#239 Climate Risk, a New Era for Climate Tech | Grace & Adam from Equal Ventures

 📺 Watch on YouTube

What’s up, everyone! 

Today we have a great episode with Grace Penders and Adam Chadroff from Equal Ventures. If you're not familiar with Equal, I recommend checking out episode 116 where we had on Rick Zullo, the Founder of Equal.

Today, we're continuing the conversation about the climate tech vibe shift. However, our conversation with Equal is a little bit different. Equal has, from the very beginning, had a thesis broader than just climate. One of those other areas is insurance. This is an area that is increasingly intersecting with climate. This is becoming especially acute given the rise in natural disasters and the catastrophic financial impacts that follow.

Our conversation today focuses on these themes as well as what the insurance industry’s role is in helping solve the climate investing challenge. There are plenty of ways. This is playing into how governments engage.

Overall, it's an amazing episode and we're really excited to share this with you.

Sidenote, we recorded this in person in the equal offices during my recent visit to New York. So if you'd like to watch, check it out on YouTube. (Also, be sure to give us a follow on YouTube to help us grow the channel)

Topics 

• 00:00 Cold Open & Intro
• 03:00 The Climate Tech Vibe Shift
• 05:58 The Intersection of Climate and Insurance
• 09:01 Investment Trends in Climate Risk
• 12:05 Quantifying and Mitigating Climate Risks
• 15:03 Innovations in Climate Risk Management
• 17:55 Preventative Measures and Market Impacts
• 26:05 Understanding Market Compression and Its Impacts
• 29:50 The Role of Insurance in Value Creation
• 32:54 Government Involvement in Climate Risk
• 35:00 Navigating Innovation in Insurance and Utilities
• 40:18 Exit Opportunities in the Insurance Sector
• 44:10 The Climate Capital Summit and Future Trends

Links

• Grace Penders | Adam Chadroff | Equal Ventures
• Connect with Somil on LinkedIn | Connect with Silas on LinkedIn
• Follow CleanTechies on LinkedIn
• This podcast is NOT investment advice. Do your homework and due diligence before investing in anything discussed on this podcast.

Chapters

• 0:00 Cold Open & Intro
• 3:00 The Climate Tech Vibe Shift
• 5:58 The Intersection of Climate and Insurance
• 9:01 Investment Trends in Climate Risk
• 12:05 Quantifying and Mitigating Climate Risks
• 15:03 Innovations in Climate Risk Management
• 17:55 Preventative Measures and Market Impacts
• 26:05 Understanding Market Compression and Its Impacts
• 29:50 The Role of Insurance in Value Creation
• 32:54 Government Involvement in Climate Risk

Transcript

Adam Chadroff (00:00)
risks profiles are changing, so we need to measure differently. But I think quantification isn't the whole thing. The primary store of wealth for most people is their home. And if suddenly, like a significant percentage of homeowners are unable to get coverage for their home, then that's like a massive structural and systemic problem. Sometimes I think on the software side, there's a very small ecosystem of large software platforms and potential buyers.

And you know, sometimes that space can be challenging, but I think if you're building a generational insurance company that like supports the industry and delivers a new insurance product, I think there's massive potential exits.

Silas Mähner (00:42)
If you're hearing this now, it's because you are a paid subscriber to Clean Techies. Thank you so much for supporting our mission. Enjoy this ad-free listening experience. Hey everyone, welcome back to the Clean Techies podcast where each week we are breaking down the trends, stories and lessons of leading clean tech entrepreneurs and investors. We'd also ask a big ask for you at the beginning here is if you have not done so already, please go to the description of the show and fill out our ongoing listener survey. This really helps us to improve the content to be a little bit more tailored to you as well as to understand kind of

how we might serve you in better ways. All right, today, Somil and I are continuing our conversation about the climate tech vibe shift, and we're speaking with Grace and Adam from Equal Ventures. The reason we're doing this is they actually have a broader thesis than just climate, and they've had that for quite some time. Two of those areas are climate and insurance, okay? So with this kind of ongoing vibe shift, we figured it might be interesting to talk to somebody who has had a broader thesis from the very beginning, and...

I just understand what it's like for them, right? Because I think as we're seeing, especially VCs widen their thesis, it's interesting to see, know, is this, was it inevitable from the beginning? We go through a lot of different things to kind of dive into, but one of those is also, of course, the convergence of insurance and climate in general. So part of this, this episode as well is on this idea of climate and risk, we're diving into a post that Equal had recently where they, they, they categorized this next wave or

phase of climate as being climate risk. So, clean tech 3.0 equals climate risk. So, it's a really well-received post. A lot of people had thoughts about this, so we wanted to dive into that further with them. It was also really fun, just a side note, we got to record this in person at the Equal Ventures offices while I was back visiting in New York. Adam had to phone in, but Somel, Grace, and I were able to hang out in person. So, it's a really, really fun episode for us to do. I'm sure you're going to enjoy it, but without any further delay, let's get into the show.

All right, welcome to the show, Grace. Good to have you on.

Grace Penders (02:46)
Nice to catch up with both of you guys.

Silas Mähner (02:48)
And

we've also got Adam here remotely. You want to say hi Adam, introduce yourself.

Adam Chadroff (02:52)
Everyone sorry couldn't be there in person. I'm out work with with Gracie.

Silas Mähner (02:56)
Absolutely.

Yeah. We're not going to hold it against you, If you're not feeling so well, we don't expect you to come in. Obviously for anybody watching, you can see that we're actually getting to record at least three of us in person in New York while I'm visiting. So it's a pleasure to be here with Grace. Obviously we're big fans of what you people are doing. And I think I'll just try to tee this up. the kind of the impetus of doing this conversation is we're noticing a really big shift right now in climate tech, with the new Trump administration and kind of, especially the branding side of things.

Adam Chadroff (03:00)
cough all over you today.

Silas Mähner (03:24)
And you had an amazing LinkedIn post that talked about the climate tech one point or clean tech one point, climate tech 2.0 and now climate risk 3.0 is kind of the climate, the third iteration of it. And, you know, just how you guys are looking at things. since equal has a little bit of a different focus, we wanted to get you on and discuss kind of how things are shifting and how you look at it. And maybe some of the benefits that there are to, to, to focusing on things other than just purely climate. I don't know if you want to give a little bit of an intro to yourself and kind of the impetus for that post and, and we'll go from there.

Grace Penders (03:54)
Yeah, I'm happy I can give a little bit of background on myself. So we have Adam here, who's our insurance lead at Equal. I'm the climate lead here at Equal. I've been here for roughly a year. Used to spend time even like slightly later stage investing at another fund called Energize Capital and previously actually came from the energy world. I've worked with 14 electric utilities in the past and...

Honestly, I actually started my career in Puerto Rico after Hurricane Maria, helping figure out FEMA funding, how this ties into, you know, how we fund our infrastructure, both in terms of replacing what we had, but also improving for the future and other events that might hit the area. So I think a big part of even how we're thinking about this thesis has been coming from work that we've done in the past. And Adam, I don't know if you want to give a quick intro as well.

Adam Chadroff (04:40)
Yeah, sure, so I...

I am also at Equal Ventures. I cover the insurance vertical and I've been at the firm just over two years. My background is from financial services and insurance. So I was working in financial services for about five years and then I moved to operating roles at venture backed insurance startups. So I spent time at a venture backed digital agency and then a commercial NGA and various operating roles and then made my way to Equal Ventures where along with Grace, you know, we look for opportunities in our respective verticals and, you know, try to find the most compelling opportunity.

to play the very specific themes and theses that we pay most attention to within our work.

Silas Mähner (05:17)
Yeah, absolutely. So I guess let's start with the what is going on. So obviously there's this vibe shift happening. I'm just kind of curious from your guys' perspective. Is this something that's temporary? Was it always going to happen? Was it inevitable? Just like, what are your thoughts there?

Grace Penders (05:32)
Yeah, I mean, so, you know, even in just from my investing experience, we've been kind of going up that height cycle. And now perhaps we're kind of having that slight life shift in terms of, you know, the capital that's investing in the space, the companies that are being funded in this space, obviously different things happening from political factors. Well, I think I don't necessarily, you've used the word positioning before, but

I do think this is just a natural progression and evolution of how we think about climate. think in the past, you know, we've talked about how do we prep for an environment like this, you know, what are things that we can do on a sustainability front? What are things that we can do on an energy front? But I think right now we're having an interesting point of time where, you know, some of the things we prepare in for are here. Like we're starting to see that urgency of just not just how this impacts

climate more from a theoretical lens, but how does this actually impact us as people? think climate is something that's deeply personal. And I think oftentimes when we've looked at this space in the past or folks have looked at this space in the past, it's almost been sometimes a bit more theoretical of how we prepare. I think what we're seeing right now and even LA wildfires and different national events that are hitting here in the US as well, it's kind of shaped the discussion just to be maybe a little bit more about value, whether that's, you know,

your own personal value as an individual, but also value as a company and enterprise. So I think in some ways it's been like this evolution, we're just reaching the core of what climate technology has been for a while.

Somil Aggarwal (07:05)
Yeah. I think if you look at sort of the investing landscape, a lot of our investing peers, you know, not many people would have yet come out and said we're sort of in the next generation of what is climate tech, right? Yeah. You know, prior to your post, I didn't see much content on it. within your, you know, within you guys as a firm, how did you get the conviction to really go out and say that this is a new age? Did the elections make that easy? That you just mentioned the wildfires. Like what made you confident enough to go out and say that we're entering a new era?

Grace Penders (07:34)
Yeah, can do that.

Adam Chadroff (07:35)
We didn't necessarily, I wouldn't argue that we changed our investment thesis. I think like we've sort of been head down focused on this as a long-term probability and even inevitability. But I think, you know, with there's sort of two like vibe shifts happening, you know, so to speak, right? On simultaneously there's this change in.

the geopolitical environment and the expectations about what will be mandated and tolerated, even allowed with respect to various energy and sustainability initiatives. there's uncertainty following this big wave of investment is the first catalyst. And that's certainly happened over the last few months. But I do think that the first, the building and the awareness of increasing

weather and climate variability and natural disasters over a multi-year period is something that I think people have just started to realize. And I think the catastrophic outcome in Los Angeles in January just drove that home for people, right? was like, this is something that was not happening in a remote place. It was not happening even in a place where people expected that there was such a vulnerability. And it was so sudden and unexpected that I think it...

sort of shook people as it ought to. But I think those two trends have sort of come together and have culminated in people reassessing how they think about investing in climate and what the objectives are. And Grace said something really important. She talked about how climate is very personal, right? Because it affects you as an individual. But so is insurance, right? We think of insurance as this super-rude, dee-dee, know,

thing that is separate from everything else in one's life, but it's not. It's really about financial protection. And if we are in an era where your assets and your home and your livelihood are at such risk, then the convergence of financial protection and climate vulnerability is a very long-term theme that I think we have to learn to grapple with.

Somil Aggarwal (09:53)
So you guys have been tracking this for a while, so you can speak to this likely better than most. What, of course, you had this sort of external, what you call external macro trends, right, that are affecting the overall change of landscape. But specific to, if we think about startups, investment, momentum right now, what dominoes have fallen? Have the investors finally said, we're committing capital to this segment, we see the market opportunity? Have the insurers finally said, we're willing to work with startups and new data assets? What dominoes have fallen?

Grace Penders (10:22)
I mean, I think in the sense of equal, we've had this unique positioning for a while where, you know, one person on our team is fully dedicated to climate and energy. We have someone on our team fully dedicated to insurance. I think just even within the past couple of weeks, few months, we've just also started to see a pretty big transition even on the insurance front. You know, one in terms of a lot of the talent that has been coming in, folks who have been building businesses in other spaces that are

Now looking to figure out where do they want to play within the climate space. We've seen a lot of interconnection of people wanting to play both at insurance and climate. So we've seen a lot of activity in that space. Interesting. Yeah.

Adam Chadroff (11:06)
Okay.

I that's right. I can't point to a single specific thing like suddenly X dollars of capital immediately came in or some new relationship that wasn't, you know, couldn't be fostered before is now happening. But there's a clear shift in like awareness and interest in the intersection of these problems. And I mean, you can see that just by like reading the news, right? Like we had been talking about climate risk and insurance for a long time and it was, you know, it's a peripheral thing that you would talk about.

people would say yes, but I think, mean, I lost count of how many like above the fold, you know, mainstream national news articles were suddenly talking about the crisis in insurance and the systemic risks that we won't face in the future, but that we face now and not in, you know, peripheral places that we know are vulnerable, but in literally like the heart of Los Angeles. So I, I,

I don't have a great answer to your question. There's something that probably feels very much more on people's.

Silas Mähner (12:11)
I will say I think that part of it is, and this gets to the question I'm trying to get to, is really with insurance, everything becomes quantified, right? Disaster, the impacts are quantified. And when people are losing money, and especially when they can see how much money they're losing, then there's some motivation to fix it, right? Especially the individuals on the corporate level, right? There's been people talking about insurance as a core component of what's going to drive...

adaptation investment for a long time, right? Or I shouldn't say a long time, at least like 12 months or so I've been hearing kind of a little bit of it. It seems like it's now just being absorbed, right? The insurance point is basically you're attaching value to all the climate impacts. And as a result, these climate tech companies, these startups are, in my opinion, just kind of going to go down into the industries that they serve, right? They're not going to necessarily brand themselves as climate tech. They're going to be industrial tech. They're going to be whatever they're doing.

serving those industries, preventing them from loss, et cetera. And obviously, I'm assuming over the past couple of years, you've probably seen more and more insurance-related companies that are kind of getting towards the intersection of climate and insurance. Is that accurate, Anna? Yeah.

Grace Penders (13:15)
What I would add is, specifically even called it climate risk, not climate insurance. I think insurance is a big part of the equation. I think there's been a lot of factors that have been contributing to this over the years, whether that's energy volatility, vulnerability with infrastructure. I come from the utility assets world and transformers has been a big part of the conversation, but it becomes really real. If you think about different places.

I worked with originally in Puerto Rico. Yeah, there's huge supply shortages that impact, you know, customers, their access to electricity, reliability, things that very much hit personally. So I think we've been seeing just like a series of these factors and I think there's different ways to address climate risk. Insurance is one of them. I think there's a lot when it comes to thinking about preservation of capital, preservation of infrastructure.

I also think from a resiliency standpoint of energy, we're going to see a lot more companies popping up in this space.

Silas Mähner (14:15)
Yeah, that makes a lot of sense. guess from the branding perspective then, you've called it Climate Risk, which I think is a great name by the way. Do you think that VCs and founders who are just really explicitly in climate tech should adapt and change how they're branding things in general? Should they do what I suggested of just focusing on the industries they're serving? Do you have any takes on this?

Grace Penders (14:37)
Yeah. So again, I don't think that this is inherently different than what we've been leading up to at this point. Some of it's positioning, but I think some of it's pockets where we're going to see a lot more venture dollars looking to invest. I think there are plenty of companies that we've seen in this space that let's take this situation of 80 % of outages and blackouts are coming from weather related events.

We've seen this rise of different types of companies that have been emerging. Maybe they're not necessarily calling it climate risk, but they're serving this greater purpose. You think about, you know, all the companies that I've seen related to distributed batteries, all the companies that I've seen that are thinking about how do you make energy economical where, you know, you're able to distribute these resources at large to the greater community. So I think that's something that I would note too is like some of it you could say is a branding perspective.

Some of it's just like where we're gonna see pockets of more dollars flowing into. I also think it's pockets that we might see new dollars flow into. I think insurance is just one of those examples of where maybe where that capital is coming from was very specific and limited. I think we're gonna kind of have to see that kind of opened up in terms of people who are looking to invest in that space, but also people who are looking to invest in areas tangential, but they're thinking about how do you prepare?

How do you think about recovery? I think it opens up different ways of how we think about adaptation.

Somil Aggarwal (16:04)
From my experience as a founder and then also looking at site as an investor, do think branding has major implications, right? Like how do you do that one-to-one matching of, you know, this person fits your thesis. And I think if when you're playing a numbers game, frankly, as a founder, as a startup, you're trying to figure out who are the people who are the right fit for my mission, right? So if the term of the next two, three years is risk, right? It benefits you to do that.

Thinking from the operational point of view, you guys obviously have visibility into sort of what's new in insurance and what's new in sort of quantifying risk. One thing that I've been seeing on sort of the AI side is people are talking lot about sort of the richness of data sets or certain data sets have been collected for a certain number of years now and they're reaching maturity. And so, Adam, you look ready to answer this question. I'd just love to ask from the visibility of on the ground things that are happening, what are some of the tailwinds you see in the space?

Adam Chadroff (16:56)
I mean, look, I think...

You call it like quantifying risk. And I think that's part of it. And that's been part of the discussion for a long time. We know the risks profiles are changing, so we need to measure differently. And there's been a lot of investment to date in that sort of category, whether it's explicitly insurance or it's modeling companies or any number of quantifying technologies. But I think quantification isn't the whole thing. think when I think of the innovation that we need to see in insurance and measurement as part.

that actually affecting outcomes is probably more important and more urgent than just measuring. If you measure, can, as an insurer, maybe avoid certain losses and outperform your peers, which is important. But if you affect outcomes, you can actually help solve this problem or be a force that actually is positive feedback into the ecosystem. So I think in addition to quantifying, we have to think about mitigating.

right, and actually being able to change what sort of impact an event has by being prepared for it or avoiding it, as well as, you know, incentivizing effectively, because various regulatory and demographic issues, right, are at play here too. It's not purely a climate issue, but the confluence of like very expensive structures being built in areas that are increasingly crowded.

and increasingly vulnerable because of climate change is very problematic, right? It's not like we have the same housing stock and we just suddenly have more fires. It's that we have a much more dense demographics in many areas that are very much especially impacted by climate risk and those risks are also worsening. So I think if people were focused on quantifying and measuring before, I think there's probably this renewed and I hope more urgent focus on mitigation and incentives.

Silas Mähner (18:48)
Do you see the insurance companies primarily being the ones to kind of push this forward with saying, we need, we call for startups to help solve these problems so that we can, you know, go back into these markets at some point. Are they, the big insurance companies going to talk to the states and say, you guys got to invest in these things or whenever coming back to the table, like what is the

Adam Chadroff (19:08)
Well, they sort of already are in some ways, right? Like if you look at the headlines about like big insurers leaving certain states, right? Like there's been a ton of news about carriers sort of leaving or pausing business in states like California, where there's especially acute risks and stringent regulations that are problematic for big insurers. So, I mean, that is one way to sort of like make a demand, right? You can sort of like stop doing business in a place that's having its own side effects, right? That's like causing supply shortages in certain markets.

state actors and like re-insurers of last resort like many states have to actually have to step in and take on those risks so it's almost like making them public in certain ways but I mean to answer your question more directly like I don't even if those large carriers want to solve the problem I don't think like in isolation actions that an individual company can take can you know are gonna change the game and I also think like

I mean, historically large insurance companies don't tend to be the most bold agents of change. Right? I don't want actually say that. That's not necessarily like a negative comment. It's just like that's a large insurer is a well-capitalized entity that is built to sort of withstand shocks and avoid risk by nature. large, highly risky and organizationally challenging.

change in how you do business is unlikely to come from a massive enterprise like that. So I think that makes us especially excited about being able to put dollars to work with other sorts of companies that are supporting them and filling gaps that we see in ecosystem.

Grace Penders (20:43)
And in many ways, we're kind of setting up this interesting intersection between those two big entities on both sides, whether you're thinking about that more from an insurance perspective, or if you're thinking about it from electric utilities. I think we see this as a really unique opportunity where you have two industries that work in this space. And because of the importance of some of those companies to have that stability and maybe.

be a little bit slower to some of that change also creates a lot of white space for companies to form in this space.

Somil Aggarwal (21:15)
You

were talking to us right before this about sort of the increased deal flow and, you know, going back to what you're able to see on the ground. What, what are some of the latest and best innovations in this space, right? Whether it's on the quantification side or on the, know, affecting change, affecting the outcome side, just give us a sense of like, what's been exciting to you in the past couple of months.

Grace Penders (21:35)
Yeah, do you want to start Adam?

Adam Chadroff (21:37)
Yeah, I mean, think we're definitely see renewed or like more visible interest in some of those latter categories I talked about, right? And in platforms that don't just measure risk, but they also affect the outcome of like what happens if there's an incident and help avoid an incident with the ultimate goal of pricing in a way that actually compels people to change their behavior, which over time could mean living in different places or building different structures or relying on different types of energy sources.

that are more reliable, but I think like, it keeps coming back to that word incentives for me. And I think there's a ton of investment dollars going towards new platforms that are able to change behaviors. we call it bending the risk curve, so to speak, but I think there's a lot of opportunities for new players to step in, in that regard. Grace, I don't know if you want to add other.

Grace Penders (22:32)
Yeah, I mean, I think we've invested in some of those solutions already, like companies like Stands that are doing property insurance and focusing on WebFlyer and what that could look like moving forward. Again, very deeply tied to the customer. I think even just like what we've been seeing in other companies we've invested in, companies like Shadow that are helping to make it more economical to be able to finance but also control distributed energy in bulk. I think we've seen a lot in that space.

I think something that, you know, just going back to our initial conversation of like climate risk is just really about value, value to the individual value to the company. think even on from more of a energy perspective, we've seen a pretty big shift, just even how like large energy companies are thinking about the value of their own customers to them. whether that's utilities or gen tailors or retailers that are trying to think about customers and maybe in a very like specific way, but like.

What value do they provide to them? But also it very much impacts like how they think about like pricing and packaging of how they think about like how these customers pay. It changes their perspective of how they create more stability, how they're able to reinvest into infrastructure. I also think when you think about different types of customers that might have different types of assets, maybe they have solar and batteries, maybe they have a generator. It also changes like how they think about incentivizing going back to Adam's point.

But I would say everything that we're looking at is tied to that concept of value of how do you improve it.

Silas Mähner (24:07)
So I'm trying to understand, is there a certain category where it's like most of this is just technology that's going to protect an individual from their assets being destroyed? Or how much of this is going towards actually affecting preventative change with like the state saying, we've figured out, these are the risky areas. We're going to go preemptively do some burns and protect these areas. Like what's going on on the preventative side versus like, hey, I just need to protect my stuff.

Adam Chadroff (24:33)
Yeah. I mean, I think we're seeing a lot of innovation on the preventative side too, or it's not always preventative, but sometimes it's just mitigating what happens in the event of a disaster. I mean, there's very clear and proven ROI that, know, according to lots of studies and real life examples from intervening before a disaster happens. And I think the more we could do to compel more of that behavior, we'll be very much welcomed. And I think it's, you know, it's not, it's not just interest from, you know, insurance companies and

and energy companies that are gonna do more preventative actions, although they will, I think you're seeing interest from a much wider array of actors now. So that'll include public entities, but that'll also include corporates that sort of aren't historically thinking about their vulnerabilities or they're protecting their assets in this way. So I think there's just gonna be a, my hope is that we'll see much more interest.

in pursuing those sorts of preventive and mitigating opportunities.

Grace Penders (25:35)
It does

have pretty large kind of market impacts down the line, right? I think sometimes when we talk about the space, we just talk about it from like damage on assets, right? Like this very small thing, but there's a cascade of like impacts from that, right? Like whether you're thinking about how investor skepticism changes how people invest in that space, whether that's second order effects of just operational impacts, thinking about supply chain and how that impacts it. But also from like,

greater impact that we'll start to see down the lines too, whether that's thinking about market compression, you know, that's going to even change how we think about companies at large and their enterprise value. So I think there's a lot of orders impacts of this. think we're just only at the tip of the spear of how we're thinking about the damage.

Somil Aggarwal (26:23)
piece.

can imagine it sounds like a root cause for pricing model innovation, right? Both in terms of how to understand the customer and how to value the impact on them. One thing I'm noticing, especially when talk about understanding the second order, third order effects, do you think that there's a future in where insurance companies, through some sort of technical innovation, can participate in some of the value creation that's happening down there? So for example, an insurance collaborates with

you know lenders more directly let's say is that a future that you guys are seeing or this is coming from a non-insurance expert but just based on what you said i it sounds like look

Adam Chadroff (27:01)
You caught a good point, right? If the insurance company is the one that's left holding the bag or the reinsurance company, whoever it is in the ecosystem, yeah, then they have a really big incentive to not just be more discerning in which risks they take on, but to also change the outcomes of what happens in the book that they do take on. So I think we will see more sort of insurer and reinsurer collaboration with other business entities to...

on infrastructure projects. think municipalities and governments share a very similar incentive. We think a lot about asset values in terms of numbers, but as Grace said, I'm going to tie it back to this again. It's very personal. The primary store of wealth for most people is their home. If suddenly a significant percentage of homeowners are unable to get coverage for their home, then that's like...

massive structural and systemic problem that is not only huge for people and affects tax bases in various areas, but it's also very concentrated. This is a widespread problem and there's stats about the very significant percentage of homes and homeowners that are at risk, but it's also concentrated. There's pockets where there's extreme vulnerability of fire or flood or hurricane or whatever the peril is.

It's a huge problem if those asset values are suddenly deemed to be uninsurable or like, you you're on your own. And we, I mean, we've seen stats about the extent of those vulnerabilities. There's, tens of trillions of dollars. We're talking like, you know, a full, close to a full year or more of like US GDP of, of asset value potential declines.

based on unavailability of insurance and asset prices going down. But that's not just someone is gonna lose money somewhere. That's like a massive structural paradigm shift in where we store wealth and who has assets and how they get protected. it's, I don't know, the gravity of these second and third order impacts I think is suddenly hitting home. And I think that's gonna catalyze a lot of new activity because there's no other option.

Somil Aggarwal (29:18)
Yeah, I just want to make a comment real quick before that. That's what I'm hearing from a lot of this is that for better for worse, and in many cases worse, unfortunately, but you know, solution to a problem. What's happening right now is pushing risk mitigation to the forefront of many stakeholders' minds who maybe in the past either could ignore it or it just frankly wasn't as important. But it's sort of an opportunity that insurance has, right, to kind of steward that moving forward.

Adam Chadroff (29:44)
Which is why I don't think it's going to be only like large multinational insurance companies that are thinking about it.

Grace Penders (29:50)
I like how you

phrase it too. It's really this like structural shift, structural paradigm shift of how we think about it. So going back to the first question, like, is this a different way to, you know, talk about from clean tech to climate tech? Perhaps, but I do think it's especially like, maybe it's because we're at that tip of the spear, but I think it's way bigger. I think it really reshapes how we think about exactly what Adam said, like how we invest, where we allocate dollars, how we preserve that value.

Adam Chadroff (30:10)
bigger.

Grace Penders (30:20)
So I think there's going be lot of opportunity. think we're just, you know, we turned to climate risk right now, but like we're not even close to what that looks like.

Silas Mähner (30:30)
Yeah, the only thing I can think of as you guys are talking about these areas is that to me, it seems as though it's inevitable that the governments become substantially more involved because if it is such a paradigm shift and there's such destruction happening, like no matter whether you're Republican or Democrat, you're going to see there's so much happening. have to act from a national security perspective to do these things. do you like, is that, I know I'm asking Chris.

Adam Chadroff (30:54)
I mean

if you look at the...

If you look at the exposures of like public, the public carrier in California, for example, I'm sure other States, you know, may look vaguely similar. Something like in the last three to five years, their, the assets that they have in their public plan for insurance tripled, 200s of billions of dollars. And I mean, that same entity just had to get bailed out, I think, for the first time, just a couple of weeks ago, they got like a billion dollars from somewhere else in the government. it's a, you know, that's already happened.

already sort of like deferred to private entities and where they can't meet the systemic challenges, like public entities have already stepped in. And yes, is the answer to your question, right? There's definitely going to be more attention to this, more intervention, more sort of political activity and from both sides of the aisle, whether they say it explicitly or not, because like, this is a huge problem that is going to impact people. But I don't know about the same token, like the gravity of the problem is almost bigger than like.

A bailout won't solve this problem. I think we're very used, like you can't, bailout might help in the short term because like there's instability and like you need people to get paid and you need claims to happen and you need there to be consistency and availability of insurance coverage, you can't, the extent of this problem is so big that you can't just bail it out. So I think government is a stakeholder and is not the exclusive stakeholder.

Somil Aggarwal (32:24)
But let's just follow up on that question too. As a fund, and maybe these are early conversations, how are you evolving to match that new short-shaping landscape? I mean, on one end, there's funds that are LPs and advisor networks are primarily government, right? And you think sort of like the government first funds. And then you guys are obviously very articulate in terms of how you go about insurance. So have you either, maybe already you are, but are you thinking about how to involve public sector actors in that? Or is that not, maybe not mature enough yet for engagement?

Grace Penders (32:54)
I mean, I think we have this unique situation where, again, we these two sectors that touch the space that some should perform. I think a big part of what we do here at Equal is, again, like probably most of my days are spending time talking about the whole ecosystem, talking with tons of folks on government, talking with tons of folks on private equity, right? Especially when you think about these resources and companies trying to lower the cost of capital so they can scale faster.

I think it really does change even just how funds just think about how they work with each other. think traditionally today, climate has been fairly siloed in terms of how they invest and who they work with. I think a lot of companies have been in some ways have been probably because of just the incentives of venture have been scared to maybe work with some of those big entities, whether that's utilities or government, just because of those sales cycles that don't match. No, but I think it's a core part of our thesis. I didn't mind we're talking about earlier.

part of people's thesis is like we're investing in the long term. We're investing in areas that are the massive challenges of this generation. But at times, it's more important for us to figure out ways that we can involve different parties across the group. I think it's going to be increasingly part of the conversation.

Adam Chadroff (34:06)
Yeah.

I mean, insurance and energy, right? Have both been like, they're not the easiest categories to invest in. They're like, they, people get excited about them and people discover that they're actually very challenging investment sectors and they don't always scale and like a SaaS company does. So I think.

You know, we, our approach is to try to be very long-term oriented and thesis driven. We've been thinking about this problem space and, you know, evolving our thoughts on it for a long time. I think we are, our, our move is like to be head down and continue focus on this long-term problem and on the solutions. I think it probably affects more of the people who are excited to talk to us, right? It's like the, the.

when you get a wave of excitement or urgency about something, I think it just enables us to be able to talk about these issues with more stakeholders and include them in our network to find novel solutions.

Silas Mähner (35:00)
Yeah, and I think the integration method is what's all of the companies we've had on the show who really, really succeed. They find a way to integrate with the other players in the space. They're not just doing the solo. They find a way to partner because otherwise you can't scale as quickly, cetera. So I guess in general with all of these companies that are looking at, are...

maybe characteristics that you would say these founders really need to have in order to succeed at building something that's kind of in this intersection of insurance and climate? Are there any core characteristics?

Adam Chadroff (35:29)
I mean, one is you have to be immensely innovative, right? This is like, mean, to your point, this is such a big problem that you have to do something meaningfully different from how it was done before. That's number one. But I think number two is like, you know, to your point about how many interconnected stakeholders there are and you know, that some of those stakeholders don't move so fast and that some of those stakeholders are just learning to grapple with this, the extent of the problem. You also have to be very tied in to those different stakeholders, right? Like it's, it would be challenging to create a generational and

I think the is...

Grace Penders (36:22)
If you

are really trying to build something that's disruptive and different, you do have to have that. I would say I look very much for that interconnectedness relationships, just because these two industries are specifically notorious in terms of how you can build in the space. I think the last thing I'd say was really just how adaptive. think to be honest, we love working with founders who've started with ideas and have...

molded and changed them based off the feedback that they're hearing from customers. I think we've done some of our most successful companies are ones that are just always listening to the market and adjusting. I think that's such a crucial part for both of these industries that are at that stage where there's just so much kind of just massive things moving that like you need to be able to have that skill set.

Silas Mähner (37:09)
Yeah. Well, one thing I want to slightly circle back to for both of you is, is you mentioned that you have to do things differently and innovatively, but my understanding is that like if you're working with utilities and, and probably insurance companies too, they probably do not like innovation because they, like you said, they're inherently like trying to avoid risk. So how do you work that needle of like going to them and saying, Hey, we have an innovative solution while still being like proven enough for them to actually say, okay, well, we'll try it out.

Adam Chadroff (37:35)
You take baby steps and you prove it.

So, mean, in a space like insurance, right? Like you can, you can actually demonstrate the value you're creating. So I don't think you can immediately say like, okay, I'm doing 180 degree shift and how underwriting is done. just trust me. Like no one's going to want to back you. Right. And I don't mean no one like would want to invest in you. mean, like you need insurance capital and you know, an insurer to provide capacity for you and licensing.

that's going to be challenging. I think you have to take steps that are bold, but that you can back up with data and you have to be able to demonstrate value you're creating until the industry sort of sees the value you're creating.

Silas Mähner (38:20)
That's the reason

for the close partnership and integration.

Somil Aggarwal (38:23)
Yeah. And

I think with utilities, like in some of the utility investments that I diligence, it's utilities rather ironically would be quick to take the call, set up a system, talk with the people. But the difficulty is in that if you think about climate tech to demonstrate effectiveness to your point may take a year or nine months or some, know, it takes that long just to set up sort of a test facility or test procedure that demonstrates the value. Right. And so I think that maybe in insurance, if you're able to demonstrate

value on a quicker timeline that might meet the requirements and

Grace Penders (38:57)
I there's different ways. think just like insurance have kind of specific nuances, utilities do too. I would say as someone who like worked in utilities before investing and still invest in a lot of companies that space, I think they're actually moving incredibly fast right now. I would say faster companies. And that's probably even a change that I've seen in the past six months. Some of those sales cycles where you think might take a year, you know, I've seen some that have been in a matter of weeks. So I think.

Somil Aggarwal (39:13)
That's a must.

Grace Penders (39:25)
Again, this might even go to the broader shift of what's happening, but, maybe you might call that of like an ebbs and flows of climate, but it's also opening up a lot of doors too, for some of those companies. think there's also a lot of ways to navigate. Like just as Adam said of how you test yourself, think utilities are in some ways, sometimes it's easier to sell like very specific use cases if there's a very clear need that they need to be able to build something. Utilities are not looking to build.

They're probably notoriously one of the companies that is not looking to build internally, but is looking to use a partner. So there are ways to do those specific use cases and build. And again, if you're creating, let's say it's services, if you are even selling specific services, if there's, if it goes back to actually building like value and platform value as a company, that's an easy way to kind of build that relationship with a utility that will be a long-term.

Adam Chadroff (40:18)
Yeah.

Somil Aggarwal (40:19)
This

is a site pivot, but asking very crassly, what are the exit opportunities in...

Adam Chadroff (40:25)
I

mean, I think it depends what you're building. I think like sometimes for a very different from the sort of insurance companies we're talking about right now, right? I think on the software side, there's, you know, there's a very small ecosystem of large software platforms and potential buyers. And, know, sometimes that space can be challenging, but I think if you're building a generational insurance company that like supports the industry and delivers a new insurance product, think there's massive.

potential exits. And I think it could be, you know, in partnership or, you know, as, as part of a, you know, a large insurer that is critically trying to tackle these problems or even a standalone public companies. think, I think we're going to see generational companies built that are tackling this problem. We've talked a lot about like how to, you know, what opportunities to pursue in this sort of problem space. But one thing I think our team's been very

clear about is that like there is a humongous tam and a really massive exit opportunity for the companies that can most concentrate the benefits of the value creation in this space.

Silas Mähner (41:34)
Yeah, I was just going to comment. I'd really like to hear that there's possibly new giants being created because I'm always concerned like in a hundred years, will we see the exact same companies running the world that do now? So I'd love to see that this is in your minds a potential rather than just like, we're to build a nice product that's going to get acquired by the big insurance companies and they're going to that.

Adam Chadroff (41:50)
don't think that at all. I

think there's going to be massive new wares from this paradigm shift.

Somil Aggarwal (41:56)
But potentially our last question, but every time we break, know, there's probably only a handful of like really meaningful articles we've broken on the show. What has the reception been to the article and sort of even the momentum since posting? Like how are people receiving it and kind of letting you guys know that it made a difference?

Grace Penders (42:15)
Yeah. I mean, honestly, we've been really excited. think, you know, equals affirm. We, we post a lot. think this is probably one of the articles that seems to have gotten a lot of reception in terms of viewership, but also in terms of people who are reaching out, trying to the conversation. I think this is also the first time that people are just, again, this is about.

This is not about like a next step necessarily within climate. It's about like how the conversation changes. So we, I think even since we've posted that, I've seen a lot of people even post just about the concept of climate risk, about preservation of economic value. So I think it's just going to become a larger part of how we talk.

Somil Aggarwal (42:53)
Are people receptive to these thoughts that they may have to rethink the direction of their portfolios? Or are you still seeing a little bit of resistance, maybe just some, like, oh, I'm learning about this.

Adam Chadroff (43:05)
I'm noticing much more urgency. think people are eager to get the wheels turning to figure out what they need to do.

Grace Penders (43:14)
And I don't think it's necessarily pushback. think we have a lot of funds who are still well capitalized and looking to invest in this space. And I think this just changes the conversation of how they work with their own portfolio company. You know, again, pivot and be adaptable and kind of think about the broader goal that we're aiming for, but also to rethink new companies in the space. So I think in general, it's actually been very receptive.

Silas Mähner (43:38)
So any

other I guess major topics or trends that you guys wanted to cover before you wrap up?

Grace Penders (43:42)
No, I think like the big things that, and I think in the article we highlighted some of them, it's just like, it's not necessarily one trigger, but it's just like a series of these things that build to become something bigger, whether it's that energy instability, right? 80 % of power failures, or that's the disaster costs. You know, it averages roughly 120 billion annually in terms of some of those costs of being able to kind of recoup those infrastructure investments.

from enterprise value and even just what Adam was saying in terms of that insurance fallout where we're just starting to see a lot of white space. So we're excited by this.

Somil Aggarwal (44:19)
Amazing.

Silas Mähner (44:20)
Interesting.

Well, I guess last thing is you want to tell us a little bit about the insurance capital summit that's coming up. Someone's here,

Adam Chadroff (44:26)
yeah, I'd absolutely like to talk about that. So, I mean, you guys might be aware that, that Grace ran the Climate Capital Summit last September. And, know, it was an opportunity to sort of do like the anti-conference, right? Like there's, think there's a lot of fatigue with really large events with too many vendors and tiny companies and boots and they're exhausting. you know, through the Climate Capital Summit, we pulled together a much more intimate forum for conversation and networking, right? It's around 300 or so participants.

to, you know, leaders from corporate executives, the founders of growth stage companies, you know, private investors from P and VC. And there was an awesome reception for it. We had multiple, you know, public company CEOs speak and a really engaged and like highly accomplished audience from all three of those different buckets of constituents. So we walked away with the mandate to like, to try to replicate that across our different, our different verticals. So we'll be doing this in New York.

on May 8th, and we're super excited to sort of take a page out of Grace's playbook from the Climate Capital Summit. So we've got, you know, leading corporate participants from large brokerages, large carriers and reinsurers, you know, who will be speaking at the summit alongside, you know, founders of leading intro tech startups and growth stage companies. And then, you know, many of the PNBC folks from our network and others that we've been connected with, you know, related to the event. So it's May 8th here in New York. You can see more at ICS.

That's our website landing page for the summit. And from there, can register to save your space. I say that we're already quite oversubscribed relative to the limited amount of space, but we will have to balance participation across those three different constituent groups. So we're eager to have as many people sort of express interest in the event as we can accommodate.

Silas Mähner (46:16)
Yeah, I was going to say if you're in other words, if you're a founder in the insurance space, you should probably try to get there. I will also say that if you're trying to follow Grace's footsteps in the event, you've got big shoes to film at. It was a great event. Definitely one of the-

Adam Chadroff (46:29)
aware

of that.

Grace Penders (46:32)
I think we're actually going to have some big names even on the insurance side who are going to be on the keynote speaker.

Adam Chadroff (46:39)
Yeah, I think there's going to be some consistency across both of those two summits in 2025, right? I think the climate and energy side is increasingly clear topic at the insurance one. And I can tell you anecdotally, some of the keynote speakers I've been talking to when I chat with them about what they want to chat about in their forum.

People who are not from the climate space, people who are not focused on catastrophe risk want to talk about that because it is so topical and important. is the thing that like, even if you're a national broker, your employees and your customers and your clients are having huge problems that are so concentrated and it's top of mind for the CEOs of those companies. So we're definitely going to be covering the climate side of that narrative at our event.

I'm sure we'll find opportunities to stuff in some of the insurance and risk mitigation into the Climate Capital Summit in September.

Silas Mähner (47:36)
Well, thank you guys so much for doing this. We couldn't be all four in person, but it was really fun to this recorded. Hey, no worries, man. It was really fun to get this recorded in a timely manner. So thanks so much for doing it and looking forward to just continue to see you guys as continued success.

Adam Chadroff (47:50)
Yeah, likewise. Thanks for the time.

Silas Mähner (47:53)
Alright everybody, thank you so much for tuning into this episode and thanks for being a paid supporter of this work. It really does mean a lot to us. It really, really does, genuinely. Please feel free to drop us any feedback, whether that's positive or negative. We're always like Home Depot, we're always improving. If you are going to give us negative feedback, please do it privately so we can improve nicely. We wouldn't want that publicly posted ideally, but yes, please give us any feedback. Let us know your favorite episodes. Let us know if there's any guests you want to see on in the future. We are specifically looking for another person or another

kind of company or fund to talk to that's similar to kind of what Equal Ventures is doing, something along this vein of the climatic vibe shift. So feel free to reach out with any suggestions there. And all right, folks, that's all. We'll see you next time.