is we're not seeing actually most of the cl…

AI assessment note: “We see a lot of individual investment ecosystems that have popped up over the years”

Q as we start to explore the contours of this category, the risk to me is not that we don't find anything that qualifies, it's kind of the opposite. It's that, like, turns out everything counts, and then, again, we lose the value of the definition. So is there anything that you think of that people maybe think of as adaptation and resilience that you would say is out of scope?

A That's a good question. So I think, you know, one funny thing that we struck upon when we started Tailwind is that we would call people, whether they were folks at banks or corporations or the government, be like, what do you think about when you think about adaptation and resilience solutions? And obviously people are like seawalls. Um, and that's been a kind of funny refrain that we've heard from the broader community. This is very common that like the vast majority of Americans that have been confronted with this concept Are thinking about public infrastructure when they answer the question of what solutions might look like in this space. Um, one thing we did at Tailwind in order to kind of crack open the question you asked and sort of debunk, like, what even falls into this space is we built out an adaptation and resilience investor taxonomy that we actually released earlier this year with support from ClimateWorks, and this is essentially our best cut At, like, a functional worldview that we could use here. So, like, for instance, obviously those of us that have been in mitigation forever are super familiar with, like, the five major greenhouse gas emitting sectors. Um, resilience has, like, not had any kind of functional breakdown like that. So what we did is we looked at, like, okay, what are the global IPCC goals on this topic? What are the SDGs that relate to climate r…

AI assessment note: “we built out an adaptation and resilience investor taxonomy that we actually released”