May 19, 2025 • 42 mins
On today’s Sustainability In Your Ear, meet Kavita Patel, a principal at MUUS Climate Partners, as we discuss how smart investments and business support can drive environmental impact while generating returns. MUUS Climate Partners invests in early-stage climate technology companies, with a portfolio including battery recycler Nth Cycle, EV charging innovator AmpUp, and innovative air conditioning developer Harvest. The firm targets critical sectors—energy, industry, materials, and transportation—where innovation is essential for meeting climate goals. In our conversation, Kavita addresses the “green premium,” pointing out that while consumers may pay more upfront for sustainable products, they often realize long-term savings. She emphasizes that the most significant opportunity to reduce costs lies in eliminating waste throughout our economy, from production, through the use phase, to recovering and reusing materials traditionally discarded after a single use.
Kavita emphasizes that the most significant opportunity to reduce costs lies in eliminating waste throughout our economy, from production, through the use phase, to recovering and reusing materials traditionally discarded after a single use She also .shares a key insight about entrepreneurial leadership: successful climate tech founders have multiple backup plans. True innovators become “chief resource obtainers” by finding value where others see none. The entrepreneurs who will transform our economy can turn scrap into gold, whether starting with used equipment or reimagining landfill contents as raw materials for sustainable products. To learn more about MUUS Climate Partners and their approach to climate technology investment, visit muusclimate.com.
Kavita emphasizes that the most significant opportunity to reduce costs lies in eliminating waste throughout our economy, from production, through the use phase, to recovering and reusing materials traditionally discarded after a single use She also .shares a key insight about entrepreneurial leadership: successful climate tech founders have multiple backup plans. True innovators become “chief resource obtainers” by finding value where others see none. The entrepreneurs who will transform our economy can turn scrap into gold, whether starting with used equipment or reimagining landfill contents as raw materials for sustainable products. To learn more about MUUS Climate Partners and their approach to climate technology investment, visit muusclimate.com.
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Episode Transcript
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Speaker 1 (00:10):
Hello, good morning, good afternoon, or good evening, wherever you
are on this beautiful planet of ours. Welcome to Sustainability
in your Ear. This is the podcast conversation about accelerating
the transition to a sustainable carbon neutral society, and I'm
your host, Mitch Ratcliffe. Thanks for joining the conversation today.
As investments in climate technology grow, there's an increasing focus
(00:31):
on identifying solutions that can deliver both environmental impact and
financial returns. We also need smart patient capital from investors
that look beyond quick returns to build the foundation for
lasting systemic change. Venture capital firms can play a critical
role in the transformation the grid of industrial processes and
(00:52):
product development as we make sustainability in enduring practice and business.
So today we're going to talk with Kavita Patel. She
is a principal at MEWSE Climate Partners. The firm invests
in early stage companies at the intersection of climate and technology.
Their portfolio includes organizations like battery recycler inth Cycle, whose
CEO has been on the show before, and ev charging
(01:14):
innovator amp Up, as well as the smart air conditioning
developer Harvest. Their investments target critical sectors such as energy
material science, industrial production, and transportation, where innovation is essential
to meet climate goals. Kavita brings deep experience in sustainable finance,
venture investing, and operational leadership, and today we'll explore how
(01:35):
MEWS approaches emerging climate technologies and what they see as
the most promising areas for investment in twenty twenty five,
as well as the challenges that startups and investors face
in scaling climate solutions. You can learn more about their
work at mewseclimate dot com. Meuse is spelled muus and
mew's client is all one word, no space, no dash,
(01:58):
mewsclimate dot com. We'll get to the conversation right after
a quick commercial break. Stay tuned, Welcome to the Showkavita.
How you doing today?
Speaker 2 (02:12):
Doing great, Mitch, I'm excited to be here.
Speaker 1 (02:14):
Well, thank you for joining us. At You're living at
the cutting edge and a lot is changing at the
cutting edge. So as we head into the summer of
twenty twenty five, where do you see the biggest shifts
happening in climate tech due to the tariffs and the
potential restoring of manufacturing in the United States.
Speaker 2 (02:31):
Yeah, it's funny that you mentioned reshoring. I think climate
tech has already been a boom for reshoring, and domestic
manufacturing efforts do an in large part to the IRA.
I mean, just in our portfolio, I can think of
at least six of our portfolio companies that have stood
up or are standing up domestic manufacturing, and that spans
(02:55):
across building materials, water filtration, batteries, supply chain, and just
in general. You know, we've seen a ton of battery
factories being constructed and underway that are just come about
to come online. So we haven't seen the impact of
much of this activity, precisely because reshoring takes years to
(03:19):
find sites, permit, build, and commission, and it's also easier
in a stable environment, and businesses like predictability and stability,
which is something that's in short supply right now. So
we don't know how long the tariffs will last or
how high they will be when the dust settles. But
(03:40):
this economic uncertainty that's created by the trade war, rising
rates inflation really make it challenging to start a new
reshoring process in the US. So once we see stabilization,
it's possible we may see some movement.
Speaker 1 (04:00):
I've never seen anything quite like this in my career.
And I was taught. I've talked with several CEOs you say,
I don't know what my materials are going to cost
in six or seven months. Most of them have backlogged
enough that they're ready to weather the initial storm. What
kind of advice are you giving to your portfolio companies
about how to manage their access to the materials? They need.
Speaker 2 (04:23):
Several different options and creative solutions. We've seen our companies pursuing,
and all the kudos goes out to the CEOs of
these startups. It's really a mixture of substituting materials, finding
alternative and ideally several additional suppliers, upcycling end of life materials,
(04:46):
or trying to purchase asset or supplies from struggling companies,
and also corporate partnerships with large buyers who have more
sway with suppliers. So it's oftentimes startups will struggle to
get manufacturing capacity at a contract manufacturer or be first
in line or whatever it is they're purchasing, but if
(05:11):
they partner with a larger purchaser, they can oftentimes get
it faster. And we've also seen some nimble CEOs taking
advantage of stressed companies to purchase items at discount as well.
Speaker 1 (05:26):
At the water policy level, though, can any nation achieve
climate goals without being integrated in the global supply chain?
I mean critical minerals, for instance, is one key area,
but there's so many different materials in everything we use
and make. What are your thoughts on that?
Speaker 2 (05:43):
Yeah, I think it is going to be difficult and
for us to be truly independent, or any country to be,
it's going to take time to set up a circular
economy that we don't have right now. You see that
a lot within the metals and mining space within the
United States. We have a couple of companies that are
(06:05):
in that space really saying we have all the materials,
it's just in products that we're using, and how do
we take that end of life and upcycle into something
usable so we don't have to depend on metals coming
from Canada and South America and Australia.
Speaker 1 (06:21):
That requires, though, that people, individuals and businesses have a
way to put the materials back into the system so
that this economy can be circular. Is that an area
you've been investigating.
Speaker 2 (06:36):
I think car batteries is a great example of what
we can do as a society if we put our
minds to it. The process for returning car batteries has
been established and is something that's just the standard way
that we do business in this country, and it's a
challenge getting that done with other things and materials like
(07:00):
plastics for example. But I would say in the metal
supply chain, scrappers for example, are being very cooperative with
the industry in part because it's turning it into a
higher value product that they can sell for a higher price.
So there are definitely economic reasons to do these things,
but you just have to overcome the hurdle of getting
(07:23):
all of these decentralized materials into one place.
Speaker 3 (07:27):
You know.
Speaker 1 (07:27):
I've interviewed Megan O'Connor, who's the founder of one of
your portfolio companies in the Cycle, and they recover critical
minerals from batteries and electronics. Like you were just saying,
it looked like a great business before the tariffs and
everything started to shut down. How do you see that
company's prospects changing as a result of this near reality?
Speaker 2 (07:46):
Yeah, I think the metals and mining sub sector is actually,
on a relative basis, quite well positioned in this environment,
like you said, and cycle has their electro extraction to
technology that reduces the cost and carbon footprint of refining
critical metals like cobalt and nickel, And they have a
(08:09):
facility in Ohio and where the world's first to make
MHP from nickel and cobalt, which is a middle material
that goes into things like EV's defense, et cetera. And
the rare the metals that they are upcycling are primarily
sourced from China, and so the US and Europe in
(08:33):
the past few years, not just in twenty twenty five,
have been prioritizing this new critical metal supply chain because
they know that it means energy independence and there's a
new urgency to protect that as a matter of national security.
So China's restriction on export of refined metals, plus the
(08:57):
president's executive orders on accelerated the domestic critical mineral supply
chain should actually have a greater impact on domestic production
than the rollback of say EV incentives. And in the
EU laws and regulations are actually restricting transporting of black
(09:19):
mass across borders, and so end Cycle is one of
the few companies that can provide a colocated solution to
solve those needs.
Speaker 1 (09:28):
Do you see them expanding by licensing the technology, are
actually building up presents in different geographies.
Speaker 2 (09:35):
I would believe that they're building out a presence and
co locating on site, and I wouldn't be surprised if
we see them both in the US and Europe in
the near future.
Speaker 1 (09:47):
That'd be great to see that, because of course we
need those materials recovered. So let's widen the aperture a
little bit. What other emerging technologies do you think are
going to have the largest impact on accelerating the energy
transition over the next five or ten years.
Speaker 2 (10:02):
Right now, it is all about load growth in the
United States under the porth is.
Speaker 1 (10:09):
Not everybody's going to know that term.
Speaker 2 (10:12):
So load growth is when there's increased demand for electricity
both on and off the grid. And in the prior state,
you know, before your your parents had solar panels on
their rooftop, you were really just getting electricity from the grid.
Now we're in a more complex uh grid environment where
(10:34):
there's many different sources that are generating electrons that are
flowing into our homes and businesses. So there's increasing complexity
and increasing demand of electricity, and a lot of that
is because of the growth in AI and the US
wanting to be the leader globally in the AI arms race.
(10:58):
So we're expecting another doubling at least in load growth
in the United States by twenty thirty, which is a
very very very tall order. And the transmission and distribution
of transporting those electrons into people's homes is a very
slow process that's encumbered by permitting and other regulatory items.
(11:22):
And so we are seeing on grid optimization, grid enhancing
technologies that can improve the efficiency of the electrons flowing
into our homes and businesses. We're also seeing more off
grid solutions to say, where are there pockets with ideal
(11:45):
conditions where I can stand up a microgrid, stand up
a data center and things like that. Then you have
the offshoots of this load growth. So we talked about
metals in mining and the reshoring of the prosessing and
circularity of metals. The reason that's important in this case
is for batteries and the battery supply chain. You know,
(12:10):
solar is already one of the cheapest sources of energy
we have, and I believe it's something like ninety percent
of the new capacity turning online is from renewables. Already.
The unlock that we're going to have is as batteries
continue to come down the cost curve to enable renewables
(12:31):
to pull even farther ahead of fossil for electricity, and
you know, for example, one white space is in long
duration and seasonal energy storage that would be game changing.
We have one company called Cache Energy that can store
up to one hundred hours, which would completely change the
way that the industry operates. You can you can charge
(12:55):
in the summer and then you know, discharge in the
winter months when generally people are using more diesel or
fuel oil and turning on peaker plants.
Speaker 1 (13:08):
So when you say one hundred hours is at one
hundred hours for how many homes do you have a
sense of that.
Speaker 2 (13:15):
So what happens with a lot of battery technologies is
there's a degradation over well, degradation might not be the
correct word, but many batteries can only store for eight
to twelve hours and then it has to flow out
in some way. There's a lot of for example, hot
brick companies where you might lose one percent each day,
(13:37):
so eventually it would run out in a similar way
that we need to charge our batteries, right, even if it's.
Speaker 1 (13:43):
Not a memory in a computer for instance, Yes, exactly.
Speaker 2 (13:47):
And so while most are at the eight to twelve range,
and you know, long duration is twenty thirty hours, cash
is really providing a seasonal storage that can completely change
the economics of renewable resources.
Speaker 1 (14:03):
But how many batteries would you need in an area
in order to provide that year round backstop that you're describing.
I'm just curious. It sounds like something that you might
need a dozen batteries for a Houston or maybe a
thousand batteries for Houston. What's the scale that we're talking about.
Speaker 2 (14:21):
They don't have a battery in the conventional way that
we would think of it. It's actually a material that
can be stored and say a granary or even outside
with a carp on top of it, so that energy
density is quite high where they would be able to
cover a vast expanse and could even at a certain scale, replace,
(14:44):
for example, coal plants.
Speaker 1 (14:46):
Interesting, Okay, so we're talking about a scalable battery infrastructure
that can be placed almost anywhere, not at.
Speaker 2 (14:54):
An individual home, but definitely exactly Yeah, in replacement of
energy generation resources.
Speaker 1 (15:03):
So what characteristics do you prioritize when you're evaluating a
startup or a technology for consideration as an investment.
Speaker 2 (15:13):
Yeah. I was thinking long and hard about this because
I didn't want to give the generic VC answer. I
think many of us are looking for the same factors.
I would love to talk about some of our companies
who have been quite resilient in the current environment and
(15:33):
what I think has made them so successful. You really
have to have resilience and be a creative problem solver
in this time of increased volatility, and some of the
what we like to say is that the CEO has
to be the chief resource obtainer for the company, both
in recruiting the team, winning customers, being a great storyteller
(15:58):
for investors, and creating that right balance between painting a
vision but also being honest. Where I see a lot
of early stage companies fall down is having clear planning
around milestones to position for success and those proof points
that customers and investors aren't really looking for. And some
(16:23):
of the creative problem solving we've seen is due to
a tough fundraising environment and managing cash within that time.
So we've seen different customer payment structures to get more
cash up front. I mentioned prior buying assets out of
bankruptcy to reduce future capex needs, bring down the size
(16:46):
of your raise, unlock additional non dilutive financing lines. You know,
a lot of people are waiting on O said doe
money that's not coming in. Is there a way that
can be replaced by state money or from corporate partners
corporate in in kind services for example. So it's definitely
(17:11):
a tough environment and those are some of the strategies
we've seen.
Speaker 3 (17:14):
Our best CEO is employing several of your companies focus
on measurement, including Utilidata and rail Vision Analytics, which actually
analyzes the performance of train networks.
Speaker 1 (17:26):
How does digital tools like AI, Internet of Things and
advanced analytics change the potential for climate innovation from your perspective, Yeah.
Speaker 2 (17:34):
I would say that's really at the core of our
investment thesis, that these technologies will help bring down the
green premium to point of elimination and really advance the
adoption curve within the space. Rail Vision is a really
great example of using AI to fine tune human practices,
(17:57):
and oftentimes software solutions can be measurement only. But what
I love about rail Vision it's that it does have
an immediate carbon emissions reduction impact. So you know, rail
engineers do the same thing as we do when we drive.
They start fast, they break late, they turn too sharply,
(18:19):
and so rail visions machine learning model informs optimal driving
based on the train consist crossings, weather, things like that,
and so they can actually reduce diesel fuel usage, which,
other than labor, is the top cost for the rail industry,
(18:41):
in some cases better than hardware improvements that have been
tried we have. You know, most of our other companies
have some sort of software or AI backbone. For example,
near Exen is another company in the infrastructure space. They
use computer vision and machine learning to stitch together acoustic, visual,
(19:05):
and thermal data points to identify structural defects, thereby reducing
a lot of times concrete usage, which as we all know,
is very emissions intense in doing predictive maintenance for our infrastructure,
and I think we've seen anyone doing a road trip
(19:26):
across the US knows that we could always stand torrastructure.
Speaker 1 (19:32):
Well you're describing. I think the ideal way we should
use AI, which is to augment human intelligence to let
somebody like a train engineer see into the full spectrum
of the way they're operating the machinery that they're responsible for.
How do you how does that potentially help us accelerate
climate responsible behavior? Can we get that kind of feedback
(19:55):
across a full spectrum of our relationship with the environment?
Speaker 2 (20:02):
Meaning how can AI change human behavior to reduce.
Speaker 1 (20:06):
Us That's one aspect of it. But is it something
that you can that you imagine can be embedded into
almost every interaction we have with our use of energy,
our use of materials, and so forth. I mean, can
you paint a bit of a picture of what you
imagine sustainability looks like when it is AI assisted.
Speaker 2 (20:26):
We've seen AI spur innovation to bring it down cost
curves so many cycles faster than it ever did before.
Even for our hardware companies, oftentimes they have an AI
back end that's improving the pace of innovation for getting
(20:47):
to Gen two, Gen three of their product consumption comes
first in terms of the energy footprint of AI and
solutions come later. So I think the jury is still
out on what the net impact of that will be.
Speaker 1 (21:05):
This is a fascinating conversation, but this is a great
place to take a break. We'll be right back after
this quick commercial. Now let's return to the conversation with
Kavita Pateel of MUSE Climate Partners, a venture firm investing
in the energy materials, carbon capture, and circular economy industries,
(21:26):
amongst others. So, Kavita, as we were talking about before,
AI is going to be an important part of our
relationship with almost everything in the future, and we can
see into a deeper world using it and be more
efficient in our use amongst other things. How do you
imagine AI playing a role in our ability to reduce
(21:47):
our impact overall before we start to account for its
consumption of energy.
Speaker 2 (21:54):
Absolutely, AI has been important in being completely game changing
the pace of innovation of a lot of the new
technologies that are coming to market that reduce emissions. I
mean we talked about rail vision, there's AI powered fleet
management systems that help people transition from ice vehicles to
(22:16):
electric vehicles. You can use AI as a homeowner to
make better decisions and capture incentives for green home upgrades.
Rock Rabbit is one of our companies that does that.
We can better predict electricity demand and make sure we're
not over or under buying because as we've seen with
(22:37):
the blackouts in Spain. You know, reliability is still the
number one goal, even as we have increasing weather anomalies
and load demand on the grid. And so it's better
decision making, it's faster innovation, and it's just making it
(22:57):
easier to do the right thing.
Speaker 1 (23:01):
Are you confident, because of course everybody is talking about
the potential energy demands for making and using the AI
that in the long run, AI will offset its carbon footprint.
Speaker 2 (23:14):
I think that is the zero point five c degree question.
You know, consumption always comes first and the solutions come later.
A lot of these new technologies are on a five
to ten plus year timeline.
Speaker 1 (23:30):
You know.
Speaker 2 (23:30):
It's kind of like AI applied to drug development. Can
AI turned through a massive database and look at millions
of small molecules that could create a cure for cancer? Yes, definitely.
Do we know that it is going to cure cancer?
We don't. We just know it's increasing our chances of
(23:51):
doing it in a more timely manner. So similarly, applying
AI to offset the energy footprint with the solutions create.
Part of it is a technological question, part of it
is a political question and a financing question, and also
a consumer behavior question. So I am optimistic, and you know,
(24:14):
you also have to accept the reality that this is
the way the world is going, and it's up to
us as consumers and investors to make sure that AI
does move in the direction of being applied in the
right cases.
Speaker 1 (24:28):
Are there industrial sectors where investors might be underestimating growth opportunities,
particularly because of the potential efficiency lift of AI areas
like clean mining or grid resilience that we were talking
about before. What are your thoughts on that?
Speaker 2 (24:42):
Absolutely, I mean, I think the industrial space has been
one of the hardest to decarbonize. We've historically seen a
ton of work in energy and in food, in ag
and in mobility, and oftentimes the industrial sector can be
the hardest to decarbonize. You know, for example, steel, and
(25:06):
there's many different ways to decarbonize steel. You can look
at using AI to optimize the process so that there's
less it's less emissions intense. You can look at replacing
the heat that's required in producing steel, and you can
also look at a material substitution play. So there's one
(25:30):
company in our portfolio that I'm super excited about called
invent Wood, and they actually are modifying wood and densifying
it to turn it into an environmentally sustainable construction material
that is on par with the strength and other characteristics
(25:51):
of steel and reason.
Speaker 1 (25:53):
I just saw this at the forest at the US
Forest Products Laboratory in Madison, Wisconsin. I could not believe
what we're building with that kind of what It was amazing.
Speaker 2 (26:02):
It's beautiful and it's counterintuitive, but it is actually fire safe.
So you know, imagine rebuilding after the LA wildfire as
abut one example, and being able to have a beautiful
wood building with structural integrity and fire safety where you
don't have to use steel and your carbon footprint is
(26:25):
significantly cut. I think the potential applications there are huge.
Speaker 1 (26:31):
So how does decarbonization as a general practice and maybe
a foundational practice play into your thinking about sustainable manufacturing?
Are you making investments specifically in integrating decarbonization into everything
all industrial practices?
Speaker 2 (26:55):
We haven't yet made an investment in a software tool
that can help with decarbonizing industrial practices. We have made
a lot of manufacturing plays that are using technology to
decarbonize in certain spaces.
Speaker 1 (27:12):
Should that be a priority for an investor is to
focus on lowering the carbon impact of an investment overall?
Or are you thinking about a broader systems approach where
we're looking at water and other impacts that might in
the long run benefit nature.
Speaker 2 (27:28):
Ah. I see what you're saying, meaning, as the startups
are scaling, their carbon footprints are actually getting larger, and
so as investors, how are we guiding these companies in
order to say you need to manage the carbon footprint
even through that growth. It's kind of a paradoxical situation
because you're investing to decarbonize, but the company itself has
(27:50):
a growing carbon footprint as it's scaling. I think the
most important thing is to understand what are those key
drivers of emissions and to manage and track that over time,
which is something that we do with our companies. So
you know, for example, maybe there are chemical inputs in
a manufacturing process that make up forty percent of their footprint,
(28:15):
and looking to see what alternatives there are to that,
even if it is at a little bit of a
premium once they get to a certain scale. So it's
a great question to ponder and definitely one of the
complexities of scaling a climate tech.
Speaker 1 (28:33):
Company or any company these days. Frankly, the other thing
that a lot of people are talking about is carbon removal.
Is that something that you believe is a viable market
for you to invest in.
Speaker 2 (28:48):
Carbon removal and carbon to value is one of the
I would say earlier technologies in terms of how mature
the technology is and how it's come down the cost curve.
Given where we are right now in terms of the
warming that's already been locked in, I do believe that
(29:10):
carbon removal is an important part of the story, and
there are huge communities around tackling this problem. On one hand,
you have let's say nature based carbon removal or carbon avoidance,
and on the other hand you have you know, air
miners using removal from oceans or other places. And so
(29:36):
the challenge there is really getting to a price point
of removal per ton that is palatable to consumers who
are now paying for something that they didn't before. And
there are some regimes like the EU has a carbon
tax where there's an economic incentive to do so. If
we had passed a carbon tax in the United States
(30:00):
would be in a very different place than we are
now with respect to carbon removal. But I think everyone's
chasing getting to around one hundred dollars per ton in
carbon removal and that's going to be the holy.
Speaker 1 (30:11):
Grow one hundred. Okay, that's a pretty reasonable numbers. It's
not necessary to get to the eight or nine hundred
that I've seen some saying they need to achieve. That's
good news.
Speaker 2 (30:23):
Our customers paying one hundred dollars, not eight hundred.
Speaker 1 (30:26):
Dollars understood, That's what I'm saying. I have heard organizations
say in order for this to be viable, we need
to be making eight hundred dollars a ton of removal
carbon removed, which is absurd. No one's going to be
able to pay that.
Speaker 2 (30:40):
Correct.
Speaker 1 (30:44):
As I hear what you're talking about, it sounds like
that becomes a component of your business sometime in the
future rather than a core effort today. Because the price
of carbon hasn't risen to the level that it needs
to be, and in fact, even Canada, which had a
carbon tax, is backed away from that because of the
political uncertainty around it. Is that our biggest challenge, from
(31:06):
your perspective as an investor, is putting a policy framework
in place that allows us to make these decisions with
confidence that we're going to be able to recoup the investment.
Speaker 2 (31:18):
Policy does. Policy and government incentives are very significant in
helping more frontier technologies come down the cost curve for sure.
I think the other aspect that we consider as climate
tech investors is timing. So when you're investing in a company,
we have a framework to evaluate the carbon reduction potential
(31:41):
and compare companies against each other to make sure that
our marginal dollar is going into the most impactful areas,
and timing is a huge part of that. So you
might be investing in a carbon removal technology that could
have significant gigaton scale impact but likely in I don't know,
five to seven years. Or you could invest in an
(32:05):
EV fleet management company that's enabling the transition from ICV,
which is happening right now in real time, and so
you can start measuring realized impact seven years earlier, but
the overall impact might be lower. So how do you
compare those two against each other? And that's why for ourselves,
(32:27):
we have a portfolio target, not an individual company target,
to take advantage of and be cognizant of aspects like timing,
aspects like how many companies are there in the space.
If no one else is tackling this problem and you're
one of the only solutions that should get some credit.
If you're working in a hard to decarbonize space, that
(32:49):
should get some credit. So it's a it's a push
and pull.
Speaker 1 (32:53):
You're hedging your risk across the entire portfolio in order
to account for the complexity of the systems that we're
trying to migrate towards decarbonized outcome.
Speaker 2 (33:03):
Absolutely, you know what.
Speaker 1 (33:05):
Just before we close up, I wanted to ask about Pantholassa,
which generates electricity from wave energy in the open ocean.
They're buoys. It's an interesting bet. But the question I had,
and we talked about the grid a little while ago,
how is that source of energy going to be integrated
in the grid.
Speaker 2 (33:22):
Yes, Panthalasa doesn't say a lot publicly, and they recently
came out of stealth mode. I think foundationally I can
say that AI load growth takes a lot of time
to have new energy generation sources to power it. The
interconnection itself can be challenging. So the fundamental thesis is
(33:46):
what if you could generate extremely low cost energy without land,
without permit about construction, without the interconnect. Panhlasa's device can
be created more easily than a car, and they're using
deep ocean waves, which is our greatest untapped renewable resource
(34:10):
to generate energy to power what you could power an
onboard computer for AI. You could also do bitcoin mining,
and so they are really revolutionizing and are on the
cutting edge of what's possible.
Speaker 1 (34:26):
So you're actually not betting on the interconnect, You're betting
on distributed placement of self sustaining functionality like bitcoin mining
or monitoring ocean temperatures for instance. That's really interesting.
Speaker 2 (34:42):
Yeah, it takes interconnect out of the equation, which has
been one of the biggest headaches in the industry in
recent memory.
Speaker 1 (34:49):
So that kind of distributed power generation could be applied
across a lot of different contexts. Are there other investments
in your portfolio that are thinking about that shame approach
but on land where you could co locate functionality with
a source of energy. Yeah.
Speaker 2 (35:09):
We do have actually a recent off grid energy company
called Dragon Wings, and it's a portable solar plus storage
system that kind of is in this shipping container sized
facility and it opens up the solar panels. So again
(35:30):
at using the La wildfires as an example, or construction
that's far away from a gas station, you're essentially replacing
diesel generators. You no longer have to schlept fuel back
and forth, and you'll have a consistent, renewable clean energy
(35:52):
that's better for construction as they're, for example, rebuilding from
the LA wildfires.
Speaker 1 (35:59):
Now we've talked a lot about different stories, and I'm
curious across your portfolio what founder habits, from their technical
rigor to the ability to tell a good story seem
to predict success most when thinking about scaling a climate venture.
Speaker 2 (36:16):
Founders who are able to flourish in a time when
you know, we had the Spack boom, we had COVID,
the IRA pass, now we have the tariffs in a
trade war. It's a really tall order and hard to
be good at everything. But I think the founders right
now who are showing that creative problem solving and resiliency
(36:38):
are really the ones that are going to pull ahead
in this environment. There are also founders who are faster
to catch up with market realities and be looking ahead
of the curve instead of being reactive, or instead of
hoping that like many people that oh maybe he wouldn't
(36:58):
do that with the tariffs, or don't worry, it'll come
down to ten percent that are actually creating. Oh yeah,
I've had this plan BC and D this entire time.
Let me tell you about it. So the forward thinking
founders that are scrappy in what is the only certainty
is uncertainty is where we're really seeing companies thrive.
Speaker 1 (37:20):
So do you see where we're going right now as
a time potentially when instead of the climate migration collapsing,
it might actually blossom because we've responded to the adversity
and the challenges that the industry faces.
Speaker 2 (37:35):
So an interesting stat is that climate investing activity actually
increased in Q one versus the same time last year.
Although we're in a tricky economic environment, you know, the
economics of renewable energy have been and will remain attractive
(37:58):
and only become even more or so, so there's undeniable
economic and technological tailwinds within the space. The capital stack
has also significantly matured in recent years with debt venture, debt,
equipment financing, grant money, lines of credit, et cetera, and so,
(38:21):
and there's still dry powder to deploy for all of
these funds who have raised money. So I am cautiously optimistic.
I don't want to say that. You know, we're not
in a period of unpredictable market conditions, but I do
think that, you know, climate tech is showing signs of
resilience for those high quality companies.
Speaker 1 (38:45):
Very encouraging to hear, and obviously we are in a
very challenging time, but hopefully it'll be that that moment
when we forge a new future together. And Kavita, thank
you so much for the time you spent with us.
It's been fascinating, awesome.
Speaker 2 (38:58):
Thanks Mitch, thanks for having me.
Speaker 1 (39:03):
You've been listening to a conversation with Cavita Patel, a
principle at the clean tech and climate investor MEWSE Capital Partners,
and you can learn more about their work and portfolio
of companies at mewsclimate dot com. Muse is spelled mu
us and Mew's climate is all one word, no space,
no dash mewseclimate dot com. Kavita spoke about bringing down
(39:25):
the green premium, the extra price you pay for a
green product, and that's a practical acknowledgment that consumers are
going to be paying for something they didn't before, even
when they realize other savings, including environmental savings from sustainable
products and services. That's a tough story to tell because
it's full of trade offs that remain esoteric for the
(39:45):
typical shopper. So where do you invest. The greatest opportunity
to bring down these costs is to eliminate the vast
amount of waste in our economy, particularly by recovering and
reusing materials that throughout the industrial era have often been
used only once and then thrown away. And then there's
all the other ways that we could eliminate upstream from
that event. But as Kavita pointed out, government policies can
(40:07):
support or hinder that progress, and now is the time
to make our voices heard on behalf of renewable energy,
sustainable business practices, and our hunger for better environmentally beneficial products.
Let's recognize that it will be harder in the current
US political environment, but the greatest companies and movements arise
(40:27):
in tough times like these, so we have to double down.
So what will it take to lead the change, to
start companies, to launch nonprofits, and lead the race to innovate?
As a multi company entrepreneur, I'm struck by Kavita's comments
about the most successful leaders having not just a plan A,
but a plan BC and D two. That's how you
(40:47):
become the chief resource obtainer for your organization. You commit
to being scrappy finding resources, are making them where others
find no value. But many people see this pursuit of
unrecognized value it's just scraping by. It's doing too little
instead of liberating value wherever it can be found. But
the greatest entrepreneurs turn scrap into gold, whether that means
(41:10):
starting your business with used equipment batter desks, are seeing
the opportunity to transform the contents of a landfill into
raw materials for the next generation of sustainable products. It
doesn't take magic, it takes grit, and the times we're
in so purely transactional as they are while challenging, provide
us all the raw materials we need to remake the economy.
(41:32):
If you want to be one of the leaders who
reinvents our world, start talking with investors, networking with business
and policy leaders, and scraping together whatever it takes to
achieve the dreams that keep you awake at night. So
we'll continue to track the story. We'll have more investors on,
We'll have more entrepreneurs on. Stay tuned, and I hope
you take a moment to check out all of the
(41:53):
episodes of sustainability in the year that we've produced Over
the years, there's more than five hundred of them for
you to share with your friends and your coworkers. So
would you take a moment, would you do me a
favor write a review on your favorite podcast platform, because
it will help your neighbors find us. Folks, you're the
amplifiers that spread more ideas to create less weights. So
please tell your friends, your family, the coworkers, and people
(42:15):
you meet on the street that they can find us
on Apple Podcasts, Spotify, iHeartRadio, Audible or whatever purveyor of
podcast goodness they prefer. Thank you so much for your support.
I'm Metracliff. This is sustainability in your ear, and we
will be back with another innovator interview soon. In the meantime, folks,
take care of yourself, take care of one another, and
(42:37):
let's all take care of this beautiful planet of ours.
Have a green day.
Hello, good morning, good afternoon, or good evening, wherever you
are on this beautiful planet of ours. Welcome to Sustainability
in your Ear. This is the podcast conversation about accelerating
the transition to a sustainable carbon neutral society, and I'm
your host, Mitch Ratcliffe. Thanks for joining the conversation today.
As investments in climate technology grow, there's an increasing focus
(00:31):
on identifying solutions that can deliver both environmental impact and
financial returns. We also need smart patient capital from investors
that look beyond quick returns to build the foundation for
lasting systemic change. Venture capital firms can play a critical
role in the transformation the grid of industrial processes and
(00:52):
product development as we make sustainability in enduring practice and business.
So today we're going to talk with Kavita Patel. She
is a principal at MEWSE Climate Partners. The firm invests
in early stage companies at the intersection of climate and technology.
Their portfolio includes organizations like battery recycler inth Cycle, whose
CEO has been on the show before, and ev charging
(01:14):
innovator amp Up, as well as the smart air conditioning
developer Harvest. Their investments target critical sectors such as energy
material science, industrial production, and transportation, where innovation is essential
to meet climate goals. Kavita brings deep experience in sustainable finance,
venture investing, and operational leadership, and today we'll explore how
(01:35):
MEWS approaches emerging climate technologies and what they see as
the most promising areas for investment in twenty twenty five,
as well as the challenges that startups and investors face
in scaling climate solutions. You can learn more about their
work at mewseclimate dot com. Meuse is spelled muus and
mew's client is all one word, no space, no dash,
(01:58):
mewsclimate dot com. We'll get to the conversation right after
a quick commercial break. Stay tuned, Welcome to the Showkavita.
How you doing today?
Speaker 2 (02:12):
Doing great, Mitch, I'm excited to be here.
Speaker 1 (02:14):
Well, thank you for joining us. At You're living at
the cutting edge and a lot is changing at the
cutting edge. So as we head into the summer of
twenty twenty five, where do you see the biggest shifts
happening in climate tech due to the tariffs and the
potential restoring of manufacturing in the United States.
Speaker 2 (02:31):
Yeah, it's funny that you mentioned reshoring. I think climate
tech has already been a boom for reshoring, and domestic
manufacturing efforts do an in large part to the IRA.
I mean, just in our portfolio, I can think of
at least six of our portfolio companies that have stood
up or are standing up domestic manufacturing, and that spans
(02:55):
across building materials, water filtration, batteries, supply chain, and just
in general. You know, we've seen a ton of battery
factories being constructed and underway that are just come about
to come online. So we haven't seen the impact of
much of this activity, precisely because reshoring takes years to
(03:19):
find sites, permit, build, and commission, and it's also easier
in a stable environment, and businesses like predictability and stability,
which is something that's in short supply right now. So
we don't know how long the tariffs will last or
how high they will be when the dust settles. But
(03:40):
this economic uncertainty that's created by the trade war, rising
rates inflation really make it challenging to start a new
reshoring process in the US. So once we see stabilization,
it's possible we may see some movement.
Speaker 1 (04:00):
I've never seen anything quite like this in my career.
And I was taught. I've talked with several CEOs you say,
I don't know what my materials are going to cost
in six or seven months. Most of them have backlogged
enough that they're ready to weather the initial storm. What
kind of advice are you giving to your portfolio companies
about how to manage their access to the materials? They need.
Speaker 2 (04:23):
Several different options and creative solutions. We've seen our companies pursuing,
and all the kudos goes out to the CEOs of
these startups. It's really a mixture of substituting materials, finding
alternative and ideally several additional suppliers, upcycling end of life materials,
(04:46):
or trying to purchase asset or supplies from struggling companies,
and also corporate partnerships with large buyers who have more
sway with suppliers. So it's oftentimes startups will struggle to
get manufacturing capacity at a contract manufacturer or be first
in line or whatever it is they're purchasing, but if
(05:11):
they partner with a larger purchaser, they can oftentimes get
it faster. And we've also seen some nimble CEOs taking
advantage of stressed companies to purchase items at discount as well.
Speaker 1 (05:26):
At the water policy level, though, can any nation achieve
climate goals without being integrated in the global supply chain?
I mean critical minerals, for instance, is one key area,
but there's so many different materials in everything we use
and make. What are your thoughts on that?
Speaker 2 (05:43):
Yeah, I think it is going to be difficult and
for us to be truly independent, or any country to be,
it's going to take time to set up a circular
economy that we don't have right now. You see that
a lot within the metals and mining space within the
United States. We have a couple of companies that are
(06:05):
in that space really saying we have all the materials,
it's just in products that we're using, and how do
we take that end of life and upcycle into something
usable so we don't have to depend on metals coming
from Canada and South America and Australia.
Speaker 1 (06:21):
That requires, though, that people, individuals and businesses have a
way to put the materials back into the system so
that this economy can be circular. Is that an area
you've been investigating.
Speaker 2 (06:36):
I think car batteries is a great example of what
we can do as a society if we put our
minds to it. The process for returning car batteries has
been established and is something that's just the standard way
that we do business in this country, and it's a
challenge getting that done with other things and materials like
(07:00):
plastics for example. But I would say in the metal
supply chain, scrappers for example, are being very cooperative with
the industry in part because it's turning it into a
higher value product that they can sell for a higher price.
So there are definitely economic reasons to do these things,
but you just have to overcome the hurdle of getting
(07:23):
all of these decentralized materials into one place.
Speaker 3 (07:27):
You know.
Speaker 1 (07:27):
I've interviewed Megan O'Connor, who's the founder of one of
your portfolio companies in the Cycle, and they recover critical
minerals from batteries and electronics. Like you were just saying,
it looked like a great business before the tariffs and
everything started to shut down. How do you see that
company's prospects changing as a result of this near reality?
Speaker 2 (07:46):
Yeah, I think the metals and mining sub sector is actually,
on a relative basis, quite well positioned in this environment,
like you said, and cycle has their electro extraction to
technology that reduces the cost and carbon footprint of refining
critical metals like cobalt and nickel, And they have a
(08:09):
facility in Ohio and where the world's first to make
MHP from nickel and cobalt, which is a middle material
that goes into things like EV's defense, et cetera. And
the rare the metals that they are upcycling are primarily
sourced from China, and so the US and Europe in
(08:33):
the past few years, not just in twenty twenty five,
have been prioritizing this new critical metal supply chain because
they know that it means energy independence and there's a
new urgency to protect that as a matter of national security.
So China's restriction on export of refined metals, plus the
(08:57):
president's executive orders on accelerated the domestic critical mineral supply
chain should actually have a greater impact on domestic production
than the rollback of say EV incentives. And in the
EU laws and regulations are actually restricting transporting of black
(09:19):
mass across borders, and so end Cycle is one of
the few companies that can provide a colocated solution to
solve those needs.
Speaker 1 (09:28):
Do you see them expanding by licensing the technology, are
actually building up presents in different geographies.
Speaker 2 (09:35):
I would believe that they're building out a presence and
co locating on site, and I wouldn't be surprised if
we see them both in the US and Europe in
the near future.
Speaker 1 (09:47):
That'd be great to see that, because of course we
need those materials recovered. So let's widen the aperture a
little bit. What other emerging technologies do you think are
going to have the largest impact on accelerating the energy
transition over the next five or ten years.
Speaker 2 (10:02):
Right now, it is all about load growth in the
United States under the porth is.
Speaker 1 (10:09):
Not everybody's going to know that term.
Speaker 2 (10:12):
So load growth is when there's increased demand for electricity
both on and off the grid. And in the prior state,
you know, before your your parents had solar panels on
their rooftop, you were really just getting electricity from the grid.
Now we're in a more complex uh grid environment where
(10:34):
there's many different sources that are generating electrons that are
flowing into our homes and businesses. So there's increasing complexity
and increasing demand of electricity, and a lot of that
is because of the growth in AI and the US
wanting to be the leader globally in the AI arms race.
(10:58):
So we're expecting another doubling at least in load growth
in the United States by twenty thirty, which is a
very very very tall order. And the transmission and distribution
of transporting those electrons into people's homes is a very
slow process that's encumbered by permitting and other regulatory items.
(11:22):
And so we are seeing on grid optimization, grid enhancing
technologies that can improve the efficiency of the electrons flowing
into our homes and businesses. We're also seeing more off
grid solutions to say, where are there pockets with ideal
(11:45):
conditions where I can stand up a microgrid, stand up
a data center and things like that. Then you have
the offshoots of this load growth. So we talked about
metals in mining and the reshoring of the prosessing and
circularity of metals. The reason that's important in this case
is for batteries and the battery supply chain. You know,
(12:10):
solar is already one of the cheapest sources of energy
we have, and I believe it's something like ninety percent
of the new capacity turning online is from renewables. Already.
The unlock that we're going to have is as batteries
continue to come down the cost curve to enable renewables
(12:31):
to pull even farther ahead of fossil for electricity, and
you know, for example, one white space is in long
duration and seasonal energy storage that would be game changing.
We have one company called Cache Energy that can store
up to one hundred hours, which would completely change the
way that the industry operates. You can you can charge
(12:55):
in the summer and then you know, discharge in the
winter months when generally people are using more diesel or
fuel oil and turning on peaker plants.
Speaker 1 (13:08):
So when you say one hundred hours is at one
hundred hours for how many homes do you have a
sense of that.
Speaker 2 (13:15):
So what happens with a lot of battery technologies is
there's a degradation over well, degradation might not be the
correct word, but many batteries can only store for eight
to twelve hours and then it has to flow out
in some way. There's a lot of for example, hot
brick companies where you might lose one percent each day,
(13:37):
so eventually it would run out in a similar way
that we need to charge our batteries, right, even if it's.
Speaker 1 (13:43):
Not a memory in a computer for instance, Yes, exactly.
Speaker 2 (13:47):
And so while most are at the eight to twelve range,
and you know, long duration is twenty thirty hours, cash
is really providing a seasonal storage that can completely change
the economics of renewable resources.
Speaker 1 (14:03):
But how many batteries would you need in an area
in order to provide that year round backstop that you're describing.
I'm just curious. It sounds like something that you might
need a dozen batteries for a Houston or maybe a
thousand batteries for Houston. What's the scale that we're talking about.
Speaker 2 (14:21):
They don't have a battery in the conventional way that
we would think of it. It's actually a material that
can be stored and say a granary or even outside
with a carp on top of it, so that energy
density is quite high where they would be able to
cover a vast expanse and could even at a certain scale, replace,
(14:44):
for example, coal plants.
Speaker 1 (14:46):
Interesting, Okay, so we're talking about a scalable battery infrastructure
that can be placed almost anywhere, not at.
Speaker 2 (14:54):
An individual home, but definitely exactly Yeah, in replacement of
energy generation resources.
Speaker 1 (15:03):
So what characteristics do you prioritize when you're evaluating a
startup or a technology for consideration as an investment.
Speaker 2 (15:13):
Yeah. I was thinking long and hard about this because
I didn't want to give the generic VC answer. I
think many of us are looking for the same factors.
I would love to talk about some of our companies
who have been quite resilient in the current environment and
(15:33):
what I think has made them so successful. You really
have to have resilience and be a creative problem solver
in this time of increased volatility, and some of the
what we like to say is that the CEO has
to be the chief resource obtainer for the company, both
in recruiting the team, winning customers, being a great storyteller
(15:58):
for investors, and creating that right balance between painting a
vision but also being honest. Where I see a lot
of early stage companies fall down is having clear planning
around milestones to position for success and those proof points
that customers and investors aren't really looking for. And some
(16:23):
of the creative problem solving we've seen is due to
a tough fundraising environment and managing cash within that time.
So we've seen different customer payment structures to get more
cash up front. I mentioned prior buying assets out of
bankruptcy to reduce future capex needs, bring down the size
(16:46):
of your raise, unlock additional non dilutive financing lines. You know,
a lot of people are waiting on O said doe
money that's not coming in. Is there a way that
can be replaced by state money or from corporate partners
corporate in in kind services for example. So it's definitely
(17:11):
a tough environment and those are some of the strategies
we've seen.
Speaker 3 (17:14):
Our best CEO is employing several of your companies focus
on measurement, including Utilidata and rail Vision Analytics, which actually
analyzes the performance of train networks.
Speaker 1 (17:26):
How does digital tools like AI, Internet of Things and
advanced analytics change the potential for climate innovation from your perspective, Yeah.
Speaker 2 (17:34):
I would say that's really at the core of our
investment thesis, that these technologies will help bring down the
green premium to point of elimination and really advance the
adoption curve within the space. Rail Vision is a really
great example of using AI to fine tune human practices,
(17:57):
and oftentimes software solutions can be measurement only. But what
I love about rail Vision it's that it does have
an immediate carbon emissions reduction impact. So you know, rail
engineers do the same thing as we do when we drive.
They start fast, they break late, they turn too sharply,
(18:19):
and so rail visions machine learning model informs optimal driving
based on the train consist crossings, weather, things like that,
and so they can actually reduce diesel fuel usage, which,
other than labor, is the top cost for the rail industry,
(18:41):
in some cases better than hardware improvements that have been
tried we have. You know, most of our other companies
have some sort of software or AI backbone. For example,
near Exen is another company in the infrastructure space. They
use computer vision and machine learning to stitch together acoustic, visual,
(19:05):
and thermal data points to identify structural defects, thereby reducing
a lot of times concrete usage, which as we all know,
is very emissions intense in doing predictive maintenance for our infrastructure,
and I think we've seen anyone doing a road trip
(19:26):
across the US knows that we could always stand torrastructure.
Speaker 1 (19:32):
Well you're describing. I think the ideal way we should
use AI, which is to augment human intelligence to let
somebody like a train engineer see into the full spectrum
of the way they're operating the machinery that they're responsible for.
How do you how does that potentially help us accelerate
climate responsible behavior? Can we get that kind of feedback
(19:55):
across a full spectrum of our relationship with the environment?
Speaker 2 (20:02):
Meaning how can AI change human behavior to reduce.
Speaker 1 (20:06):
Us That's one aspect of it. But is it something
that you can that you imagine can be embedded into
almost every interaction we have with our use of energy,
our use of materials, and so forth. I mean, can
you paint a bit of a picture of what you
imagine sustainability looks like when it is AI assisted.
Speaker 2 (20:26):
We've seen AI spur innovation to bring it down cost
curves so many cycles faster than it ever did before.
Even for our hardware companies, oftentimes they have an AI
back end that's improving the pace of innovation for getting
(20:47):
to Gen two, Gen three of their product consumption comes
first in terms of the energy footprint of AI and
solutions come later. So I think the jury is still
out on what the net impact of that will be.
Speaker 1 (21:05):
This is a fascinating conversation, but this is a great
place to take a break. We'll be right back after
this quick commercial. Now let's return to the conversation with
Kavita Pateel of MUSE Climate Partners, a venture firm investing
in the energy materials, carbon capture, and circular economy industries,
(21:26):
amongst others. So, Kavita, as we were talking about before,
AI is going to be an important part of our
relationship with almost everything in the future, and we can
see into a deeper world using it and be more
efficient in our use amongst other things. How do you
imagine AI playing a role in our ability to reduce
(21:47):
our impact overall before we start to account for its
consumption of energy.
Speaker 2 (21:54):
Absolutely, AI has been important in being completely game changing
the pace of innovation of a lot of the new
technologies that are coming to market that reduce emissions. I
mean we talked about rail vision, there's AI powered fleet
management systems that help people transition from ice vehicles to
(22:16):
electric vehicles. You can use AI as a homeowner to
make better decisions and capture incentives for green home upgrades.
Rock Rabbit is one of our companies that does that.
We can better predict electricity demand and make sure we're
not over or under buying because as we've seen with
(22:37):
the blackouts in Spain. You know, reliability is still the
number one goal, even as we have increasing weather anomalies
and load demand on the grid. And so it's better
decision making, it's faster innovation, and it's just making it
(22:57):
easier to do the right thing.
Speaker 1 (23:01):
Are you confident, because of course everybody is talking about
the potential energy demands for making and using the AI
that in the long run, AI will offset its carbon footprint.
Speaker 2 (23:14):
I think that is the zero point five c degree question.
You know, consumption always comes first and the solutions come later.
A lot of these new technologies are on a five
to ten plus year timeline.
Speaker 1 (23:30):
You know.
Speaker 2 (23:30):
It's kind of like AI applied to drug development. Can
AI turned through a massive database and look at millions
of small molecules that could create a cure for cancer? Yes, definitely.
Do we know that it is going to cure cancer?
We don't. We just know it's increasing our chances of
(23:51):
doing it in a more timely manner. So similarly, applying
AI to offset the energy footprint with the solutions create.
Part of it is a technological question, part of it
is a political question and a financing question, and also
a consumer behavior question. So I am optimistic, and you know,
(24:14):
you also have to accept the reality that this is
the way the world is going, and it's up to
us as consumers and investors to make sure that AI
does move in the direction of being applied in the
right cases.
Speaker 1 (24:28):
Are there industrial sectors where investors might be underestimating growth opportunities,
particularly because of the potential efficiency lift of AI areas
like clean mining or grid resilience that we were talking
about before. What are your thoughts on that?
Speaker 2 (24:42):
Absolutely, I mean, I think the industrial space has been
one of the hardest to decarbonize. We've historically seen a
ton of work in energy and in food, in ag
and in mobility, and oftentimes the industrial sector can be
the hardest to decarbonize. You know, for example, steel, and
(25:06):
there's many different ways to decarbonize steel. You can look
at using AI to optimize the process so that there's
less it's less emissions intense. You can look at replacing
the heat that's required in producing steel, and you can
also look at a material substitution play. So there's one
(25:30):
company in our portfolio that I'm super excited about called
invent Wood, and they actually are modifying wood and densifying
it to turn it into an environmentally sustainable construction material
that is on par with the strength and other characteristics
(25:51):
of steel and reason.
Speaker 1 (25:53):
I just saw this at the forest at the US
Forest Products Laboratory in Madison, Wisconsin. I could not believe
what we're building with that kind of what It was amazing.
Speaker 2 (26:02):
It's beautiful and it's counterintuitive, but it is actually fire safe.
So you know, imagine rebuilding after the LA wildfire as
abut one example, and being able to have a beautiful
wood building with structural integrity and fire safety where you
don't have to use steel and your carbon footprint is
(26:25):
significantly cut. I think the potential applications there are huge.
Speaker 1 (26:31):
So how does decarbonization as a general practice and maybe
a foundational practice play into your thinking about sustainable manufacturing?
Are you making investments specifically in integrating decarbonization into everything
all industrial practices?
Speaker 2 (26:55):
We haven't yet made an investment in a software tool
that can help with decarbonizing industrial practices. We have made
a lot of manufacturing plays that are using technology to
decarbonize in certain spaces.
Speaker 1 (27:12):
Should that be a priority for an investor is to
focus on lowering the carbon impact of an investment overall?
Or are you thinking about a broader systems approach where
we're looking at water and other impacts that might in
the long run benefit nature.
Speaker 2 (27:28):
Ah. I see what you're saying, meaning, as the startups
are scaling, their carbon footprints are actually getting larger, and
so as investors, how are we guiding these companies in
order to say you need to manage the carbon footprint
even through that growth. It's kind of a paradoxical situation
because you're investing to decarbonize, but the company itself has
(27:50):
a growing carbon footprint as it's scaling. I think the
most important thing is to understand what are those key
drivers of emissions and to manage and track that over time,
which is something that we do with our companies. So
you know, for example, maybe there are chemical inputs in
a manufacturing process that make up forty percent of their footprint,
(28:15):
and looking to see what alternatives there are to that,
even if it is at a little bit of a
premium once they get to a certain scale. So it's
a great question to ponder and definitely one of the
complexities of scaling a climate tech.
Speaker 1 (28:33):
Company or any company these days. Frankly, the other thing
that a lot of people are talking about is carbon removal.
Is that something that you believe is a viable market
for you to invest in.
Speaker 2 (28:48):
Carbon removal and carbon to value is one of the
I would say earlier technologies in terms of how mature
the technology is and how it's come down the cost curve.
Given where we are right now in terms of the
warming that's already been locked in, I do believe that
(29:10):
carbon removal is an important part of the story, and
there are huge communities around tackling this problem. On one hand,
you have let's say nature based carbon removal or carbon avoidance,
and on the other hand you have you know, air
miners using removal from oceans or other places. And so
(29:36):
the challenge there is really getting to a price point
of removal per ton that is palatable to consumers who
are now paying for something that they didn't before. And
there are some regimes like the EU has a carbon
tax where there's an economic incentive to do so. If
we had passed a carbon tax in the United States
(30:00):
would be in a very different place than we are
now with respect to carbon removal. But I think everyone's
chasing getting to around one hundred dollars per ton in
carbon removal and that's going to be the holy.
Speaker 1 (30:11):
Grow one hundred. Okay, that's a pretty reasonable numbers. It's
not necessary to get to the eight or nine hundred
that I've seen some saying they need to achieve. That's
good news.
Speaker 2 (30:23):
Our customers paying one hundred dollars, not eight hundred.
Speaker 1 (30:26):
Dollars understood, That's what I'm saying. I have heard organizations
say in order for this to be viable, we need
to be making eight hundred dollars a ton of removal
carbon removed, which is absurd. No one's going to be
able to pay that.
Speaker 2 (30:40):
Correct.
Speaker 1 (30:44):
As I hear what you're talking about, it sounds like
that becomes a component of your business sometime in the
future rather than a core effort today. Because the price
of carbon hasn't risen to the level that it needs
to be, and in fact, even Canada, which had a
carbon tax, is backed away from that because of the
political uncertainty around it. Is that our biggest challenge, from
(31:06):
your perspective as an investor, is putting a policy framework
in place that allows us to make these decisions with
confidence that we're going to be able to recoup the investment.
Speaker 2 (31:18):
Policy does. Policy and government incentives are very significant in
helping more frontier technologies come down the cost curve for sure.
I think the other aspect that we consider as climate
tech investors is timing. So when you're investing in a company,
we have a framework to evaluate the carbon reduction potential
(31:41):
and compare companies against each other to make sure that
our marginal dollar is going into the most impactful areas,
and timing is a huge part of that. So you
might be investing in a carbon removal technology that could
have significant gigaton scale impact but likely in I don't know,
five to seven years. Or you could invest in an
(32:05):
EV fleet management company that's enabling the transition from ICV,
which is happening right now in real time, and so
you can start measuring realized impact seven years earlier, but
the overall impact might be lower. So how do you
compare those two against each other? And that's why for ourselves,
(32:27):
we have a portfolio target, not an individual company target,
to take advantage of and be cognizant of aspects like timing,
aspects like how many companies are there in the space.
If no one else is tackling this problem and you're
one of the only solutions that should get some credit.
If you're working in a hard to decarbonize space, that
(32:49):
should get some credit. So it's a it's a push
and pull.
Speaker 1 (32:53):
You're hedging your risk across the entire portfolio in order
to account for the complexity of the systems that we're
trying to migrate towards decarbonized outcome.
Speaker 2 (33:03):
Absolutely, you know what.
Speaker 1 (33:05):
Just before we close up, I wanted to ask about Pantholassa,
which generates electricity from wave energy in the open ocean.
They're buoys. It's an interesting bet. But the question I had,
and we talked about the grid a little while ago,
how is that source of energy going to be integrated
in the grid.
Speaker 2 (33:22):
Yes, Panthalasa doesn't say a lot publicly, and they recently
came out of stealth mode. I think foundationally I can
say that AI load growth takes a lot of time
to have new energy generation sources to power it. The
interconnection itself can be challenging. So the fundamental thesis is
(33:46):
what if you could generate extremely low cost energy without land,
without permit about construction, without the interconnect. Panhlasa's device can
be created more easily than a car, and they're using
deep ocean waves, which is our greatest untapped renewable resource
(34:10):
to generate energy to power what you could power an
onboard computer for AI. You could also do bitcoin mining,
and so they are really revolutionizing and are on the
cutting edge of what's possible.
Speaker 1 (34:26):
So you're actually not betting on the interconnect, You're betting
on distributed placement of self sustaining functionality like bitcoin mining
or monitoring ocean temperatures for instance. That's really interesting.
Speaker 2 (34:42):
Yeah, it takes interconnect out of the equation, which has
been one of the biggest headaches in the industry in
recent memory.
Speaker 1 (34:49):
So that kind of distributed power generation could be applied
across a lot of different contexts. Are there other investments
in your portfolio that are thinking about that shame approach
but on land where you could co locate functionality with
a source of energy. Yeah.
Speaker 2 (35:09):
We do have actually a recent off grid energy company
called Dragon Wings, and it's a portable solar plus storage
system that kind of is in this shipping container sized
facility and it opens up the solar panels. So again
(35:30):
at using the La wildfires as an example, or construction
that's far away from a gas station, you're essentially replacing
diesel generators. You no longer have to schlept fuel back
and forth, and you'll have a consistent, renewable clean energy
(35:52):
that's better for construction as they're, for example, rebuilding from
the LA wildfires.
Speaker 1 (35:59):
Now we've talked a lot about different stories, and I'm
curious across your portfolio what founder habits, from their technical
rigor to the ability to tell a good story seem
to predict success most when thinking about scaling a climate venture.
Speaker 2 (36:16):
Founders who are able to flourish in a time when
you know, we had the Spack boom, we had COVID,
the IRA pass, now we have the tariffs in a
trade war. It's a really tall order and hard to
be good at everything. But I think the founders right
now who are showing that creative problem solving and resiliency
(36:38):
are really the ones that are going to pull ahead
in this environment. There are also founders who are faster
to catch up with market realities and be looking ahead
of the curve instead of being reactive, or instead of
hoping that like many people that oh maybe he wouldn't
(36:58):
do that with the tariffs, or don't worry, it'll come
down to ten percent that are actually creating. Oh yeah,
I've had this plan BC and D this entire time.
Let me tell you about it. So the forward thinking
founders that are scrappy in what is the only certainty
is uncertainty is where we're really seeing companies thrive.
Speaker 1 (37:20):
So do you see where we're going right now as
a time potentially when instead of the climate migration collapsing,
it might actually blossom because we've responded to the adversity
and the challenges that the industry faces.
Speaker 2 (37:35):
So an interesting stat is that climate investing activity actually
increased in Q one versus the same time last year.
Although we're in a tricky economic environment, you know, the
economics of renewable energy have been and will remain attractive
(37:58):
and only become even more or so, so there's undeniable
economic and technological tailwinds within the space. The capital stack
has also significantly matured in recent years with debt venture, debt,
equipment financing, grant money, lines of credit, et cetera, and so,
(38:21):
and there's still dry powder to deploy for all of
these funds who have raised money. So I am cautiously optimistic.
I don't want to say that. You know, we're not
in a period of unpredictable market conditions, but I do
think that, you know, climate tech is showing signs of
resilience for those high quality companies.
Speaker 1 (38:45):
Very encouraging to hear, and obviously we are in a
very challenging time, but hopefully it'll be that that moment
when we forge a new future together. And Kavita, thank
you so much for the time you spent with us.
It's been fascinating, awesome.
Speaker 2 (38:58):
Thanks Mitch, thanks for having me.
Speaker 1 (39:03):
You've been listening to a conversation with Cavita Patel, a
principle at the clean tech and climate investor MEWSE Capital Partners,
and you can learn more about their work and portfolio
of companies at mewsclimate dot com. Muse is spelled mu
us and Mew's climate is all one word, no space,
no dash mewseclimate dot com. Kavita spoke about bringing down
(39:25):
the green premium, the extra price you pay for a
green product, and that's a practical acknowledgment that consumers are
going to be paying for something they didn't before, even
when they realize other savings, including environmental savings from sustainable
products and services. That's a tough story to tell because
it's full of trade offs that remain esoteric for the
(39:45):
typical shopper. So where do you invest. The greatest opportunity
to bring down these costs is to eliminate the vast
amount of waste in our economy, particularly by recovering and
reusing materials that throughout the industrial era have often been
used only once and then thrown away. And then there's
all the other ways that we could eliminate upstream from
that event. But as Kavita pointed out, government policies can
(40:07):
support or hinder that progress, and now is the time
to make our voices heard on behalf of renewable energy,
sustainable business practices, and our hunger for better environmentally beneficial products.
Let's recognize that it will be harder in the current
US political environment, but the greatest companies and movements arise
(40:27):
in tough times like these, so we have to double down.
So what will it take to lead the change, to
start companies, to launch nonprofits, and lead the race to innovate?
As a multi company entrepreneur, I'm struck by Kavita's comments
about the most successful leaders having not just a plan A,
but a plan BC and D two. That's how you
(40:47):
become the chief resource obtainer for your organization. You commit
to being scrappy finding resources, are making them where others
find no value. But many people see this pursuit of
unrecognized value it's just scraping by. It's doing too little
instead of liberating value wherever it can be found. But
the greatest entrepreneurs turn scrap into gold, whether that means
(41:10):
starting your business with used equipment batter desks, are seeing
the opportunity to transform the contents of a landfill into
raw materials for the next generation of sustainable products. It
doesn't take magic, it takes grit, and the times we're
in so purely transactional as they are while challenging, provide
us all the raw materials we need to remake the economy.
(41:32):
If you want to be one of the leaders who
reinvents our world, start talking with investors, networking with business
and policy leaders, and scraping together whatever it takes to
achieve the dreams that keep you awake at night. So
we'll continue to track the story. We'll have more investors on,
We'll have more entrepreneurs on. Stay tuned, and I hope
you take a moment to check out all of the
(41:53):
episodes of sustainability in the year that we've produced Over
the years, there's more than five hundred of them for
you to share with your friends and your coworkers. So
would you take a moment, would you do me a
favor write a review on your favorite podcast platform, because
it will help your neighbors find us. Folks, you're the
amplifiers that spread more ideas to create less weights. So
please tell your friends, your family, the coworkers, and people
(42:15):
you meet on the street that they can find us
on Apple Podcasts, Spotify, iHeartRadio, Audible or whatever purveyor of
podcast goodness they prefer. Thank you so much for your support.
I'm Metracliff. This is sustainability in your ear, and we
will be back with another innovator interview soon. In the meantime, folks,
take care of yourself, take care of one another, and
(42:37):
let's all take care of this beautiful planet of ours.
Have a green day.
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