Sustainability & ESG Investing Fundamentals, Climate Change Stakeholders & Alliances and Regional Impact Startups - E272

In this discussion, Jeremy Au and Shiyan Koh talk about the emerging trends in sustainable investing. They highlight the importance of circular economy models, which aim to reduce waste and promote efficiency in resource use. They also mention the challenges of achieving VC outcomes in sustainability investments, as the timelines for returns can be longer and the government and national security alliances play a crucial role.

Shiyan stresses the importance of having a clear impact thesis in sustainable investing, and how it is essential to assess the impact of the investment beyond just financial returns. She also notes that sustainability investing is no longer limited to consumer-facing industries, but is now expanding into B2B companies as well.

Jeremy and Shiyan discuss several examples of companies that are working towards circular economy models, including one that recycles plastic waste into building materials and another that sells excess inventory from e-commerce companies to reduce landfill waste. They also touch on the potential of carbon accounting, but note that it is a tricky space, and the world may take 10-30 years to implement it fully.

Overall, the conversation highlights the importance of sustainability in investing, and the need for a clear impact thesis and longer-term outlook in the space.

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Jeremy Au: (00:39)

Morning, Shiyan.

Shiyan Koh: (00:40)

Good morning, Jeremy.

Jeremy Au: (00:43)

We had a wonderful launch recently about sustainability in ESG and figured we'll just take our conversation. Actually, it reminded me of that song I had as a kid. I don't remember what the Captain Planet theme song was like.

Shiyan Koh: (00:55)

Oh my God.

Jeremy Au: (00:55)

Captain Planet. He's our hero, going to take pollution down to zero.

Shiyan Koh: (01:02)

This is a podcast. It is not a concert.

Jeremy Au: (01:05)

I remember watching Captain Planet, it reruns in the morning. So, I think there are a lot of people talking about sustainability, right? I think almost every other article is very much talking about the planet, the future. Well dude, climate change is real. Okay, so let's put it up front for everybody. So Shiyan and I both officially agreed that climate change is real. Okay. So I got that out of the way but I guess the question is, is the planet doomed? That's the other end of the scale . There's a lot of fear, right? The world is shrinking, the population is dropping, and pollution is going up.

Shiyan Koh: (01:45)

But like what does that actually change in your life? If you thought the world was doomed, how would you behave differently?

Jeremy Au: (01:51)

There's a fatalism competition, which is that, it doesn’t matter? Well, I was, I'm just going to go for optimism. I think the planet is going to get better. I think it's a long arc. It's going to be ups and downs, but I'm an optimist. I do believe that society is building on each other and technology is stacking on each other and somehow we figured out something very weird over the past 1000 years, which is this weird thing called technology improvement. So before that, for a hundred thousand years, humans basically were the same in terms of energy, aggregation, production, and consumption and then over the past thousand years, we have seen this amazing thing called technology, society, whatever it is. Society is starting to really progress and make things better for every generation, right? So now we say things like, oh, there's a generational shift. In the past, 5,000 years ago, every generation is exactly the same. Right now we have, we mark time with generations, right? So I do believe that with each generation, I think things are getting better. I think we create new problems for ourselves, but I think things will get better. Anyway, that's my morning pep talk to myself. How are you feeling, Shiyan?

Shiyan Koh: (03:06)

I don't know if I'm as sanguine as you. I mean, I think climate change is real and it requires a concerted effort across multiple stakeholders, which is always difficult to do and I think maybe like in our field of investing, I think the question is, how do you align people's incentives to get them to do the thing you want them to do? Because people aren't just going to do things out of the goodness of their hearts, and does that really drive material behaviour change? So I mean, it's real in that, Singapore, I think in the last budget, said they're spending a hundred billion dollars over the next 10 years to combat climate change and ensure that we can be, I mean, you're an island, right? Rising sea levels are not great for you. That's perhaps maybe the question which is to what extent or how can investors help efforts? And also ESG, we probably have to define that. What does ESG mean? I think it means different things to different people and what can the average person sort of do? Because I think that's another problem with climate change. It’s most people are like, well, what should I do as a normal, average person? I don't operate a factory or have herds of cows. What do I do to meaningfully impact something? And if you feel like you can't do anything, you kind of just throw up your hands and you're like, oh, we're all doomed.

Jeremy Au: (04:31)

Yeah, you're right to say, let's think about it from a macro perspective, right? I think you mentioned something which is Singapore is making investments and I think lots of countries and regions in Southeast Asia are investing somewhat but the awkward reality is that carbon emissions are going to rise in most countries in Southeast Asia because carbon emissions, unfortunately, is a byproduct of energy consumption, and all the countries around the region, they're looking to use more energy to manufacture, to power their homes, to power technology. So I think there's an interesting net, going to be a net increase in carbon emissions across the region, which is the function of economic growth. So I think, I think there's this tension between, developed markets and developing markets.

For developed markets, the growth is slow. I think there's maybe even some way to plateau or even shrink carbon emissions, but for countries that are growing, I think their priority and even their popular vote is for taking on more energy consumption, which leads to carbon emissions as a byproduct. So I think that the awkward reality for Southeast Asia, from my perspective, is everybody wants to be more carbon-efficient in their future energy growth expansion, but that still results in a slower rise in total emissions. So I think that's the nuance there.

Shiyan Koh: (05:53)

Yeah, but I mean, if you look at the per capita carbon emission, I'm sure the average, no, let me, I can look it up. Yeah. The average American per capita emits 13 x what an Indian does.

Jeremy Au: (06:06)

So unfair. Why don't they get down by 12x and then we keep things the same? That feels like the feeling, right? That at the international. Carbon debate, right? It's like, why are we penalizing, I think emerging economies that have never had an opportunity of a thousand years of energy consumption and carbon emissions.

Shiyan Koh: (06:28)

And it's like kind of essential for capital formation.

Jeremy Au: (6:31)

Yeah.

Shiyan Koh: (06:34)

Well, my one simple proposal for Singapore is we should just make all office buildings warmer by two degrees.

Jeremy Au: (06:42)

Lee Kuan Yew said that the world's greatest modern invention was the air conditioning that allowed people in tropical environments to work.

Shiyan Koh: (06:47)

Yes. But it doesn't have to be freezing. I think if you could just put a limiter, a rate limiter on the building air con, and just make it two degrees warmer.

Jeremy Au: (07:02)

It's a marker of luxury that you can have cold air con in your office. That's how a lot of like shopping malls and everybody thinks about it. So I think what we're kind of talking about a little bit is the case, here's this landscape of the macro, right? Emissions, carbon. So how should investors be thinking about it? I feel like there are two schools of thought. One is, obviously, we need to support the government in terms of coordinating action, et cetera but I think what's been interesting is that we hear actually quite a big debate about what the slope of carbon emission reduction should be, right? So should we invest now or should we wait for more technology to emerge in the next 10 or 20 years and then go try to fix it in 10 or 20 years? That seems to be actually a very common topic of debate actually. Because it's kind of nuanced, right? It's kind of saying like, let's not do anything for the next 10 to 20 years so much. Let's focus on R&D and then let's really focus on commercializing that technology down the road. I don't know.

Shiyan Koh: (08:00)

That feels like just kicking the can down the road. That feels like saying, well, there's nothing we can do now, which I think is untrue. Yeah. So I don't know if I like to buy that.

Jeremy Au: (08:12)

Well, the good news about that argument is that people who don't want to do anything about it can definitely agree with that argument. So there's like the people who are in good faith advocating for that, which I agree with personally, and I think there're people who are in bad faith, agree with the argument, which kind of like muddies the water a lot. I mean, I think to look at solar cells. I mean, if we had tried to do solar cell investments like 20 years ago, it would've been a nightmare because solar cells were so expensive to roll out and commercialize but now I think solar sales in many parts of the world are cheaper than oil and gas.

Shiyan Koh: (08:43)

No, but are you saying this from the perspective of an investor or like humanity? The only reason it's cheaper is because people did invest. Yeah. Like if those people hadn't invested, it wouldn't be cheaper today.

Jeremy Au: (08:54)

They invested in R&D, and CapEx and China cloned Germany, the solar cell industry and the water generally agreed not to put too many tariffs on Chinese solar cells. So there's the only reason why we're doing it but yeah, it took 20 capital investment cycles, right?

Shiyan Koh: (09:12)

Who are you saying should not invest or should fund the R&D?

Jeremy Au: (09:18)

You're making me think really hard, Shiyan. I think when people use that analogy, I think that the people thinking about like, okay, the government has to act now, R&D and incentives and CapEx formation. So for example, on hydro, et cetera but I think there's a view which is that some of the more technologies that are not ready for commercialization, it's hard for the private sector to do, right? So should we do more nuclear power? Should we do more nuclear fusion? I think these are the this is actually a very fuzzy topic to debate, and I want to kind of acknowledge that, but I think that's the one big sentiment that I feel happens in the tech circles from my perspective.

Shiyan Koh: (10:03)

I mean, it's probably largely a function of who your LPs are and what they expect. I mean, yeah, if your LPs thought they were investing in a software fund, they would not be super happy to like hear you're investing in fundamental research on nuclear fusion but I think, if your LPs are interested in that type of investment and that is kind of like explicitly what you're set up to do, then, there's no point having yet another software investor. I mean I think we only make progress when we actually invest and do the work and it's, it's not free and so like, should governments spare that R&D cost should the private sector or whatever, like, should billionaires instead of trying to get us to move to Mars, spend their money instead on energy research maybe, I don't think you make progress unless we try. Noo one's magically going to do it for us, I suppose.

Jeremy Au: (11:03)

Yeah, I think what's fair by the way and interesting is that there's a lot of R&D happening and I think obviously when we had zero interest rates and lots of free money covering around, we had all these terrible frauds like Theranos and all these other things, but we also had a lot of moonshot technology get invested in, right? So we had a nuclear fusion, we obviously, we had chatbots but we had a whole bunch of stuff that got a bunch of R&D because, you could really push out that sustainability angle and short term, but not worry too much about payments across the 10-year timeframe. So I thought it was a really interesting dynamic where the zero interest rates policy is actually allowed for R&D. I don't know, it was just that I think a lot of people were like, boo! Zero interest rates and, talk about all the fraud and the bad times but I just think a lot of capital investment happened because of it.

Shiyan Koh: (11:51)

Yeah, I mean, I have a friend who's working on new battery chemistry. I'm like, that's the kind of thing that takes a lot of money, like it's fundamental research but if he succeeds, he can improve battery efficiency. Like order of magnitude and that's, really important I think for all the renewables and stuff, you need to have better batteries and battery technology has not really advanced significantly kind of in the last like 20, 30 years and if you look at, I think the types of investors who are doing that, there are some, academics, R&D types of things but then there's also people who really have a vested interest in room proof batteries and, they don't necessarily have that capability in their own commercial labs because they need things that are much closer to market in their own commercial operations but, to fund a startup that has, brought together all of these PhDs to work on chemistry together, I think that's, a worthwhile bet for them.

Jeremy Au: (12:49)

Yeah, and I think that's true, right? Which is that we're talking about a subset for deep tech and hardware. They've always historically needed more capital, and I think with the rise of interest rates, I think they've definitely come under more pressure. So obviously, VCs are focusing on more due diligence and right-sizing the investments they're having, but I think I do notice that I think's harder for a lot of these folks to raise the capital out there.

Shiyan Koh: (13:11)

But this goes back to the origins of venture capital, which is like, it was in semiconductors, right? It's incredibly capital-intensive. I mean even like pre-Amazon, even like a simple software business, you had to like to spend on servers, let alone doing semiconductor stuff, which is obviously much more research-intensive and more capital-intensive and I mean, that's the promise, right? Which is like, hey, you nailed this, the new geometry, or you nailed this new design and every marginal chip that comes off, is pure margin and profit, I do think it kind of goes back to the origins of venture capital and like really investing in things kind of on the frontiers of like what is technologically possible. It's kind of cool. It's kind of exciting actually.

Jeremy Au: (14:00)

Yeah, no, I think it's fair and I think the awkward reality is that origins of venture capital, by doing so, we are also going back to the time of like the partnership with the government, right? Because all of that Silicon Valley suspension was highly subsidized by the defence and military industry, right? For basic R&D for subsidies around land and production and I think maybe for the past 10 years because of zero interest rates, I think, the government has really seemed to take a backseat to VCs who are like, cowboying the future and Frontier. But I think, as you said, I think the return of it is like that.

Shiyan Koh: (14:33)

Well, it's more that the governments tended to be early customers. So like, it was sort of like the Department of Defense would be the people who are buying these chips, right? Like, because they weren't necessary but the money, I mean, I think government money is sort of in different buckets, right? I think there's the really early basic research type of money and then there's like the Department of Defense wants the best missile guiding technology or whatever, and they're willing to be a customer but in between, I think, it's still private capital. It's still people who think they're going to make a ton of money by selling these things and then, once you get the Department of Defense as your customer, that kind of gives you a foothold, then go think of like other, other broader, more commercial applications. So think the one thing the government is not good at is commercial applications. Right? That's kind of like not where their speciality is.

Jeremy Au: (15:24)

What you say is true, right? Which is that I think the government has a very important role of being the first customer, but also making sure there's adoption, right? So you talk about microchips, but I think that's also very true for almost all of the climate tech that's out there for two levels. Obviously, in the short term, we've seen EVs, so the Biden administration has really accelerated means, first of all, the state of California has mandated the requirement for all vehicles to be EV and how effectively Biden has effectively done a soft version of that with a hidden industrial policy to make it basically make America be a hundred percent EV in a hundred years. So there's a huge change obviously pissing off Saudi Arabia and OPAC and so, so forth.

There's another conversation, but I think there's so much climate tech that's just dependent on the concept of carbon credits. I mean, I think that's where some of my bearishness perhaps is coming from because I think, I remember like, almost 20 years ago, we're talking about carbon credits, the price of carbon credits and all to price carbon in order to create commercial incentive, and I just think that it's been tough for a lot of startups that have been dependent on the concept of a price carbon credit. It's hard for them to monetize, it's hard for them to sell and there's not much conviction. I think that this is going to take up a much larger uptake in the future. I think EVs are a little bit more straightforward. Yeah.

Shiyan Koh: (16:44)

Well, I mean, I think they're both the same and that you do need a little bit of regulatory pressure to work. I mean, I think the economics of carbon credits is relatively straightforward, but if there's no one to compel you to pay, right, your emissions, then like why would you? So I think that's where the government comes in and so I think maybe some of these startups, it's like you're assuming people will do these things, but you don't have enough regulatory support to get it done. You as a startup, it's like hard for you to make that happen, right? It's like outside of your control and so what are the things that are kind of like within your control that can, startups can still have an impact on?

Yeah, but there's a lot of these other like, oh, like consumers going to buy carbon credits out of the goodness of their heart and like, like it's very hard to change behaviour unless there is a law that's like, Hey guys, you have to, but I mean, it's like littering. If there wasn't a fine for littering I think Singapore would be much dirtier. People would just do random stuff, right? Like, you can compel behaviour, through law or through incentives and, preferably both.

Jeremy Au: (17:50)

Yeah, and I think that's the thing, right? Which is that carbon credits, they also have the free rider problem, like you said, right? Which is like, if, if you are shrinking your carbon emissions, but someone else is increasing their carbon emissions, guess what? The carbon gets mixed up in the air anyway, right? So, people cheat all the time when carbon credits, but I think for manufacturing, right? Then it becomes a much more muscular industrial policy, right? Because, America is like, okay, this is a great way for me to subsidize the automobile manufacturing industry in the future reduce this, our dependence on OPAC so and so forth. It's just kind of interesting to see that happening, right, and as you see, China also doing a massive amount of push towards EV as well and I think Indonesia actually has come up as surprisingly. I was actually very pleasantly surprised actually, and definitely surprised, I think by Indonesia's, like big push, right? I think in retrospect it's a bit more obvious since they have so much of the raw material needed to make batteries, right? With nickel mines and so, so forth.

So it's a bit more obvious in retrospect, but if you ask me, you say, three years ago that the government would make such a clear pledge and target to transition towards EVs.

Shiyan Koh: (18:59)

Well, they also, they also have a lot of islands. Yeah. They are also impacted by climate change.

Jeremy Au: (19:05)

Yeah, true. Yeah. Yeah and also I think oil and gas also have been a source of actually geopolitical insecurity. For all our folks in Southeast Asia as well. So the risk of energy supplies and so forth has always been there. So it's a bit of a national security concern. So I think good things happen when you have the people who want to save the world and you combine them with the people who want to bring back manufacturing and people who want to maintain national security. That tends to be a, I don't know, hidden coalition that seems to be emerging for a lot of this energy tech coming out.

Shiyan Koh: (19:38)

I mean, it all boils down to money, right?

Jeremy Au: (19:42)

And I think the time horizon, because like you're basically saying like, I care about this happening 50 years, a hundred years and yeah, you need people who care about that.

Shiyan Koh: (19:51)

Well, I mean, national security, you can always waive the spectre of someone like cutting you off or invading you or something and it feels much more like close than, this sort of amorphous idea of carbon dioxide in the atmosphere and even manufacturing, like jobs. Jobs are a much more tangible thing to say like, Hey, this is what you're going to get if you do this thing. Like, you don't even have to believe in electric vehicles, but you can believe that plants in your town are going to create more employment. That's like on the net, good for your town.

Jeremy Au: (20:19)

Yeah, I agree actually, and I think that's something that a lot of the ESG folks actually I think I've noticed have become much better at, I think, coalition-building messaging, right? We're just saying like, okay, these are the five ways it impacts your day-to-day life. Right? In fact, I think one of the most interesting ESG companies, obviously they just keep the whole carbon credits. They just like, Hey, save money, electricity, bill at the kind of office building level. Right. We're just basically saying like, look, times are good, you want to save money, times are bad, you still want to save money. Right, and if you use our service, we can lower the electricity bill by 20%, which comes up to millions of dollars across a 10-year timeframe.

Shiyan Koh: (20:56)

Just two degrees warmer, man. A simple fix for you. You don't need IOT for this one.

Jeremy Au: (21:01)

Yeah. Well, they don't, they don't tell you it's two degrees celsius. They smuggle it in. They'll be like, they switch off at night. They keep it on and during the day, they, they make it seem automatic and I think they do a good job. I thought it was an excellent way to sell it. So there's like, they don't say ESG they say like, the problem is this, this is the problem that you face today and then one of the benefits they talk about later is that the ESG is one of the tailwinds that can help them in terms of getting support, stakeholders talents, press.

Shiyan Koh: (21:29)

But I think the capital thing is kind of interesting, right? So there's all these sort of mandates in the EU around climate and measurement and traceability, and there are pools of capital that are allocated against that and so there are people are looking for assets that fit this and these are interesting sort of sources of capital, I think, for people who are working in climate or climate adjacent things to be able to say like, Hey, because we're doing this as this. It has an impact on these climate goals and therefore we are eligible for these pools of capital. So it does open up, I think sources of funding that might not have previously been available and kind of in kind of unlikely ways or like, I wouldn't expect some climate business in Malaysia and Indonesia to be like raising from the Europeans but they're sort of seeing options there and a lot of it is also about measurement.

You manage it if you're not measuring it and measurement sort of goes hand in hand with digitization. Which is what a lot of startups in the region are trying to do is to digitize this supply chain or that supply chain and once you digitize them, you can actually track like, hey, okay, how many goods are moving through this supply chain at any one point in time and you can assign sort of values to those things and then you can actually say whether or not you know something is more or less beneficial for the environment. You can actually, have a baseline and then you can measure things off of that, which is not previously possible because. That has to go with all the sort of shady carbon credit stuff. Like is this really a carbon credit? Did you just make this up versus like, Hey, we actually have real-time tracking on it because we are tracking it for a business purpose, not just for climate.

Jeremy Au: (23:14)

Yeah. I think it lowers the cost of capital, right, I think previously we talked about zero interest rates lowering the cost of capital for everybody in every vertical and in this case we're talking about these mandates actually helping lower the cost of capital for societally important goals. Right, and I totally agree. I think it's tremendous, really helpful. It does remind me about the fact that there are, other funds that are going in the other direction because when too much capital is invested in ESG, then the non-ESG stuff like oil and gas and vice industries I'm putting quotes on that.

Shiyan Koh: (23:46)

Are you starting a new fund at Jeremy?

Jeremy Au: (23:48)

Well, the device industries perform really well during this economic climate because, as you said, the de-investment in them has opened up the opportunity right? I mean, even Warren Buffet kind of saw the opportunity here where he started investing a lot in oiling gas because he saw everybody pull out of oiling gas. So he pulled in and he got larger returns, because those industries have a higher cost of capital. Now, as a result, he gets to earn a higher rate of return.So I'm not saying that I want to set it up, but I'm just saying, I'm acknowledging that there is an interesting focus there.

Shiyan Koh: (24:20)

Do you guys have a vice clause? Like are you allowed to invest in gambling or?

Jeremy Au: (24:27)

That is a great question. I think for us, we've obviously worked with more and more LPs, right? Institutions and these institutions actually are starting to do ESG reporting and monitoring. So there are actually implicit and explicit provisions basically right around not disclosing any harm that's material obviously to society or environment, but also I think we are expected to report our ESG metrics actually right against, UN sustainable development goals.

Shiyan Koh: (24:55)

Oh, interesting. Like what did they ask you to report?

Jeremy Au: (24:58)

Well, I mean, it's soft reporting, right? So even now when we look at companies, we are, we are aware, we actually put in a section that says, we know that these are the benefits, versus SDG goals, and are we aware of any SDG goals that maybe materially adverse? That being said, I think, like you said,startups are really about digitizing the future, and so in general, I think it's pretty hard but it does serve as an implicit form of shaping investment policy right now that we're working with US institutions. So I think it's actually a huge, hidden, invisible hand, not economics, invisible hand, two invisible policy heads that LP stakeholders have actually kind of like exercised through the economy is actually kind of interesting.

I mean, 10 years ago, people were really trying to do impact investing and social impact bonds, and I remember talking to them, so they were trying to create very strict forms of capital pools. And the other competitor camp was, let's make all investing have mandatory reporting at ESG, and I feel like that camp actually has ended up being more impactful over the long term from my perspective. Yeah.

Shiyan Koh: (26:07)

I heard about an initiative to create green mortgage bonds.

Jeremy Au: (26:13)

Ooh, explain what green mortgage bonds are. Yeah.

Shiyan Koh: (26:16)

It's basically the idea, like if you think about what are the biggest culprits in carbon emissions, construction is a big one of them and so it's creating like basically capital for green buildings, that you can kind of borrow at a lower rate, if you meet the green construction. So you'll basically, like, you can impact sort of like a whole industry cause they all, I mean they need to borrow money to build, and then that translates through to the homeowner that they would have access to lower mortgages, lower priced mortgages if they bought something that was green right, and so basically you're like aligning the incentives all the way through, which I thought was pretty interesting actually.

Jeremy Au: (26:57)

Yeah, I think it's interesting and I think it reminds me of this conglomerate I met, and they have this huge problem where their most profitable assets are ones that are most energy inefficient on a day-to-day basis because nobody wants to buy them. Because of this future mandate in the short term, is a cash cow that keeps, creating an asset, and so they're kind of stuck.This is like, it's too expensive to refurbish or retrofit but is doing great for returns for the next 10 to 20 years, 30 years and so from their perspective they want to use those returns and use it to invest green returns. And I think actually, if you think about it from a systems perspective, it's really quite rational and quite logical from a business perspective but it just does not write well in a stakeholder or shareholder report right at all. So it's kind of like, sweep it under a rug kind of dynamic. They report everything on a blended basis, from their perspective.

Yeah. But I think what's interesting is that that's the, we're kind of talking about the future, right? It's like, I think future energy, future sources of housing is becoming more efficient and the old stock, right? The people in the present and the past are the folks that are going to drive a lot of this energy inefficiency. So I don't know, we talked about kids last time, right? But they, our kids, our grandkids. Do you think they're going to be like, thumbs up, this generation really did, did a good job, or what do you think?

Shiyan Koh: (28:22)

They already have, right? I mean, like how old is Greta Thunberg? She's like, 12? I don't know how old she is, but I mean, I think they're already aware.I don't know. My kids like to talk about this at school, they talk about how the earth is sick and how they need to like not waste things and recycle and all this stuff. So, I think kids are pretty aware and kids, a lot of it is habit, right? What are the habits that you get them into to, I don't know, are you a big steak eater, Jeremy? Cows are a big source of emissions. So one of the things you can do as an individual is to like be vegetarian, so it is very funny. I met an oil and gas trader over the weekend who is vegan and I was like, that's interesting. What precipitated that? And he was like, well, I do realize the irony of an oil and gas trader being vegan for climate reasons. He was really upset about deforestation and climate impacts and he's like, well, what can I do? And he became vegan.

Jeremy Au: (29:33)

Well, it reminds me of I was reading this book about how Coca-Cola executives don't really drink a lot of coke, so it was interesting I was reading this like expose and I was just like, what? Do they only drink Coke once a month? And they're like, this is a sometimes drink.

Shiyan Koh: (29:47)

I don't drink soda at all. Well, I gave up soda after investment banking because I had drank so much soda in a two-year period and I feel very unhealthy.

Jeremy Au: (29:57)

Yeah, but I think that's the thing about ESG and carbon, I think there are a lot of like explicit governmental norms, obviously in policy that I think are really, really important cause dollars and cents are really key to that and I have this coalition side, but it's also all these implicit social norms, right? That's just shaping people. One thing I actually do notice, for example, based on what you just said, is a lot of ESG startups actually get a ton of talent. They have a talent subsidy because people want to work for that company.

Shiyan Koh: (30:26)

People want to work on things that are meaningful, right? They want to feel like, you're not just shilling another thing to people but I mean, I think there's a lot of things you can do, right? Which is like, hey, like can we walk or bike more? Do we always have to get in the car? Can we use public transit? I think the government's trying to do some of that. They're trying to build more bike paths. They're trying to create. Transit has always been a big part of policy but there's all these sort of like structural things that you could do to try to like lower people's carbon footprint and that are actually good for society, right? People who walk and bike more will be less costly to the public healthcare system later. Yeah. So, it isn't just all like the touchy-feely, feel-good type of stuff, there are, I think dollars and cents associated with that.

Jeremy Au: (31:11)

And I think that's the crux of it. It's like, you can care about climate tech and ESG from a moral perspective, but being able to coalition building, for example, in your scenario with, urban planners and public health folks, like all that stuff really has to happen otherwise.

Shiyan Koh: (31:26)

I mean, I'm a huge fan of covered walkways. So when I first moved back to Singapore, I kept seeing these signs that were like 43 kilometres of covered walkways built, and I was like, haha, what a funny thing to like be excited about, but then I was like, you know what, it's awesome. It rains a lot here. It's really hot here and it helps people like use public transit more effectively and walk more and it keeps sort of like the urban core cooler alongside all of our green planting and everything and I'm like, these things can sometimes feel like very, I don't know, quotidian, prosaic, I don't know what the right word is but they actually matter to people's quality of life and it's, I think it's great.

Jeremy Au: (32:11)

Yeah and on that note, I think there are a lot of folks who are building in Indonesia, Thailand, right? So there's like James Chan at Ion Mobility building in Indonesia for electric motorbikes, sleek EV and Thailand is building there as well.

Shiyan Koh: (32:25)

I'm going to in a plug for my portfolio company debt bike in Vietnam building very sexy electric bikes.

Jeremy Au: (32:32)

Yeah, exactly. There we go. So I think it's, I think it's an interesting piece, right? Is like the selling electric bikes have got great acceleration, people like the consumer brand domestic manufacturing and I think that's, that's a sweet spot I think is happening. So, I suspect actually electric bikes are really going to become surprisingly again, I was surprised by this if you asked me five years ago.

Shiyan Koh: (32:51)

I think I think they're, they're awesome. I'm not even a big motorcyclist, but I've ridden those bikes in Ho Chi Minh, which is terrifying by the way and they're sweet, they're sweet bikes. Like very smooth and the acceleration is awesome. Yeah, they're a bit retro. I mean, they're going to release a scooter, which is like more conventional-looking, with like that same kind of like, 200 plus kilometre range, which is like more than enough for a day in an urban setting, you're not going 200 K unless you're like a grab driver or something. But one more thing I think is that we have a carbon accounting portfolio company in Malaysia called Kossan and they recently launched a partnership with Bank Negara and Kossan. Cosan is the second largest glove manufacturer in Malaysia Bank Negara is the central bank and basically, it's a coalition to help implement carbon accounting for the Kossan supply chain.

So all the sort of contractors, subcontractors who are all the way in that rubber latex glove manufacturing process and there's a ton of support for it. I mean, obviously, the Kossan founder and CEO cares a lot about climate, so he's kind of like an early adopter. They understand they have European and American clients and there will be pressure kind of coming on the customer side to implement some of these things and so, you are seeing these rollouts and yeah, it is a dollars and cents thing. People aren't only doing it cause they want to feel good about it.

Jeremy Au: (34:21)

Ooh is a good point. We should list out who are the cool ESG sustainability startups out there. This is interesting, right? I thought what an interesting company is Tiger Energy. So they're doing battery tech. They were a building battery-swapping network in Indonesia. So obviously they feel like a big reason why. There's a handicap of the adoption curve is the fact that people pay for the battery and the bike. When in China people just pay for the incremental charge within the battery. So there are two orders of magnitude in terms of cost. It's a bet actually around standards and operations.

Shiyan Koh: (34:55)

Guro has been doing this for quite in Taiwan.

Jeremy Au: (34:59)

Yeah and they've worked, but they haven't been able to replicate that outside.

Shiyan Koh: (35:02)

Yes, it's true. They tried to enter Vietnam and they couldn't.

Jeremy Au: (35:05)

So it's just really, really interesting. So that's a big part. I think Pollen’s pretty interesting. Also as another company, I guess both Pollen and Tech Energy have come on a podcast before, but Pollen for them, they're doing every FMCG principle and are always going to overproduce. They're never ever going to be in a scenario where they underproduce and so they have a bunch of staff. That's all. Stuck in a warehouse. They're going to liquidate it. They're going to landfill it and so now they're taking, it's taking this inventory and they're going to resell it right at, at a lower cost. So it's the efficiency play to generate, but it's a nice coalition where they remove, reduce landfill, reduce pollution, increase manufacturing efficiency, reduce storage space, and increase profits for the principles. So it's an interesting combo.

Shiyan Koh: (35:48)

Also a portfolio company. One more return key in Indonesia, also a circular economy business where they're taking, so not just FMCG, but excess inventory from like Lazadas of the world. So that's like electronics, shirts, shoes, whatever it is and selling it on and they actually have an interesting idea, which is they have these bin stores where inventory comes in on day one. Everything in the store is like $10. The next day everything is $9. The next day everything is $8.

Jeremy Au: (36:25)

Now I want to buy something.

Shiyan Koh: (36:27)

I mean, yeah, it's pretty cool and then so like kind of like replicating that model, bringing it out to tier two, tier three cities but really basically eliminating landfill or even worse burning things and, getting used out of it.

Jeremy Au: (36:43)

And I think going back to carbon accounting is a big spread I think there's Grace Sai and Unravel Carbon, right? She was on a previous BRAVE podcast as well, but she also raised a very large seed round to do carbon accounting, I think it's a very tricky space.I actually haven't I think there's a lot you have to kind of stack on to get there, but I think the world will eventually do carbon accounting, but the question is, is it within 10 years or within 30 years?

Shiyan Koh: (37:05)

I hope so. My fun life is 10 years, so, told the Pantas guys, I need you.

Jeremy Au: (37:10)

He just convinces every CFO as a shake dev and says, be vegan and do carbon accounting.

Shiyan Koh: (37:16)

They have, there are commercial motivations for people to implement, and so it's kind of getting in front of those people and getting it into their supply chains.

Jeremy Au: (37:24)

Yeah. On that note what's the one key thing that you hope happens in 10 years?

Shiyan Koh: (37:30)

Oh my God.

Jeremy Au: (37:32)

That's your answer. Oh my God. That'll be a bad thing to here in 10 years.

Shiyan Koh: (37:37)

I think I would hope that for trips of a kilometre or less, people think about, walking or using a bike. Like that's something that, it's good for you and it's good for the planet.

Jeremy Au: (37:49)

Yeah. In 10 years I hope for very awesome bikes, e-bikes, scooters, et cetera.

Shiyan Koh: (37:57)

They already exist.

Jeremy Au: (37:58)

I know they exist, but, and I'm not there yet. But then, the cool, the hip, my wife agrees to get one with me. Otherwise, she's definitely vetoing, in favour of gas for now. Cause of reliability.

Shiyan Koh: (38:10)

The bike or a car, which one?

Jeremy Au: (38:13)

I think car.

Shiyan Koh: (38:14)

Car, they have them pole stars, Teslas.

Jeremy Au: (38:17)

They're not there yet, there's a lot of people doing it. So, we're not there yet, but I think in 10 years, hopefully, it is easy for both.

Shiyan Koh: (38:23)

I think my next car will be an EV.

Jeremy Au: (38:26)

EV? Yeah. Awesome. See you around.

Shiyan Koh: (38:29)

All right. Thanks.