August 8, 2024 • 19 mins
Jonathan Horn is a theoretical physicist, a former managing director of JP Morgan, and now he’s on mission to transform the controversial world of carbon offsetting with his firm Treefera.
In this show, we look at the challenges facing companies trying to offset and reduce their carbon footprint, and how AI and machine learning is helping solve those issues.
RUNNING ORDER:
02:23 - Part one: the problem with carbon markets
09:25 - Part two: how companies like Treefera are tackling the crisis
15:20 - Part three: the future state of the carbon market
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to the first ever live
edition of the Investor Download.
This is a podcast about the themes drivingmarkets and the economy
now and in the future.
On today's show, we're going to be divinginto the murky world of carbon markets.
(00:23):
The equivalent of nearly 53 gigatons ofcarbon dioxide were released into the
atmosphere in 2021, if youinclude all greenhouse gases.
Depending on which scenario you look at,we will have to remove 6, 8, 10, maybe
15, maybe even 20 gigatons per year.
(00:45):
Amid dire warnings of the effects that'shaving on the climate, countries and
companies have pledged net zero goals.
To help meet pledges, companies have beenusing carbon trading markets and offsets.
It's like a compensation scheme forgovernments, companies, or individuals.
If you produce carbon emissions, let's sayyou're an airline or a steel factory,
(01:07):
you can try to balance them by findingother ways to reduce carbon in the
atmosphere by an equivalent amount.
The carbon trading marketis worth nearly $1 trillion.
But here's where thingsget a little bit murky.
Carbon credits are simplybuying permission to pollute.
So let's say you cannot avoidpolluting where you are.
(01:30):
So you pay somebody else,someplace else, who is doing work to
reverse the effects of your own actionsthat are damaging the environment.
Worst still, some of those creditsaren't achieving the offsets or
reductions that have been promised.
Study after study has indicated that mostoffsets available on the market
don't reliably reduce emissions.
Far, far more commonly, the carbon offsetmarket is used as a reputation laundromat,
(01:56):
and that can make climate change evenworse by giving a false impression
of progress while robbing us of time.
And time is something we just don'thave in the race against climate change.
So on this show, we're going to look atwhat's gone wrong,
what we could do about it, particularlyaround technology,
and what that might mean for you asinvestors, business owners,
and the climate itself.
(02:23):
Now, it's a story that I can't tell on myown, so I've got a very special guest
with me in the auditorium today.
He's a theoretical physicist, aformer Managing Director at J.
P.
Morgan, and he's on a mission to clean upsome of those carbon markets and make it
more transparent forthose that invest in it.
Please give a warm round of applauseto the CEO of Treefera, Jonathan Horn.
Jonathan, welcome.Thank you.
(02:43):
How are you doing?Very Good.
Glad to be here, and thankyou for the warm welcome.
No worries at all.
I'm going to throw somethingstraight at you first up.
I've heard carbon markets been describedon many occasions as the Wild West.
Is that a fair comment?
There is some fairness in that comment.
I think thecarbon markets, like any market, depend on
(03:04):
governance to control them and toensure that they're proper working.
There's been many examples.Carbon markets aren't new.
We've been here many times before.
So they really got going, first of all inthe '70s, then in the 2000s, and
have been revived more recently.
But I think they're a necessary mechanism,and therefore, there's no choice but to
(03:26):
improve the governance, improvetransparency, and regulate them properly.
But the fact they've been through a fewiterations already suggests
there is a problem with them.
There's definitely been problems in thepast, and there's still some significant
problems that need to besolved, like any market.
Okay, I mentioned you'rea CEO of Treefera.
Can you just tell us a little bitabout Treefera and what it does?
Yeah, sure.
(03:48):
So Treefera is anAI-enabled data platform.
The purpose of Treefera is to givea discoverable, understandable, and
trustworthy data on nature-based assets.
And so, of course, we started with treesthat are super charismatic, but that
includes all types of nature-based assets,and it includes all types of
(04:09):
understanding, so impact from aninvestment point of view, from a carbon
offsetting point of view, froman in-setting point of view and from a
supply chain point of view.
It covers all aspects ofdata required in those areas.
And you've recently beenexpanding your team?
Yes, we've approximately quadrupledthe team in a very short period.
So we went through pre-seed last yearand we've just done Series A this year.
(04:33):
So we're expanding very, very rapidly.
I understand your co-CEOis also your wife?
Yes.
Down in the left-hand corner there.
She's here in the audience as well.Welcome.
We've come colour coordinated in some way.
I was going to ask how it is working withyour wife, but I'm pretty sure I know what
the answer is going to be, bearingin mind she is in the room as well.
Yeah, absolutely.
We've always had completelydifferent career paths.
(04:55):
Hers is much more on go-to-market.
Mine is much moreon the technical and banking.
And we've always been interestedin each other's careers greatly.
And so this opportunity arose, andwe found all our skillsets
are really complementary.
Okay, brilliant.
And before we go on to your mission, Ijust want to talk a
little bit about yourself.
For you, were you always really interestedin data, in the environment
(05:18):
around you, and how it works?
So I grew up on a farmin a place called Rutland.
It's the smallest county in England.
Huge collection of horseshoes, if anybody goes there.
I was really interested in the naturalenvironment,
but I was also very interested from a veryearly age in physics, particularly,
(05:43):
and in science, and trying tounderstand how things work.
So my defining characteristic, I wasintensely curious.
And there was plenty of famoustheoretical physicists in the past.
There's one there, very famous man.
Yet you ended up in investment banking.
How is that?
It's weirdly theoretical physicists,there's a lot of them that wash up in
(06:06):
investment banking for various reasons.
My attraction to investment banking wasreally it's about solving
problems at scale.
I originally joined Citi as part of theirpayments business, TTS as
it was called at the time.
For me, payments on the scale that Citiwere doing it at that stage was really
about massive flow problems,and most of my work was done in risk,
(06:31):
strategy and flow around payment.
Was there a light-bulb moment during thattime where you thought what you're
doing now is what you're destined to do?
In terms of Treefera, it evolved andemerged rather than any eureka moment.
I was doing a lot of work on artificialintelligence and data at scale.
(06:52):
I was doing a lot of work on risk,understanding
risk and risk assets, risk in the naturalworld, the integration of what
we think of as the economy and the naturalworld, which really
could be thought of as one thing.
And I started to understand and realisedthat main issue in order to efficiently
deploy capital in those areas, in myopinion, was a lack of understanding and
(07:15):
data, transparent data, inorder to deliver that insight.
So really, it came from the emergingthought that someone really
needs to sort out this data.
And did you always want to become a CEO?
That was never a burning ambition.
I've always liked leading teams, and I'vehad many opportunities in my career to do
(07:36):
that, but I didn't wake up one day andsay, I'd love a card with CEO on it.
Enjoyed it or regretting it?No, it's brilliant.
I'm really enjoying the company.
We've built an amazing team in a shortspace of time, which is the same reward.
So no, it's been a fabulous decision.
(07:59):
Okay, so let's talk a little bit moreabout Treefera's mission because it does
directly impact what we're trying to talkabout today, which is other
markets and clean them up a bit.
So what is Treefera's mission?
So Treefera's mission is to bringdiscoverable, understandable, and
trustworthy data setson nature-based assets.
They are relevant and importantin all sectors of the economy.
(08:21):
So supply chain, biofuel, bioenergy,regenerative agriculture,
and then your more common carbonprojects, particularly nature-based.
So,carbon sequestration through forestation,
through biochar, all of thosethings require data sets.
(08:43):
Typically, the data thatexists today is complicated.
You need to be very expert inorder to try and understand it.
We're trying to package that data up anddeliver it,
particularly to financial services andother enterprises, in a way that makes
sense to the consumers of that data.
In that sense, it's simple.
In another sense, it'sa vast scale that's required.
(09:05):
You need to be able to provide data atthe scale of countries and globally.
In order to make this practical,it has to be done at a point that's
obviously cost-effectiveto make the use of that data ubiquitous.
On Apple Podcasts,Spotify, or wherever you get your
podcasts, you're listeningto the Investor Download.
(09:26):
Why should it matter to investors, thepeople in the audience, the
people listening at home?
Perhaps some of us learned during thefinancial crisis, having data about the
fundamentals of an asset and theunderlying provenance of that
asset is vitally important.
Today, data on nature-based assets issuper patchy, hard to understand.
(09:48):
If you can understand the data onnature-based assets,
you can make a proper assessment aroundrisk, and that makes insurance and
investment then a reliable proposition.
So it brings it into the domain offinancial services in a real way.
Presumably without stating the obvious, itall starts with the climate crisis, right?
(10:09):
It absolutely startswith the climate crisis.
And so that chart youshowed earlier, David.
So what's different, I think, about theclimate crisis versus other things that
we've been facing, thisproblem isn't going to go away.
It's just going to getworse and less addressed.
So there's this constant backdrop of timerunning out and things having to be done.
So from my point of view, it's also anobligation to do something about this.
(10:34):
I think very strongly that something hasto be done, and then people that are in
a position to do something should do so.
But it's not a negative thing.
Often when you think a crisis,it's a terrifying prospect, which it is,
but it's also a massivebusiness opportunity.
I was going to say there's a lot of risksout there, so what are the
opportunities for investors?
(10:54):
The opportunities are everywhere you look,every industry you look in,
every business that you look at.
If we're going to the secondof your 3Ds, decarbonization.
If they're going to decarbonize,they need data in order to understand
what their impact todayis on the natural world.
That could be supply chain, sodeforestation in coffee supply chains
(11:17):
in Brazil has to go down thereto an individual plot level.
That's some small scale producer withthree or four hectares of coffee.
What's the deforestation inthat space since 2020?
That's now enshrined in regulation.
Those are the sorts of insightsthat are going to be required.
And if you have those insights,then the opportunity is like any.
Now, I always used to think in banking, Iwas working, which I loved working in a
(11:42):
big risk engine, really,a risk processing engine.
So if you really understand the risksbetter than somebody else, then you can
make sound investments in these spaces.
Data plays a huge role asyou were talking about there.
So let's start with someof the technology you use.
Do you use drones and satellites?
Use drones and satellites, thevast majority of it is satellite.
(12:02):
What's fascinating about satellites is,the last year, there's like
12,000 launches of satellites.
When we first started this business, I diddream of launching a satellite with my
picture on the side, but I'd certain maybethat was a vanity project, but the ...
Talks with Elon Musk?We talked with Elon Musk over this.
So what's the important part about thisis satellite data has become inexpensive.
(12:24):
It's getting better and better quality.
When we started Treefera, free data, opensource data was at 100 metres resolution.
An image from a satellite, onepixel was 100 by 100 on the ground.
That's now 10, so 10 by 10.
So the resolution isgetting better and better.
You can buy off the shelfresolution data at 30 centimeters.
(12:45):
So in Treefera, we can get data that wouldallow you to identify
this table from space.
So the quality of the data, the richnessof the data, the insights you can get
from it are growing exponentially.
Okay, so does that mean you don't needpeople like these guys
on the ground anymore?Not so much.
And one of the secret sources of Treefera,we do have ground source data
(13:08):
that typically comes from our clients,which is helpful to validate
and calibrate the AI models.
But once that's embedded in the model,you can analyse all sorts of vast areas
at super high speed andinexpensively, and that allows you
then to take action and develop plans.
And I presume AI playsa huge part as well?
(13:29):
AI plays a huge part.
I've been interested, my first AI modelwas actually, I was looking back in 1996.
So AI has been around a long time, likea lot of these other technologies.
What's enabled it now is the costpoint and price point
for cloud, so now compute at a vast scale.
(13:50):
The types of models and the qualityof those models is going up and up.
What you can detect reliably andaccurately with AI is now incredible.
And assumingit was part of the solution, AI could
also be part of the problem as well?
It is part of the problem.
Again, going back to my previous employer,we spent a lot of time, valuable time,
(14:13):
trying to make AI more efficient.
There's a misconception often that AIand machine learning are the same thing.
They're not.
AI is a much bigger topicthan machine learning.
So a lot of these models are now extremelyexpensive computationally, therefore,
they're burning through ahuge amount of electricity.
Running AI last year, I think, was3% of the global energy consumption.
(14:38):
It's forecast to become 8%,that dwarfs aviation as an industry.
AI is becoming, quietly, a very bigproblem within climate change, generally.
So again, our obligation is to be muchmore frugal, and that's part
of the Treefera mission.
Are people working to make AI moreefficient in terms of energy consumption?
Yes and the differences you can make bytaking a much more frugal approach
(15:03):
to the engineering are vast.
So you can quite straightforwardly makeit a thousand times more efficient.
Get in touch with us by email atschroderspodcasts@schroders.
com or visit our website, schroders.
com/theinvestordownload.
Okay, just before we get on to the future,how the future might look like, I just
(15:26):
want to ask one question becausewe're talking about trading markets,
but why don't we just attack the source?
Surely, nature-based solutions will do abetter job than just trading on markets.
We need to do all of the above.
So again, going back to yourgraph, that isn't going to change.
I think the interview that you showedbefore, they said, we're going to have to
capture between 10 and 20gigatons per year.
(15:48):
That requires reduction,and it also requires sequestration.
Both leavers have to be pulled inevery place as much as possible.
Okay, so I presume carbon markets are hereto stay, but do you see more money being
funneled into thenature-based side of things?
Yeah, definitely.
I think carbon markets are avery important mechanism.
(16:09):
Inorder to operate correctly, they need to
be governed, they need tobe integrity in the market.
If you see, certainly in the US,there's been a huge push now.
I think it was a couple of weeks ago inthe FT, there's an article
from statements by Yellen on drivingintegrity in the carbon markets.
Those huge investments that they'reputting in the US
(16:31):
and the drive to integrity, that's goingto foster a better environment for
operating correctly in the carbon market.
Okay.
Obviously, there's lots ofdoubts out there from investors.
How long do you think it will take forpeople to get more belief
within the carbon markets?
Because it's pretty muddy water out there.
It is muddy water.
We work a lot on what I wouldsay is the origination side.
(16:55):
People come into market with projects.
I was out in Washington State the otherweek talking with regenerative
agriculture consortiums.
The people on the originationside are doing a huge amount.
That will eventually cometo the carbon market.
From where we sit, we see a huge amount ofprogress on the origination and the
(17:19):
big drive on integrity in the market.
Some people are alreadythere, many others will join.
How do you respond to people that thinkthat lots of companies, because you speak
to a lot of companies, their carbon offsetplans, their plans for
sustainability are just PR plans.
Realistically, of course, therehas been plenty of greenwashing.
(17:39):
That's inescapable.
But the more we drive integrity in themarket, and again, the backdrop of that
chart that you showed at the start,which is an inescapable result of physics,
those things are goingto drive serious action.
Okay, and just a final question, what doesthe future look like for the industry?
Well, from a Treefera point of view, I'veliterally bet the farm on it,
(18:01):
so hopefully looking very rosy.
But I think genuinely, I think thatin terms of timing, when we started
Treefera, I think the turning point for mewas working down in Canary
Wharf in 2020 in the summer.
It was too hot to go to work, and I usedto go to work on a
bicycle, and you thought, wow, this iswhat it feels like to cycle in 42 degrees
(18:24):
heat with this must drive, action.
So I think it's a very positive future.
Jonathon, it's been fascinating.Thank you so much for joining us.
That was the show.
We very much hope you enjoyed it.
(18:45):
You can subscribe to the InvestorDownload wherever you get your podcast.
And if you want to get in touch withus, it's schroderspodcasts@schroders.
com.
And you can find out much,much more at schroders.
com/insights.
New shows drop every otherThursday at 05:00 PM UK time.
In the meantime, keep safe and go well.
(19:06):
The value of investments and the incomefrom them may go down as well as up, and
investors may not get back theamounts originally invested.
Past performance is not aguide to future performance.
Information is not an offer, solicitation,or recommendation of any funds, services,
or products, or to adoptany investment strategy.
Welcome to the first ever live
edition of the Investor Download.
This is a podcast about the themes drivingmarkets and the economy
now and in the future.
On today's show, we're going to be divinginto the murky world of carbon markets.
(00:23):
The equivalent of nearly 53 gigatons ofcarbon dioxide were released into the
atmosphere in 2021, if youinclude all greenhouse gases.
Depending on which scenario you look at,we will have to remove 6, 8, 10, maybe
15, maybe even 20 gigatons per year.
(00:45):
Amid dire warnings of the effects that'shaving on the climate, countries and
companies have pledged net zero goals.
To help meet pledges, companies have beenusing carbon trading markets and offsets.
It's like a compensation scheme forgovernments, companies, or individuals.
If you produce carbon emissions, let's sayyou're an airline or a steel factory,
(01:07):
you can try to balance them by findingother ways to reduce carbon in the
atmosphere by an equivalent amount.
The carbon trading marketis worth nearly $1 trillion.
But here's where thingsget a little bit murky.
Carbon credits are simplybuying permission to pollute.
So let's say you cannot avoidpolluting where you are.
(01:30):
So you pay somebody else,someplace else, who is doing work to
reverse the effects of your own actionsthat are damaging the environment.
Worst still, some of those creditsaren't achieving the offsets or
reductions that have been promised.
Study after study has indicated that mostoffsets available on the market
don't reliably reduce emissions.
Far, far more commonly, the carbon offsetmarket is used as a reputation laundromat,
(01:56):
and that can make climate change evenworse by giving a false impression
of progress while robbing us of time.
And time is something we just don'thave in the race against climate change.
So on this show, we're going to look atwhat's gone wrong,
what we could do about it, particularlyaround technology,
and what that might mean for you asinvestors, business owners,
and the climate itself.
(02:23):
Now, it's a story that I can't tell on myown, so I've got a very special guest
with me in the auditorium today.
He's a theoretical physicist, aformer Managing Director at J.
P.
Morgan, and he's on a mission to clean upsome of those carbon markets and make it
more transparent forthose that invest in it.
Please give a warm round of applauseto the CEO of Treefera, Jonathan Horn.
Jonathan, welcome.Thank you.
(02:43):
How are you doing?Very Good.
Glad to be here, and thankyou for the warm welcome.
No worries at all.
I'm going to throw somethingstraight at you first up.
I've heard carbon markets been describedon many occasions as the Wild West.
Is that a fair comment?
There is some fairness in that comment.
I think thecarbon markets, like any market, depend on
(03:04):
governance to control them and toensure that they're proper working.
There's been many examples.Carbon markets aren't new.
We've been here many times before.
So they really got going, first of all inthe '70s, then in the 2000s, and
have been revived more recently.
But I think they're a necessary mechanism,and therefore, there's no choice but to
(03:26):
improve the governance, improvetransparency, and regulate them properly.
But the fact they've been through a fewiterations already suggests
there is a problem with them.
There's definitely been problems in thepast, and there's still some significant
problems that need to besolved, like any market.
Okay, I mentioned you'rea CEO of Treefera.
Can you just tell us a little bitabout Treefera and what it does?
Yeah, sure.
(03:48):
So Treefera is anAI-enabled data platform.
The purpose of Treefera is to givea discoverable, understandable, and
trustworthy data on nature-based assets.
And so, of course, we started with treesthat are super charismatic, but that
includes all types of nature-based assets,and it includes all types of
(04:09):
understanding, so impact from aninvestment point of view, from a carbon
offsetting point of view, froman in-setting point of view and from a
supply chain point of view.
It covers all aspects ofdata required in those areas.
And you've recently beenexpanding your team?
Yes, we've approximately quadrupledthe team in a very short period.
So we went through pre-seed last yearand we've just done Series A this year.
(04:33):
So we're expanding very, very rapidly.
I understand your co-CEOis also your wife?
Yes.
Down in the left-hand corner there.
She's here in the audience as well.Welcome.
We've come colour coordinated in some way.
I was going to ask how it is working withyour wife, but I'm pretty sure I know what
the answer is going to be, bearingin mind she is in the room as well.
Yeah, absolutely.
We've always had completelydifferent career paths.
(04:55):
Hers is much more on go-to-market.
Mine is much moreon the technical and banking.
And we've always been interestedin each other's careers greatly.
And so this opportunity arose, andwe found all our skillsets
are really complementary.
Okay, brilliant.
And before we go on to your mission, Ijust want to talk a
little bit about yourself.
For you, were you always really interestedin data, in the environment
(05:18):
around you, and how it works?
So I grew up on a farmin a place called Rutland.
It's the smallest county in England.
Huge collection of horseshoes, if anybody goes there.
I was really interested in the naturalenvironment,
but I was also very interested from a veryearly age in physics, particularly,
(05:43):
and in science, and trying tounderstand how things work.
So my defining characteristic, I wasintensely curious.
And there was plenty of famoustheoretical physicists in the past.
There's one there, very famous man.
Yet you ended up in investment banking.
How is that?
It's weirdly theoretical physicists,there's a lot of them that wash up in
(06:06):
investment banking for various reasons.
My attraction to investment banking wasreally it's about solving
problems at scale.
I originally joined Citi as part of theirpayments business, TTS as
it was called at the time.
For me, payments on the scale that Citiwere doing it at that stage was really
about massive flow problems,and most of my work was done in risk,
(06:31):
strategy and flow around payment.
Was there a light-bulb moment during thattime where you thought what you're
doing now is what you're destined to do?
In terms of Treefera, it evolved andemerged rather than any eureka moment.
I was doing a lot of work on artificialintelligence and data at scale.
(06:52):
I was doing a lot of work on risk,understanding
risk and risk assets, risk in the naturalworld, the integration of what
we think of as the economy and the naturalworld, which really
could be thought of as one thing.
And I started to understand and realisedthat main issue in order to efficiently
deploy capital in those areas, in myopinion, was a lack of understanding and
(07:15):
data, transparent data, inorder to deliver that insight.
So really, it came from the emergingthought that someone really
needs to sort out this data.
And did you always want to become a CEO?
That was never a burning ambition.
I've always liked leading teams, and I'vehad many opportunities in my career to do
(07:36):
that, but I didn't wake up one day andsay, I'd love a card with CEO on it.
Enjoyed it or regretting it?No, it's brilliant.
I'm really enjoying the company.
We've built an amazing team in a shortspace of time, which is the same reward.
So no, it's been a fabulous decision.
(07:59):
Okay, so let's talk a little bit moreabout Treefera's mission because it does
directly impact what we're trying to talkabout today, which is other
markets and clean them up a bit.
So what is Treefera's mission?
So Treefera's mission is to bringdiscoverable, understandable, and
trustworthy data setson nature-based assets.
They are relevant and importantin all sectors of the economy.
(08:21):
So supply chain, biofuel, bioenergy,regenerative agriculture,
and then your more common carbonprojects, particularly nature-based.
So,carbon sequestration through forestation,
through biochar, all of thosethings require data sets.
(08:43):
Typically, the data thatexists today is complicated.
You need to be very expert inorder to try and understand it.
We're trying to package that data up anddeliver it,
particularly to financial services andother enterprises, in a way that makes
sense to the consumers of that data.
In that sense, it's simple.
In another sense, it'sa vast scale that's required.
(09:05):
You need to be able to provide data atthe scale of countries and globally.
In order to make this practical,it has to be done at a point that's
obviously cost-effectiveto make the use of that data ubiquitous.
On Apple Podcasts,Spotify, or wherever you get your
podcasts, you're listeningto the Investor Download.
(09:26):
Why should it matter to investors, thepeople in the audience, the
people listening at home?
Perhaps some of us learned during thefinancial crisis, having data about the
fundamentals of an asset and theunderlying provenance of that
asset is vitally important.
Today, data on nature-based assets issuper patchy, hard to understand.
(09:48):
If you can understand the data onnature-based assets,
you can make a proper assessment aroundrisk, and that makes insurance and
investment then a reliable proposition.
So it brings it into the domain offinancial services in a real way.
Presumably without stating the obvious, itall starts with the climate crisis, right?
(10:09):
It absolutely startswith the climate crisis.
And so that chart youshowed earlier, David.
So what's different, I think, about theclimate crisis versus other things that
we've been facing, thisproblem isn't going to go away.
It's just going to getworse and less addressed.
So there's this constant backdrop of timerunning out and things having to be done.
So from my point of view, it's also anobligation to do something about this.
(10:34):
I think very strongly that something hasto be done, and then people that are in
a position to do something should do so.
But it's not a negative thing.
Often when you think a crisis,it's a terrifying prospect, which it is,
but it's also a massivebusiness opportunity.
I was going to say there's a lot of risksout there, so what are the
opportunities for investors?
(10:54):
The opportunities are everywhere you look,every industry you look in,
every business that you look at.
If we're going to the secondof your 3Ds, decarbonization.
If they're going to decarbonize,they need data in order to understand
what their impact todayis on the natural world.
That could be supply chain, sodeforestation in coffee supply chains
(11:17):
in Brazil has to go down thereto an individual plot level.
That's some small scale producer withthree or four hectares of coffee.
What's the deforestation inthat space since 2020?
That's now enshrined in regulation.
Those are the sorts of insightsthat are going to be required.
And if you have those insights,then the opportunity is like any.
Now, I always used to think in banking, Iwas working, which I loved working in a
(11:42):
big risk engine, really,a risk processing engine.
So if you really understand the risksbetter than somebody else, then you can
make sound investments in these spaces.
Data plays a huge role asyou were talking about there.
So let's start with someof the technology you use.
Do you use drones and satellites?
Use drones and satellites, thevast majority of it is satellite.
(12:02):
What's fascinating about satellites is,the last year, there's like
12,000 launches of satellites.
When we first started this business, I diddream of launching a satellite with my
picture on the side, but I'd certain maybethat was a vanity project, but the ...
Talks with Elon Musk?We talked with Elon Musk over this.
So what's the important part about thisis satellite data has become inexpensive.
(12:24):
It's getting better and better quality.
When we started Treefera, free data, opensource data was at 100 metres resolution.
An image from a satellite, onepixel was 100 by 100 on the ground.
That's now 10, so 10 by 10.
So the resolution isgetting better and better.
You can buy off the shelfresolution data at 30 centimeters.
(12:45):
So in Treefera, we can get data that wouldallow you to identify
this table from space.
So the quality of the data, the richnessof the data, the insights you can get
from it are growing exponentially.
Okay, so does that mean you don't needpeople like these guys
on the ground anymore?Not so much.
And one of the secret sources of Treefera,we do have ground source data
(13:08):
that typically comes from our clients,which is helpful to validate
and calibrate the AI models.
But once that's embedded in the model,you can analyse all sorts of vast areas
at super high speed andinexpensively, and that allows you
then to take action and develop plans.
And I presume AI playsa huge part as well?
(13:29):
AI plays a huge part.
I've been interested, my first AI modelwas actually, I was looking back in 1996.
So AI has been around a long time, likea lot of these other technologies.
What's enabled it now is the costpoint and price point
for cloud, so now compute at a vast scale.
(13:50):
The types of models and the qualityof those models is going up and up.
What you can detect reliably andaccurately with AI is now incredible.
And assumingit was part of the solution, AI could
also be part of the problem as well?
It is part of the problem.
Again, going back to my previous employer,we spent a lot of time, valuable time,
(14:13):
trying to make AI more efficient.
There's a misconception often that AIand machine learning are the same thing.
They're not.
AI is a much bigger topicthan machine learning.
So a lot of these models are now extremelyexpensive computationally, therefore,
they're burning through ahuge amount of electricity.
Running AI last year, I think, was3% of the global energy consumption.
(14:38):
It's forecast to become 8%,that dwarfs aviation as an industry.
AI is becoming, quietly, a very bigproblem within climate change, generally.
So again, our obligation is to be muchmore frugal, and that's part
of the Treefera mission.
Are people working to make AI moreefficient in terms of energy consumption?
Yes and the differences you can make bytaking a much more frugal approach
(15:03):
to the engineering are vast.
So you can quite straightforwardly makeit a thousand times more efficient.
Get in touch with us by email atschroderspodcasts@schroders.
com or visit our website, schroders.
com/theinvestordownload.
Okay, just before we get on to the future,how the future might look like, I just
(15:26):
want to ask one question becausewe're talking about trading markets,
but why don't we just attack the source?
Surely, nature-based solutions will do abetter job than just trading on markets.
We need to do all of the above.
So again, going back to yourgraph, that isn't going to change.
I think the interview that you showedbefore, they said, we're going to have to
capture between 10 and 20gigatons per year.
(15:48):
That requires reduction,and it also requires sequestration.
Both leavers have to be pulled inevery place as much as possible.
Okay, so I presume carbon markets are hereto stay, but do you see more money being
funneled into thenature-based side of things?
Yeah, definitely.
I think carbon markets are avery important mechanism.
(16:09):
Inorder to operate correctly, they need to
be governed, they need tobe integrity in the market.
If you see, certainly in the US,there's been a huge push now.
I think it was a couple of weeks ago inthe FT, there's an article
from statements by Yellen on drivingintegrity in the carbon markets.
Those huge investments that they'reputting in the US
(16:31):
and the drive to integrity, that's goingto foster a better environment for
operating correctly in the carbon market.
Okay.
Obviously, there's lots ofdoubts out there from investors.
How long do you think it will take forpeople to get more belief
within the carbon markets?
Because it's pretty muddy water out there.
It is muddy water.
We work a lot on what I wouldsay is the origination side.
(16:55):
People come into market with projects.
I was out in Washington State the otherweek talking with regenerative
agriculture consortiums.
The people on the originationside are doing a huge amount.
That will eventually cometo the carbon market.
From where we sit, we see a huge amount ofprogress on the origination and the
(17:19):
big drive on integrity in the market.
Some people are alreadythere, many others will join.
How do you respond to people that thinkthat lots of companies, because you speak
to a lot of companies, their carbon offsetplans, their plans for
sustainability are just PR plans.
Realistically, of course, therehas been plenty of greenwashing.
(17:39):
That's inescapable.
But the more we drive integrity in themarket, and again, the backdrop of that
chart that you showed at the start,which is an inescapable result of physics,
those things are goingto drive serious action.
Okay, and just a final question, what doesthe future look like for the industry?
Well, from a Treefera point of view, I'veliterally bet the farm on it,
(18:01):
so hopefully looking very rosy.
But I think genuinely, I think thatin terms of timing, when we started
Treefera, I think the turning point for mewas working down in Canary
Wharf in 2020 in the summer.
It was too hot to go to work, and I usedto go to work on a
bicycle, and you thought, wow, this iswhat it feels like to cycle in 42 degrees
(18:24):
heat with this must drive, action.
So I think it's a very positive future.
Jonathon, it's been fascinating.Thank you so much for joining us.
That was the show.
We very much hope you enjoyed it.
(18:45):
You can subscribe to the InvestorDownload wherever you get your podcast.
And if you want to get in touch withus, it's schroderspodcasts@schroders.
com.
And you can find out much,much more at schroders.
com/insights.
New shows drop every otherThursday at 05:00 PM UK time.
In the meantime, keep safe and go well.
(19:06):
The value of investments and the incomefrom them may go down as well as up, and
investors may not get back theamounts originally invested.
Past performance is not aguide to future performance.
Information is not an offer, solicitation,or recommendation of any funds, services,
or products, or to adoptany investment strategy.
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