FULL TRANSCRIPT
Slava Rubin (00:00)
Welcome everyone. Thanks for joining us today. My name is Josh Kampel I'm the CEO of Worth Media Group. For those unfamiliar with Worth, we're a 40 year old media company initially started by Fidelity Investments, really at that intersection of business and finance. Since we've acquired the brand, we've added a couple of things into the mix of our content. So we're really now at that intersection of business, finance, innovation, and impact.
And the reason we added impact is we saw that really solving some of the world's biggest problems, in many cases as defined by the UN Sustainable Development Goals, are a huge economic opportunity. If you believe, I guess I'll say, Chat GPT, I went on there today, it defines solving the UN SDGs, the 16 I'll say goals plus partnerships as a $12 trillion.
market opportunity by 2030. So a lot of the things that we talk about and we cover come from a place of the doing well and doing good. How do we invest in areas, create businesses that solve some of these, the world's most pressing problems. We do host a series of events on these types of topics. Our next one, which you'll learn about in the follow-up email is our Techonomy Impact Event.
that takes place during UN General Assembly and New York City Climate Week here in New York City on September 24th. So hopefully you will join us. And today's conversation about energy, it's an interesting topic. It's an ongoing ⁓ coverage area for WORTH. So please, again, you can check it out on WORTH. But we see it as a huge opportunity in that.
There's a transition happening in some cases from fossil fuels to renewable energy. There's an opportunity to creation of new power sources to bring power and energy to markets that do not have yet access, both creating both again, new economic opportunity for the citizens of those areas, bringing the cost of energy down. So I think today we'll have a really interesting conversation talking about
you know, what is the innovation that's happening? Where are people investing? What are the broader opportunities? So I'm excited for the great group that we have together today. We're excited to partner with Vincent and Eric Cantor and his team on today's event. So I will hand it over to Eric to introduce the panel and kick us off. And again, thanks everyone for joining us. All right, welcome.
The next wave, we're talking about how investors are going to navigate climate and energy in the coming years. We have an amazing panel. Let me introduce myself briefly, Eric Cantor, as Josh said, CEO of Vincent. We're also a media company helping private and helping investors navigate private markets. We do that with a variety of content and services, one of which is creating events like these where we bring investors and managers together to talk about something in the news that's pretty critical.
So who is here on the investor side? We asked you what your experience was in energy investing. We have some advanced people. We have some pros. We've got some beginners. We run the gamut. We'll focus on kind of a moderate level. We'll have our panelists keep that in mind as they answer questions today. And we've got a great panel with three partners that I'm about to introduce. Before I do that, let me just remind everybody that nothing we're discussing here is financial advice. This is for educational purposes, entertainment purposes.
When you invest, you should be looking at your own situation and taking into account the opinions of your advisors or yourself and your unique reality. So with that, let's introduce our Energy Investor panel. Why don't we start with Scott Case? Hey, good morning, everybody. Thanks for having me, Eric. Thanks for hosting. Really appreciate it. My name is Scott Case. I'm the founder of Zettawatts I'm a lifelong startup junkie.
probably the most well-known company. was the founding chief technology officer at Priceline.com And for those of you who are beginning this energy journey, about four years ago, I had a cold start. I think I could turn on the lights and found the electricity space in particular in the United States to be fascinating. for those of you who new,
Please reach out after this if you'd like to talk and I'm happy to share resources with you for my deep dive. Zettawatts helps large corporations procure clean energy with additionality, which means we bring new projects online. And we also work with those same companies to help their supply chains do the same thing.
Excellent. Let's go to Breene from Carbon Collective. Yeah, my name is Breene Murphy. I'm the president of Carbon Collective Investing. We are a climate-focused investment advisor. So we build portfolios that take the best practices of Vanguard, but divest from fossil fuels, reinvest in climate solutions. We help individuals with their old 401Ks. We help mostly organizations.
that with their 401Ks and we offer a broad set of options in addition to our climate smart option. And then as a result, we've launched two ETFs, the climate solutions equity ETF, as well as a short duration green bond fund. And then those ladder into a series of climate smart target date funds. So a lot of stuff going on for us, but thank you so much for having us here.
Awesome. Chris, save the best for last. Want to give us your intro? Sure. Sorry I was a minute late there. Good morning, everyone. And I'm excited about the conversation today. My name's Chris Sattler. I'm a managing partner and co-founder at Energea I'm an energy entrepreneur. I've started a couple of companies, started in the retail energy business when deregulation hit the US.
I had a couple of successes there. And in the last decade, I've been focused on developing and giving access to energy infrastructure projects to institutional investors, and now with Energea, opening access all the way down to retail investors. The product features are inflation adjustments. So they're inflation adjusted. They are
non-correlated to public equities and they're stable yields. So those are the three pillars that we lean on for Energea and excited to have the conversation today.
Great, so we've got solar for retail, we've got electrification, we have energy investments in your retirement account. Yes. And before, so we're gonna jump into a great conversation here. Let's just review a little bit of data at the top, just to set some context.
so that our panel has a few things to respond to that we've already set. know, energy demand is growing. The world needs energy, right? Many economies are advancing into a new phase with AI. Others are just getting deeper into industrialization. Either way, energy has been a pretty good bet for the past few decades and will continue to be. A critical part of that growth is in renewables. So,
If you think about the different forms of energy and the costs of them, you're going to see a lot of dynamics around this. And I'm sure this is going to come up today because we have a few people on the panel talking about renewables. It's interesting to think about the cost of future energy sources versus what has gotten us here. And so all of this together creates investment opportunities. You've got a bunch of different options. You can do it private. You can do it public. You can go renewables.
You can go traditional.
it's hard to generalize energy performance, right? We just picked out a couple liquid indicators that show that, you know, can a little bit outperform or a little fall short of the market with energy, but we want to go much deeper into this today and figure out what is going to drive the performance of these things moving forward. In terms of investor opportunities, like I said, there's a lot of different options and we're going to talk about at least four of them today.
we're going to call out some of the projects and talk about time horizons, talk about risk factors. You can go on some of the private platforms and purchase things. You can work with RIAs focused in this area like Carbon Collective. You can buy an iShares product that just indexes the market. And there's a lot of different ways to get exposure to this. So with all that in mind, let's jump into it with our panel. Starting point.
We just looked at some very high level graphs, but would love to hear you dig in deeper on energy demand. We know it's growing. Where is it growing? What does that growth look like? Really, where is the market today? I'd love you to bring the concept of AI data centers into the discussion if you can. Why don't we start with Breene on that one? You're gonna start with me other than Scott or Chris. I'm punting it, because this is what they do all day, every day. I can talk about it, not to their level.
All right, Chris, you're on the hotspot. Let's go. Yeah, I can take that one. So you brought up one key area of growth in demand, which is AI. And that is, that's not the only one. And I'll come back to it. So you have electrification, you have electric cars, electric transport. That's a big driver of some energy demand. You also have the Global South. These are
there's still 780 million people in the world that don't have electricity. So those three drivers, which is AI, and AI is a big one. I'll give you a fact on that one too. And one of these hyperscale data centers that they're building tons of around the world right now uses around the same electricity as 30,000 homes. So massive demand from AI.
And then you have all the electric cars, and then you have the Global South. So those are the three drivers. And for the first time in a while, you're seeing significant energy demand growth around the world in all of these markets for those three reasons.
I mean, this might be someplace where I could jump in because one of the things I was also reading in addition to what Chris was saying is because you have that 780 million people that do not have access to electricity, there's been some talk about people skipping generations. So like in Africa, they didn't put in landlines on their tele phones, right? They went right to cell phones. And so there's like this trend of going from.
But it's still establishing of like what will actually happen. But there is a thought that they may go like directly to renewables, especially with the prevalence of China and how cheap it is and how much they're becoming more of a global partner.
Add on
distributed generation is much more reliable. And you see in India, the growth putting in big gigawatt infrastructure to do, let's say natural gas fired, the fuel for those, the infrastructure just isn't there. Whereas with solar, you can put up a hundred megawatt facility or even a 10 megawatt facility and.
provide electricity to whole communities. So I think that you're absolutely right, Breene. I expect some of that leapfrogging to happen. I'll just pile onto the growth piece, just looking way out. And depending on your investor profile here, if you're thinking decades, which you talked about the curve in the past, just looking out from a pure civilization standpoint, energy fuels everything and electricity is like the base core thing. So as you think about energy,
just understand that we'r all the energy, the energi of the day into electricit said, the electrification direction. The thing that d then I'll turn it back to facing a massive climate Like if we snapped our fing putting carbon in the at be facing a disaster catastrophe that is going to require
hotter local places that didn't need air conditioning or gonna need air conditioning, which is really only electrified. So there's some macro factors beyond choices that we are making today that are going to impact the energy demand. And I don't think most of the models I've seen are pricing that adaptation into the growth side of the equation. So there's a global...
reality that we're going to face that the biggest driver for fixing it is going to be around usage of electricity, including if you believe in carbon capture and sequestration, that takes a boatload of energy to drive it. And so we're going to need everything on the from the generation point that we've got. So it sounds like you're saying the energy forecast is actually low. There's going be more demand than what's even.
I'm suspicious of AI because I think they have so much of an incentive to figure out how to reduce their energy footprint that I believe they're going to find innovations in this that are going to bend that curve a little bit. Near term, it's going to continue to be an issue. But the choice is that some of these companies are making. Meta announced, for example, they want to do two 200 megawatt natural gas fired plants in Ohio behind the meter, which means it's not going to go out into the grid to support a gigawatt.
data center. I don't know what's going to happen in that environment there when they get a 20 or 30 or 50 % improvement on efficiency. So it's a, think as an investor, I wouldn't chase the AI path so much as I would look at those big global shifts that Chris talked about. And I would just add on climate adaptation as like the ultimate one that is going to drive our need for more energy overall.
We just do a couple of definitional things to help out since we have a number of people who are new to the space. Two terms you use just to make sure we have a shared understanding. Number one, distributed. And number two, you're talking about gigawatts, megawatts. Maybe if we just normalize, like one of those data centers that you said was like a city with 30,000 houses. So call it a small city or a town. How many megawatts do we need to be online for something like?
So if you, I'll zoom out way out. In the United States, we have one terawatt, so a thousand gigawatts of generation available to us. As a side note, China has that equivalent just in solar. Okay, so if you wanna know where the lead is on renewables, it's in China.
They're huge. So that's the whole country at that scale. So you can sort of divide it up into, all right, if there's 1,000 places around the country, they each have a gigawatt in it. That sort of gives you a picture of things. Some places like New York have a lot more. Some places like Kansas City are smaller. So think about it at that scale. I think that the challenge from a scaling standpoint is
when you build a giant power plant, you have to get that electricity to every place, which means you need transmission lines. It means you need distribution lines. You need all this infrastructure to get it from where it is today to where you want to use the electricity. And that requires infrastructure upgrades and I won't bore you with it, but there's a bunch of challenges to doing that. Distributed would say, okay, instead of a thousand megawatt thing, just think about it that way, you could have 10,
megawatt solar farms around a community, or you could have 110 megawatt ones. Right? So distributed means you're putting it out into where the electricity actually gets used in the community. And the ultimate distributed is sitting on the roof of your house, right? Where you have a battery in your garage, you have rooftop solar, which is probably one of the greatest investment opportunities that there is going forward from a
a pure return profile in certain markets around the country in the US and internationally it can dramatically change the reliability of electricity for a homeowner. So the ultimate distribution is like right where you are and using the electricity in the same place and then you kind of scale it out from there and think concentric circles from that perspective. So
putting a giant nuclear power plant someplace feels really good, but you have to figure out how you're get the power from there to every place else. And so that's where this distributed comes from. So Eric, I don't know if that gets what you wanted to, but trying to keep it at a high level, that's what's going on. Yeah, super helpful. Thanks for clarifying. let's, everyone's digging into renewables. So let's keep digging in there. So can you talk a little, and we'll start with Chris on this one again, renewables as a, as like,
how much they make up of the overall energy supply and where that's going. We've been hearing for years, know, when solar gets cheaper than petroleum, then all these things will happen. So it's like, where are we on the way to that? What are the headwinds? And if you're an investor trying to play that, knowing that there's all these different distortions in the market with subsidies, tariffs, et cetera, like how could you respond to, how can you incorporate some of that knowledge, let's say?
Okay.
At a fundamental level, renewables from an economic standpoint, they're the cheapest source of generation you can add to the grid, especially solar. It's quick, it's deployable, it's the cheapest. It does have some downsides. It's intermittent. So you need a mix of other technologies to support the generation and the load curve. As far as percentage of the grid,
In the US, I'm not sure, maybe Scott knows the renewables, you might know the mix. It's still relatively small, but renewables are, as a percentage of new generation added to the grid, the majority. It's probably- Way beyond the majority. Yeah, yeah. It's like 90 % last year. Yeah, so you have a, it's a majority, but we're now displacing an enormous amount of-
whether it's coal or fossil fuel or whatever nuclear generation that's existing in the grid. this is an energy transition. It's going to take a long time. These transitions don't happen overnight, but the fundamentals are in favor of renewables. They're the cheapest. They do have some downsides, disadvantages that need to be solved for, and that's happening. Scott, maybe you got some facts. With batteries, exactly. Yeah. So about 60 % of the US generation is fossil fuels.
About 20 % is renewables and about 20 % is nuclear, rough numbers in terms of like for this audience. The global numbers are shifted by market. So EU is a little bit higher on the renewables and nuclear side. Like France, I think is 90 % nuclear right now. Germany, I think is a mix. So it really depends on the market. As I mentioned, China's footprint is huge, but it's still not the majority is renewables as of now. There are certain markets in the United States like California where
It's about 50%. And as Chris said, you do have to pair these intermittent technologies, solar and wind, with some kind of storage, which I think 90 % of the energy that's coming online right now in the US with renewables has storage as part of the base project definitions. So that's become very common in being able to essentially time shift. The sun doesn't, sun shines in the middle of day, you need electricity at night, right? So how do you shift that electricity usage? So that's kind of the...
the state of percentages and sort of where things are going. And as you heard, it's the majority of the renewables bring online. In the U.S., we've had this disruption from a policy standpoint that is going to, it's gonna be weird. There's gonna be a fast track of projects getting put on the grid over the next two or three years to take advantage of the existing tax credits. And then it's an unknown what's gonna happen. Those tax credits from a capital standpoint are a great way
Right now, if you take advantage of the transferability, if you have a tax liability, there are an interesting way to play an investment in the clean energy space today. I'll leave it to Chris and Breene to talk about that if it's of interest. You have to have a tax liability to think about it. But if you do, it's an interesting way to play where you can reduce your tax liability and participate in bringing new renewables onto the grid. But the shift, the transition that's happening, I think it's inevitable.
We're going to have in the US a minor disruption, but globally it's not slowing down. It's continuing, which means the overall demand for everything from equipment manufacturers, which is his own investment class, independent of deploying actual renewables, independent of the operations of them and the long-term economics of each one of these projects in these markets is a critical part of how you think about this space.
Breene what's your thought here?
I mean, look, like when we're talking about, you know, like the trends right now, I think Scott is doing a really lovely job of describing them. Like, like from my, I just want to make sure people understand my perspective. You know, Scott and Chris, like they are in these energy markets in a, in a much more focused way. I'm building like entire portfolios around this. So this is something where we've built a whole portfolio thesis, just
Basically looking at the market and saying, similar to what Scott is saying around, we are not pricing in, climate adaptation to, energy demand. And so there's going to be more as a result, there's going to be more energy demand. we have a similar thesis. It's not the same, but it's basically saying, like the public markets are not pricing in climate change being here. Similar to Scott that it's changing. And so.
we're seeing this like rapid transition over to renewables. It's almost completely displacing like the new energy demand, which is growth, right? And so from our perspective, it's like a small piece of the way we build our portfolios. And it's like a really crucial one because what we're seeing is there's big gaps in the market, not just in, you know, kind of the Zettawatts and the Energea, like being able to get access to,
⁓ private equity style investments in. Scott had something that he said that I think is really important, which is the speed to grid. And I think when we're talking about AI, they are going to be more sensitive to speed because it is an arms race right now than it is going to be what type of fuel generation. So if it's more expensive and slower, like a methane plant is going to be in Ohio, they're probably going to have second thoughts. So.
This is me just giving my framework and saying, and what we're seeing is all over the world, like peak demand in oil. In China, it's likely hit. In the EU, it's likely hit. We're even expecting it in the United States despite new federal policies. So there's this big change that's happening in the markets, largely driven on it being cheaper, faster, better.
Right, because I know Chris was talking about the intermittency of solar and wind, which is 100 % true. But batteries, like the cost of that has dropped. It's like 90 % drop in the last five years. And so if you go from something that used to be expensive to now is incredibly cheap and reliable, like we all use batteries. We know what they're at. I think the battery revolution is also going to be like a fascinating thing to watch. Again.
I am not an expert in that battery revolution, but I can see a role that it plays in a larger portfolio. So that's my answer. It's not really an answer, but it's like helping people get a perspective on my perspective. I can let me give one other perspective just on a thing to think about when you think about generation of electricity and investment and investment thesis with coal, oil and gas.
You have an input commodity that is priced in a global market that moves with the global market. And then in most of the markets you have in the US, you have an output of electricity that is in a wholesale market that also floats on its price. So if you're trying to figure out what's going to happen in the energy market, you have to understand both sides of this. contrast that with solar, where it's about will the sun shine another 300 days this year or 287.
I'd rather bet on the probability of plus or minus a few days of not shining, given that we live on Earth and the sun is in the middle of our solar system, versus the changes in the geopolitical environment that could drive oil prices through the roof or gas prices through the roof, where you don't have any control over that. From an investment thesis standpoint, things like electrification, things like bringing renewables onto the grid, they plug along.
They might get disrupted along the way, but there's only one side of the equation they have to navigate with it. And so I just think if you were going to go deep on the energy space, unless you're going to become an expert in geopolitical movements and to try to understand and predict that, it's likely, to Breene's point, that oil and gas reach some kind of a peak, and then they tail off over time. And so if you're looking for a place to grow,
there's an inevitability of these other technologies and geothermal is going to come up the curve. And so a few other ones will be coming along the lines. So I just think if you're going to spend time on it, thinking decade to two decades out, it's much better to become an expert in this side of the equation if you're new to this space than it is to try to figure out what the 20th century edition of the energy market is. Like you've got to look forward or I would suggest you look forward. Great.
Right. So now we're in my world. looking at like global macroeconomic trends, like this is a place in which like I spent a lot more time on. So I have two very like very short points. But basically we had an economic system that was built around doing business as a way to create peace on the heels of World War Two. Bretton Woods financial system. America had the dollar replace the pound sterling as the reserve currency.
And we were basically saying to the world, let's globalize. And in doing so, we would become more peaceful. Now that had an assumption that it was going to work forever and it's not anymore. Right. We hit peak global trade in 2017. We're starting to see tariffs, right? Like as a result of all business is good. It's not the truth anymore because now we're living outside planetary boundaries. And so it's like, people are trying to grapple with what is
The system that we have created is like not exactly working and we have a new system that has not yet emerged. And so now we're going into this time where, and there's a really great report on it. called the Carlisle report. It's called a new joule order. And the very specific thing that they talk about is as a result of this kind of eroding system, we are going to be in a more regionalized world, less globalization, you know.
And if you're trading across borders every day and oil trades across the border every day, right. But renewables don't. And they said that there's going to be this somewhat paradoxical thing of people not caring about solving climate change as much anymore, but actually doing more to solve climate change and adapt because of energy security reasons. And so we're in a really unique environment where this is
This is only accelerating. so like from our standpoint, so we have an ETF CCSO that, and it's climate solutions, US equities, more than 50 % of the revenue comes from these climate solutions. But it's a broad list of them. Solar wind, electric vehicle, batteries, heat pumps, nuclear, grid expansion. It's a ton of things. And you would think in a Trump administration that has been like vocally hostile to a lot of these forms of energy generation,
And yet it has been outperforming the S&P 500 you know, in this time period, just because these trends are much larger than even what, like a sitting president can, can be able to implement. So this is just like, you know, when Scott's talking about this, is like inevitable. Like we are making this transition at such a rapid pace and we're at the beginning of it. It's a multi, multi decade trend because it's incredibly hard to replace infrastructure.
So it's not something you can do overnight, but it is something that will provide millions of jobs and like incredible opportunities to invest over the coming decades. And that's something that I'm really excited about.
Let's keep going on this thread of portfolio building and what's I mean, it sounds like you're all of the opinion that there's sort of a split between what was and what will be. But let's talk to investors about their own portfolio building. you know, I mean, for lack of a better question, how do I make money in the space? I.e. How do I approach investing and look at kind of performance numbers and growth and turns in line with what's to come here?
let's start with Chris. Performance, mean, what do I need to know about performance? Obviously, the future may be different than the past, but like historical performance is usually where I start, know, I'd say, okay, what's this done over last three decades?
and then think about what's going to happen in the next three. Okay, I think there's two parts there. There was allocation, portfolio building, and then performance. with Energea, our assets are infrastructure, their performance is stable, it's predictable, it's contracted cash flow, we buy operational assets. When they run, it creates revenue and we distribute it monthly. That's how we do it. Performance is
You can check our website, we have multiple different funds. They do Brazil Fund 12 to 14 percent IRR, down to the US or Africa Fund 10 to 12, and then the US Fund 6 to 8. We advocate for a blend of those three. So you get diversified from a currency perspective, from a market perspective, and you generally are about 11 and a half, 12 percent. So that's the comment and answer on
performance, but on allocation on portfolio building, we've all heard the kind of the 60-40 is changing stocks and bonds and there's now it's adding- Not totally, but I'll go into that. Yeah, please do. How much is private markets? Is it 10 %? Is it 20 %? I think it depends on the individual investor, could be even higher.
You can point to endowments or pension funds that are historically much higher in private markets. That's changing, but they've performed. I think it was Larry Fink in his article is the new 60-40 is 50-30-20 stocks, bonds, private markets. At Energea, we consider ourselves private markets. We're not traded publicly, we're a private market.
investment so we'd be part of that 20%. I do think that allocation comes down to the individual investor and their goals and needs. that's my answer. So the way in which like this when they talk about the 60-40 that's 60 % stocks 40 % bonds and right and the main reason
why you do that is because stocks have market risk and bonds have interest rate risk. This is wildly oversimplified, but this is some key points. Market risk is like, what's going on the S&P 500? A good example of this is 2008. The market is starting to crumble, but in that time, the interest rate risk is actually going the other way on your bonds because they're driving up the interest rates.
The reason why they said the 60-40 was dead is in 2022, there's a really unique phenomenon and it's affected everybody in energy. because as much as in the United States that Biden put the Inflation Reduction Act, rising interest rates is much more penal to renewables than the support of the Inflation Reduction Act. Because if you have higher interest rates and you're buying everything on loans, you have much higher costs.
And so in that time, also means those new loans are higher cost. And so the bonds in your portfolio did worse. And so as a result, you have both your stocks and your bonds go down in 2022. Very rare time. That tool is now back in the hands of the Fed. And so it is unlikely that the 60-40 as defined is over. Now, it's also true what Chris is saying, which is there's an emergence of private markets, but you might not always have.
access to private markets wherever you are. So if you're in a 401k, which a lot of our clients are, you don't have access to private market investments. In your own portfolios, that's where you can start to build it. And one of my favorite people to read, and I 100 % guarantee other people on the call like this is like Nat Bullard. And so Nat Bullard comes out with this annual decarbonization report. I read it every year. I post about it. It's one of my favorite things.
But there's one particular slide that comes out and really hits on this call, which is the credit default risk that comes with solar projects is like half of traditional projects. in addition to a performance, those are great numbers that Chris is talking about, right? But in addition to performance, there's also a lower risk with renewables. And think about it. It's because it's excitingly boring, right?
It's predictable. Like this is what you want from a good investment. And so there's like a really unique timeframe. And this is why I was even talking about with AI and that like, still going to be a demand for renewables because it's fast and predictable. Right. And so we're in this like very unique period where even though there's federal policy that is antagonistic to a lot of renewables, the market demands and the market capabilities of these new technologies are such that you're going to see it.
start to build and then in what Chris is saying, having that asset allocation is starting to change. Now, final point that I wanted to make is the most important question to answer when you're investing is when do I need the money? That's the most important question to answer. If you need the money in six months, like you got to, you are putting in a high yield savings account, right? If you need it in five years, you might put something that's liquid, but it is like bonds, right? If you're looking at 10, 15 years retirement,
then you might start looking at other things. And that's a place where, you know, really understanding your asset allocation, you might be able to go beyond. And liquidity is just like, can I get my money out? Right? Just so people understand that. And so it's like, if you're at 10 or 15 years, then like working in things like an energy is like really interesting. But it might not be in that like very short period. So it's like very crucial to understand your situation. And this is why we have these like also incredibly boring disclaimers of like,
This is not financial advice. It's because we don't know what you on this call are going through. We don't know when you need the money. Like we don't have that answer. And so none of this can be financial advice. So it's like up to you to take the frameworks of what we're saying. And we're trying to give it to you as clear as we can to then go back and allocate it back into our portfolios. Because you could see very easily someone who's, you know, 50 years old, not going to retire for 15 years, building that 50, 30, 20 portfolio.
Right. So you, you know, let's, let's say you do Carbon Collective We would have, you know, the, the, would be the 80 % of it. We could do stocks and bond allocation that would meet it. And then you would have that 20 % available for private markets. And this may be like, uh, you know, again, it's private market. So there's fewer disclosures, but there's like those returns were great. And the money is very illiquid, right? Think of like owning a house. You have to sell that house as a pain in butt. Right. So it's like.
There's this time and it's somewhat predictable. I think that's where someone like Chris could go into that. Like how long do these things last? Because if I'm investing in this larger set of trends, I can build a portfolio that address it in the public, public markets as well as compliment it with private markets. And so that's the end of my like very short digression. So much talking about it. that was helpful. I do want Chris to double click though on, something on, on what we've been talking about here, which is like.
Can you articulate, again, without naming a jurisdiction or a project name, how exactly, when we get into one of your funds, is it working? My understanding is we're allocating a fund, and then you're sponsoring a project in a municipality in Brazil to build some capacity, which you're then using debt and equity to repatriate those dollars to my account on Energea in some time frame. Can you just give us a little more?
Again, like typical context on where those flows are and when what and when is going where. If you're an investor or potential investor, you visit our site today, you create an account, you have options, fund options, you can do what we call the core account, which blends over the three portfolios, which is Africa, US and Brazil. Or you can specifically say, I like Brazil, I'm Brazilian, whatever, like this return profile, I just want Brazil.
you invest into that portfolio of operating assets. Those assets are operating contracted cash flows, off-takers. In Brazil, it's a lot of community solar. We do have some corporate off-takers. There's a large number of assets that are operating today. New dollars that are coming in, we use those to buy more operational assets. You are participating in equity in that portfolio of assets.
As they generate power and the power is sold, every single month we pay the bills and then it's distributed pro rata, per your shares and you'll get a monthly dividend. The biggest powerful feature I like to talk about on our product is auto reinvest. So we give you your monthly dividends, but if you don't need them, if you're a long-term investor and we hope you are because that's the ideal...
profile for our investment is long term. Take those dividends, click auto reinvest, and you'll get more shares in that portfolio and your return will grow. It's compound growth. So I hope that was clear on how it works. Yeah. Any doubts? Yeah, no, that's great. mean, what's the, so how long, I mean, is it evergreen then? is there a point where these funds are evergreen.
Yeah, the funds are up. Okay. And so like last year, what percent would I have made on that on an average? In Brazil, would have made I think it's 13%. The same the same IRRs that I told you. As a cash distribution, not a not as a appreciation or it's it's half and half. There's there's some appreciation, especially early on in these portfolios when we did development work.
and we actually built the projects. We've migrated because I have to get into every single funds kind of a strategy, but in Brazil, the market has kind of turned and we can buy assets that yield about the same as constructing new assets. So we're more of a M &A model right now, just because of dynamics in that market and it would take longer than we have right now, but most of it's cash yields.
Got it. There could be some appreciation and it depends on the Just want to make sure we had a shared understanding of that. So change gears a little bit. Question came in from the audience here. I'll read you the question we're going to have to zoom out on a little bit. But what are your thoughts and perspectives on the environmental concerns related regarding lithium binding for battery storage? I'm going to zoom out on that and just say, Scott, us, you talked about battery storage. Where actually is that and how?
critical is solving that to making some of these things work. And any comments you want to make about environmental impacts are also welcome. Well, so lithium is just one of the technologies for storage at this point. And there are now an increasing number of different platforms. Most of the lithium is going to go into batteries that need to be mobile, need to be moved around. There are big lithium stacks for energy storage, but there are
better technologies now. So related specifically to electricity and generation, I think we're gonna see a decline in lithium being used as a platform and some of these other emerging storage capabilities coming out. Flow batteries is another example of things. So there's a set of technologies. From an environmental standpoint, there are trade-offs with everything. If you're extracting any natural resources, there's gonna be an environmental impact that's not, you know, it's not special for lithium.
It's everything, whether it's rare earth metals of any kind, magnets, et cetera. So I think in this energy transition, we are going to have trade-offs on the impact that we make on this. certain markets are more, pay more attention to those environmental requirements like the EU, unbalanced the United States, even though that's changing a little bit, but.
you have a very different footprint in sub-Saharan Africa, for example, where the rules around environmental, they don't always have the resources to enforce them. So I think being thoughtful about the battery side, and if you wanted to avoid technologies with lithium, because you felt like it was an important part, you certainly could do that. But I think in this energy transition, going to have some cost in order to get some benefit. And I don't see it as being avoidable. Yeah. Got it.
I mean, just like very clear, I put an article in the chat from Dana Nucitelli, who did like a really rigorous breakdown on this question, because it is true that renewables are still an extractive business, right? Full stop. And comparative to the established system, the changes are dramatic, right?
One of the things that we look at is, you know, think of all the oil spills, you know, around in the oceans. Like these have like gigantic impacts. All of the tankers that are driving around, 50 % of all the tankers going around the world are just carrying fuel, right? They're just carrying fuel from one place to another. So it's like, you have these like really large environmental impacts that are caused because of this type of globalized trade of trading like oil all over in addition to the actual drilling of it.
And it is also true that we have significant problems, environmental problems with mining. It is also true. I have friends that are working on this, trying to help out people on the Amazon against these sorts of things. So I think it's really incumbent upon us to be able to understand two things, which is thing number one, this is much better.
And thing number two is even in this much better scenario, we can still operate and try to make it like make it much better. Like the better scenario can be even better. And so that is not an elegant answer. I don't think because I would like to say like, no, this is perfect. This is so much better. Like, you know, we're literally growing our energy like into plants and we're putting the plants on top of our cars and they're taking creating a big forest that creates energy. Like I wish something like that existed.
I know Scott's laughing, but like that's not what we're doing yet. Although like who knows, like there's some sci-fi, maybe it happens, but we're just like, we're a long ways away from having a very successful systemic solution to the amount of energy that we need, which is like barely clearly laid out from Eric at the beginning of this, like demand is going up. So what do we do?
So let's, I mean, we've flown through this conversation, learning a ton, almost at the end here. Let's go back to our investors. And here's a question that came in from one of them, but I also had it written down myself. I'm an investor starting out. I've loved what I've heard here. I wanna get started. Do not give me financial advice. I know that's all personalized. Give me process advice. What do I need to know? What do I need to decide?
diligence do I need to be qualified to do? And what's the process I can follow to move from where I am today, is interest is peaked to actually like having an energy investing sub portfolio in my investment allocation. Why don't we start with Scott on that.
He's qualified to give investment advice, I think that your allocation. You want come back to me? Like this is actually like my realm. I'll give me 60 seconds and I'll give you the I'll give you the dopey answer from someone who started out a few years ago thinking about this as an individual. I think you have to lock in on what's your long term view and to Breene's earlier point, what is your investment?
time horizon in terms of when you need cash out to be able to do this, right? That's the first thing. But I think if you want to be exposed to this, decide whether you want to invest in the future or the past. And if you're going to invest in the future, really start to understand what these different companies are and what the roles they play within the clean energy space and therefore kind of what your risk profile is. As Chris said with Energea, you've got a very reliable income stream tied to basically debt financing to
It's very straightforward. On the other hand, you could take more risk on and there's other types of investments. So I'll just talk about alternative investments. if you plan on living in your house for the next 20 years and you can put solar panels on, there's a return profile right there, like on your roof. Right. So that, that you could do very intimate, like right here, right. Can offset your electricity bills, make you feel good every day, you know, change the direction of what you're doing versus a pure long-term, you know, investment strategy on this. The thing for me,
that got my attention in doing the research, my first pass on this a few years ago was really understanding that our world cannot function without electricity. Full stop.
No functioning, right? If you lose your power at your house, how many hours before you start to lose your mind? Right? So I think if you have that long view, I would advise really deeply looking at the entire electricity infrastructure as investment opportunities and picking the places from your impact perspective on what you want to have. But, Breene, there's ways to use your existing assets to then deploy it against that, which I think is where you bring a lot of...
Yeah, I mean, when you said it really well, Scott, so I'll just like be clear, like understand what your goals are. Like, do you need to have 60, $70,000 a year, a hundred thousand, $200,000 a year and spend in 15 years? Right. Like have some idea of like, what does that goal look like? Understand where you are now. Like maybe you're, you know, maybe you're at 300,000 or 500,000 or I don't know what that number is.
You know, and then, so if you're looking to have, you know, a lot of people will use the 4 % model, which by the way, the 4 % is like thinking like a foundation where you never run out of the principle. so I'm just going to use that just in case, let's say you need 80,000. That means you mean 2 million bucks. So how much are you contributing now? And how much return do you need to get to that 2 million? Right. And if you start to find that.
You know, you are on a track of like contributing enough money into the, into the markets and maybe like a base rate would be like seven or 8 % returns. And then you go now that I'm in this longer time horizon, where can I take some risk for like, would call it liquidity risk, right? I don't, not going to get the money out right away to maybe like improve my returns and like how much of that liquidity risk can I take to improve those, to improve those returns? And then.
That's like, it's kind of a lot, but it gets you to this place of you might go, you know what? I can do 10 % into like private markets. I can do, and there's like a bunch, energy is one. You can do VC style. That's a longer time horizon typically. But it's like, there's a lot of different ways to get into this. It's just what they've been describing has been something that's more.
you know, like predictable, right? And then where, like, and then figure out what you want to do with the Russell portfolio. How much you want to fixed income, how much do you want in public equity? Like these are established forms of investment that are highly liquid. You can get your money out, you know, because like, I don't know, like I'm 42. I'm not that old, but I'm old enough to know that any plan I've ever made in life doesn't go exactly the way I planned. Right. And that sucks. I wish it did, but
If you're giving, you're building in flexibility and Slack and the system to be really nimble when those things happen and change, that's going to give you both like the ability to, my dad always used to say planning is important, but the plan is like a North star, right? Like the plan, the act of planning is always the more important thing. like continually going through, evaluating your portfolio, seeing what you're trying to do, like have regular check-ins. So, you know, like
Maybe at first you're like 10 % is the right amount to put in private markets, 20 % in fixed income, 70 % in public equity. But as you get closer to retirement goal, you might be switching those things. So it's like, it's just having that mindset of, when do I need the money? How much do I need? How much am I putting in? How much do I need to grow? And what types of risks can I sustain to get other types of investment returns? And that's just a framework of thinking that can be helpful.
for you to like, I don't know, reach your goals, have the impact that you want in your investments. And that's meaningful. We've got a couple more minutes. So I want to squeeze one more question at the end, but Chris, why don't you comment on this beginner answer? How do I get started process wise, not investment advice wise? You guys did a good job answering. Once you've set
Once you understand your goals, your liquidity needs, that's where you got to start. So understand that, write that down, pick your investment themes. And I would recommend energy transition as one of those themes. Energy transition is going to take tens of trillions of dollars and decades. There's many different ways to do it. You can do public, you can do private. It will be an enormous investment from all types of investors.
retail, institutional, wealth. And I think it's a great theme to focus on, learn more about, learn about the access, the different investment vehicles, platforms that you can invest through. But once you've set those goals and the liquidity needs, look at the themes and I recommend Energy Transition.
Great. If you wouldn't mind answering Gerald's question in the chat, in the Q and A, we can jump to our last question, which is really take out your crystal ball. Give us one development you expect or it be a new trend. It's going to come in some breakthrough technology, some investment theme that you're pretty bullish on. Something's going to happen in the next 36 months that you want to keep our eyes open for. Why don't we start with Scott on that one?
I suspect, I'll double down on what I mentioned earlier, I suspect we're going to see a massive shift.
and the need to.
multiple hundreds of trillions of dollars. And the energy piece of this is gonna be a critical input to all of that. So I think if you're US focused, and I think as Breene said, we're increasingly going to be market to market focused, where each of these markets around the world are gonna have different.
rhythms to them and different cadences. So number one would be adaptation is going to drive things and paying attention to that is going to be important. And then I'll second what Breene said, which is depending on where you are in the world, looking out at other markets and understanding where there might be opportunity there. I think we're going to see things emerge that are unexpected in the, have long-term implications. Let's just say that.
Gotcha, Breene. Quick prediction. 36 months out.
I think we're going to be shocked at how fast renewable energy growth goes. And that has been happening already. There was a stat that was saying that the International Energy Agency, they make these five-year projections for solar, and it's routinely three times lower than what ends up happening. So I just see us in this place where it's going to be pretty rapid.
but it's gonna feel very behind the scenes and boring. You're gonna wake up and be like, my gosh, we're here already? And it's gonna be messy. It's not like there's a clear always winner. Even in a time in which we're saying 90 % of the generation that has been added to the grid in the last year has been renewable, we might have ups and downs, right? Especially with new sets of policies. So, you know, we're...
So all this is to say is it's not gonna be a straight line, but the renewable energy adoption is going to accelerate. So that's what I see. Chris, last word, close this out with something exciting. I'll follow on that and I'll be more specific with, think in the next 36 months, I think storage. I think you saw solar come down this cost curve, China, like just the amount of manufacturing capacity
in solar drove that price into the ground and they're doing it right now with storage. So in the next 36 months, I know storage has always been next year, next year, next year, but I think it's the next 36 months. And you'll see that cost come down like solar did. And then it's just normal that you'll have a solar and storage combo system, low cost, and that's what's going into the grid. And that's the future. Great. You heard it here first. This was a great session. We learned a ton.
Thanks to all of our panelists for being here and sticking it out and giving us their candor. Thanks to all the investors for taking a look at this. You're going to get some follow-up with contact information. Yeah, you guys can reach out to me too. We'll do what we'll give that out. Josh, last word. Yeah, no, again, thanks for everyone who participated. Thanks for everyone who joined us. Really excited to continue the partnership with Vincent and Energea.
I know we'll be publishing some of the key insights and content from this conversation and circulating that to all the attendees and the people who weren't able to make it. And then hopefully I will see you at our Techonomy Impact Conference in September to continue this conversation. Awesome. Thanks everyone. Have a great day.
