Episode 190: Jake Levine, U.S. Development Finance Corporation
Today's guest is Jake Levine, Chief Climate Officer at the U.S. International Development Finance Corporation.
U.S. International Development Finance Corporation (DFC) is America's development bank. DFC partners with the private sector to finance energy, healthcare, critical infrastructure, and technology solutions. DFC also provides financing for small businesses and women entrepreneurs to create jobs in emerging markets.
Most recently, Jake was an Associate and Policy Advisor at Covington & Burling, advising clients on a broad range of policy, regulatory, litigation, and commercial matters related to climate, clean energy, and clean air. Before Covington, he worked as Senior Counsel and Principal Consultant to California State Senator Fran Pavley and Chief of Staff to the President of Opower. Jake also served in the White House Office of Energy and Climate Change. He developed innovative energy policies, including the most stringent fuel economy standards and the first-ever greenhouse gas emissions standards for cars and trucks. Jake holds a B.A. and J.D. from Harvard.
In this episode, Jake and I dive into the U.S. International Development Finance Corporation (DFC)'s mission, why 95% of our projected global emissions will come from outside the U.S., and his role as Chief Climate Officer. Jake also explains DFC's process and approach to investing, the kind of capital they deploy, and their relationship with local governments. Finally, we end the discussion by exploring breakthrough tech versus deployment of proven tech and where DFC needs help. Jake is a great guest with a wealth of knowledge about international climate investing.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded December 15th, 2021
In Today's episode we cover:
Why 95% of projected future global emissions will come from outside the U.S.
Overview of DFC and Jake's role as Chief Climate Officer
Learnings & key takeaways from Jake's time focused domestically and how they can be applied internationally
Further exploration of Jake's career path and how he first became climate motivated
DFC's priorities and agenda, how it's set, and who determines their focal areas
How DFC sets timeframes for the corporation's long and short term goals
The role of the private sector and the way DFC thinks about impact versus profit
How DFC defines its capital and a discussion on catalytic capital
The importance of returns to DFC when investing
Who DFC invests in and how the team finds companies and startups to fund
The criteria DFC uses to assess if a project is a good fit to invest in
DFC and in-country governments relationship and how DFC navigates working with local governments
The difference between breakthrough technology and deploying proven technology, generally in the climate space and for DFC specifically
The gaps and opportunities that would help DFC accelerate its mission and what's outside the scope of DFC that would most affect climate change
Links to topics discussed in this episode:
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Jason Jacobs: Hey everyone, Jason here. I am the My Climate Journey Show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey or MCJ, as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but they were longing for a peer group as well. So we setup a Slack Community for those people, that's now mushroomed into more than 1300 members. There is an application to become a member. It's not an exclusive thing, there's four criteria we screen for, determination to tackle the problem of climate change, ambition to work on the most impactful solution areas, optimism that we can make a dent and we're not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity the better.
There's a bunch of great things that have come out of that community, a number of founding teams that have met in there, a number of nonprofits that have been established, a bunch of hiring that's been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members and some open-source projects that are getting actively worked on that hatched in there as well.
At any rate, if you wanna learn more you can go to myclimatejourney.co, the website and click the become a member tab at the top. Enjoy the show. Hello, everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Jake Levine, chief climate officer for the US International Development Finance Corporation, also known as DFC.
DFC is the US government's development finance institution. They partner with the private sector to finance solutions to the most critical challenges facing the developing world today. They invest in projects that create jobs in emerging markets and sectors including energy, healthcare, critical infrastructure, telecommunications and financing for small businesses and women entrepreneurs. I was excited for this one because government is just not an area that I know as much about as early stage entrepreneurship and government has such a big role to play in addressing climate change. So any learning opportunity like this, I really relish. And this episode does not disappoint.
We talk about DFC's charter, their origin story, when they came about, why they came about, the goals of the organization. We talk about what types of projects are a good fit for them to finance. We talk about the criteria they use to assess. We talk about additionality and how they think about their capital versus market-based capital if and when market-based capital is available. And we also talk about the role of government in general, the role of innovation. We talk about the, what's happening in the Western world versus developing countries and how to distinguish between the two. And we also just talk about the best ways to address the climate crisis in general. I enjoyed this one and I hope you do as well. Jake, welcome to the show.
Jake Levine: Thanks, Jason. It's great to be here.
Jason Jacobs: Great to have you. And- and gosh, you're sitting in such an important area for the clean energy transition. And it's also one that no matter how many of these discussions I have, I still feel like such a newbie in given my small high-growth technology company roots. So I'm deeply appreciative that you're making the time to- to talk to me and I have no doubt that I'm gonna learn a lot from this discussion.
Jake Levine: Absolutely. Well, it's an area where I think the whole climate community, myself included, has to come up the learning curve 'cause you know, when you look at the projected future emissions of the world, 95% plus is expected to come from outside the United States. And- and at the same time, we're deeply under invested from a climate perspective in markets outside the US, outside Europe, developing economies, emerging markets. So it's a big- big task and eager to- to spread the good word and enlist everybody and- and your listeners in the challenge.
Jason Jacobs: And why is it that, that 95% number? If historically the, you know, the developed Western countries have been such massive emitters percentage-wise, why do you envision that that'll be flipped looking forwards?
Jake Levine: It's interesting. If you look around the world and look at sort of basic indicators, population growth, economic growth, trade, you see dramatic growth in emerging markets generally speaking, Indo-Pacific, Latin America, Sub-Saharan Africa, whereas in developed economies like the United States and many of our European trading partners, population growth is flat or-or declining. There are greater sort of efficiencies in terms of our technology, demand for electricity is flat or declining. So, you know, projecting out into the future, it makes sense that that's where you're also gonna see a rise in emissions.
And then there are a handful of- of key places where countries are continuing to heavily invest in fossil fuel technology, particularly in the power sector, China, India, South Africa, Indonesia, where you see new coal plants being built and brought online. And at the same time, you know, many of these markets are, and this is what's exciting, are also experiencing enormous growth in clean energy technologies in industrial decarbonization and transportation decarbonization. And so we do have an opportunity to flip that growth trajectory but we also have a risk of baking in a lot of carbon intensive assets and projects if we're not aggressively working right now to de-risk and provide financing for those alternatives.
Jason Jacobs: Uh-huh [affirmative]. And maybe that's a good segue before we get too far down the path. So what is the International Development Corporation or DFC for short and- and what do you do within the organization?
Jake Levine: Sure. So the DFC, it's the newest federal agency on the scene. We're- we're about two years old. And it's kind of cool to be in a- in a new agency. We're hap- you know, we get the chance to write our own destiny. We were created by a statute called the Build Act which is focused on development and to some extent on the way that US investment overseas can be used as a tool for diplomacy in foreign policy. And I came in as the first chief climate officer at DFC, which means that I sort of sit between the administration's strategic approach on climate, on development, on foreign policy and the way that that plays out in our transactions.
And the way that you could you think about DFC is basically as- as a American development bank. And we have a investment cap of $60 billion dollars. We've got about $32 billion dollars committed at the moment. This year we had a- a banner record year. We committed $6.7 billion dollars of- of new projects. And every year we see about four, maybe four and a half billion coming off of our books. So it'll take us a number of years to get up to the $60 billion dollar cap, then we do that through a variety of- of financial tools, whether that's debt financing, equity, technical assistance.
We provide key tools for de-risking projects and markets like guarantees and insurance. And when you look at sort of the mix of climate needs in the market, whether it's, uh, a mitigation project, say a solar and storage plant in a risky market where there may be sort of off-take risk or political risk, or if you're looking at an adaptation project to help make infrastructure more resilient to the types of impacts we're already seeing, you know, DFC has a really important role to play in- in providing some of these key financial tools to get capital invested in these projects and markets.
Jason Jacobs: And how- how did you find your way into doing this work? And even before that, how did you find your way into caring about these problems?
Jake Levine: Well, it's been a- it's been a long and winding road. Prior to joining the Biden administration, I was practicing law and working on climate regulation, environmental justice work in California but focused on the state and nationally. I did a lot of work litigating during the- the last four years to challenge some of the Trump administration rollbacks on the Clean Air Act in the power sector around the clean power plan.
Jason Jacobs: And is that- is that with the NGOs as clients, or who- who did you work for?
Jake Levine: We had a coalition of private sector folks, companies, utility companies, electric vehicle stakeholders, people who were interested in seeing the advancement of a sophisticated regulatory regime that incentivized climate innovation and decarbonization. And it was actually kind of interesting. We had a... we were in a joint defense agreement with the state of California and what ended up being about 24 other states whose attorneys general had challenged these rules because the states had determined that it was in their own public interest to keep these regulations on the books. And so the coalition was called the, I think the climate coalition, or I actually can't remember the name of the... the exact name of the coalition. But some of this litigation has now made its way up to the Supreme Court where the court has agreed to hear some of these cases and my prior law firm is still representing those companies.
Jason Jacobs: Okay. So you're doing that work and then...
Jake Levine: And then I had the chance to serve in the Obama White House in a small office called the White House Office of Energy and Climate Change, which is really where I sort of started learning about a number of these issues and- and cutting my teeth in- in the policy world, and during those years got to know a number of the folks who ended up developing some of the Biden administration and Biden campaign plans. And so I spent a lot of time over the summer of 2020 working with some of my old colleagues to kind of lay out a- a strategy for a potentially incoming Biden administration on climate and on environmental justice.
And actually I was focused more domestically, but just by a matter of coincidence and good luck was able to meet a number of the people who ended up coming in to staff, Secretary Kerry in his role as special envoy, and to put together some of the international financing plans. And that's how I learned about DFC and was able to find my way into this opportunity. And I have to say actually one of the things that I've really loved about this is some of the work that we've done to try to take our learnings from the domestic side, particularly on the justice work and build that into what we're thinking about on- on international finance.
Jason Jacobs: And can you give an example of some of the key learnings from the domestic side and how those might or should apply as we think about the international transition?
Jake Levine: Definitely. And I think here, you know, you- this would be... I'd love to- to hear what you think too because I think for a long time in the international context, climate change was... you know and sort of climate investing has been synonymous with basically renewable energy, and within that, essentially solar. And one of the things that has been so rewarding about the last seven or eight months that I've been in this role is working to really expand our definition of what does it mean to be doing a climate linked investment and thinking about other interventions also in the power sector.
So not just solar, but also storage and base load reliability and firm power for the grid that is also zero emission based. Looking at transportation technologies, we just invested in a Rwandan based two-wheel electric mobility company called Ampersand. It's a really interesting business that's electrifying, uh, motorcycles in- in Rwanda and hopefully will expand to other parts of Africa. And part of their business model also relies on the sort of the notion of mobility as a service, thinking about that as a climate opportunity.
And then also, you know, some of the work on the domestic side that you see on environmental justice, you may have seen the administration came out with something called Justice40, which is an effort to direct 40% of investments in clean energy towards disadvantaged communities, communities that have been historically marginalized and vulnerable to the impacts of climate change. And there's sort of a- a corollary to that discussion in the international context, which is what's happening around adaptation and resilience and this broad recognition that while we've been really focused on mitigation, we've been very underweight to use a finance term in the way that we're thinking about adaptation and also in the way that we're developing models to actually invest in adaptation. And that's something that we're turning our focus to now because it's of such critical importance.
Jason Jacobs: And when the DFC agenda and priorities get set, where does that come from? Does it- does it come from within DFC or- or does it come down from the top and how does your work need to fit in with the rest of the work that's going on throughout the federal government?
Jake Levine: That's a great question. So DFC is an independent agency and we're governed by a board. The chair of our board is the secretary of state, the USAID administrator is the vice chair and the secretaries of commerce and treasury also sit on our board and then we have four private sector board seats. We work very closely with the administration and we seek to align our climate investments with the goals of the broader Biden administration and the White House, and also with agencies that are- that are not on our board, but that have tremendous experience and expertise in these areas.
And I think about someone like, you know, the Department of Energy where Secretary Granholm is driving a number of key work not just domestically, but also internationally. We had the chance to spend some time together in Poland, for example, thinking about some of the energy and energy security issues in Eastern Europe and how DFC can contribute to that work, working hand in hand with the national labs at the Department of Energy. And also, you know, I think about someone- someone like Jigar Shah and the loan program office and- and the work that they're doing to invest in technology in the US.
We spent a lot of time conferring with Jigar and sort of seeking to align our- our general approach, recognizing that there are differences in terms of the companies and projects and markets that we're investing in. But there's a lot of collaboration inside the administration on this. And DFC is a tool that everybody is excited about because we're able to write checks to support the policy that the administration wants to pursue.
Jason Jacobs: And o- over what timeframe do you set goals and also over what timeframe do you put plans in place to pursue fulfilling those goals?
Jake Levine: Well, I'd say, you know, we've got a number of sort of strategic goal setting structures that we're able to use to set goals. And for example, we- we're going to be releasing soon something that we call our roadmap for impact, which sets sort of the direction of the agency on an annual basis and we report on that on an annual basis. But we also, one of the things that is unique and valuable about DFC is that we are a relatively nimble agency.
And so it means that when priorities arise, we can respond relatively quickly. Our board meets on a quarterly basis and we try to be responsive to e- emerging issues. I'll give you a recent example. A couple weeks ago, we announced a transaction for a loan of up to $500 million to First Solar in India to help them build a solar panel manufacturing facility. It's gonna have the capacity to create up to 3.3 gigawatts of- of solar per year.
And this is a transaction that is clearly aligned with our long term strategy on climate, but it also is aligned with a relatively emerging issue that we've sought to be very responsive to, which is the need to diversify the supply chain in solar away from some of the sort of current sources that we're using globally that come largely from the Xinjiang province in China and- and have risks associated with them around forced labor and other human rights issues. So that's a transaction that was... you know, we were able to put that together in a matter of months, but it was ultimately responsive to various of these long term goals.
Jason Jacobs: And when you do think about these long term goals, how do you prioritize in a world where you have kind of steady state objectives you'll be chipping away at over time and you have shifting priorities or opportunities or fire drills that- that might come up? And relatedly, how do you think about it as it relates to impact versus profit and the existence of the... you know, where does the private sector fit into all of this as well?
Jake Levine: I feel like I'm in a board meeting, [laughs]. You've hit on all of the- the juicy topics.
Jason Jacobs: And for whatever reason I- I ask them in batches which I'm trying to break that habit, but I just can't seem to shake it.
Jake Levine: [Laughs]. No it's-
Jason Jacobs: My mind works that way.
Jake Levine: It's good, we'll just line them all up. So it's hard. I mean, I think there are more priorities than we have the capacity to take on. We're a small shop by government standards. We're, I think we're about 400. I think we're now maybe close to 435 people, we've been growing. And our leadership team is, we're 10 folks, and we're focused in a handful of areas. You know, in addition to climate, we work on COVID and healthcare issues around the world. We focus on gender equity, we do work in information technology.
And a big part of what we do is helping the private sector, basically providing liquidity for the private sector in certain markets where the lending and activity of small and medium enterprises is really important for communities and for creating jobs and economic growth. And so all of these are priorities. Last year, we did about 120 transactions. So, you know, you- you have to balance where you're putting resources. But I think that one of the things about climate that we're increasingly seeing in our work is that it can be a part of almost every transaction that we do.
And there is a climate lens that we're seeking to apply, even in transactions that you may not have initially thought would be a climate project. I'll give you an example. We helped... this is another project that we were really excited about that we just announced a few weeks ago at the climate conference in Glasgow, which was a marine conservation project in Belize that was actually in the form of a debt restructuring for which we provided political risk insurance.
And so our insurance was able to help essentially upgrade a new bond issuance from what would have been, say like a BBB or a BB rating to a AA rating, which helps the government of Belize and the economy to do more borrowing, to borrow more efficiently and at less cost. And this particular project happened to have an underlying policy structure that will invest $4 million a year in protecting the Belize barrier reef and coastal environments that will have positive knock on effects for the way that the country develops sustainably around fishing and potentially carbon mitigation through the form of mangrove restoration and other coastal ecosystems.
And so... You know, but when we started that transaction, it was a debt restructuring and it wasn't so much a climate project, but the climate implications of it are enormous. So I think that when we're thinking about our priorities, we are excited to not just identify these sort of pure play, very obviously climate focused transactions, but also think about how are we incrementally improving our run of the mill infrastructure projects and our projects in- in various sectors so that they can contemplate and consider climate interventions. I don't know how I'm doing on the batch of your questions though.
Jason Jacobs: That's helpful. I can give another prompt. So for example, we had the Prime Impact Fund. We've had several partners from there come on the show. And they talk about their capital as catalytic capital, where if there's market based capital that's available without them being there, then it's not a fit for them. They wanna focus on situations where either it's earlier than there's market based capital and there's risk that needs to get baked out of the system first and it's risk that they know how to help companies navigate or there's market based capital there, but needs kind of training wheels to feel comfy coming in and- and that rely on somebody like Prime with their expertise. So that word catalytic capital, is DFC's capital catalytic capital?
Jake Levine: 100%, 100%. And it goes to the core of our mission, which is about mobilizing private sector capital to come into these transactions that otherwise wouldn't have- that wouldn't have played. And in fact, you know, we will not engage in a transaction unless our capital is what we call additional. So in other words, unless the transaction would not move forward but for DFC's participation. And, you know, a huge part of that is pulling private sector capital, crowding it in off the sidelines into these deals.
You know, a lot of folks think about this in sort of the terminology of like concessional capital or grant financing. But actually we've seen that many times, you know, you're talking about sort of specific market risks that don't necessarily necessitate a grant. They just need a little bit of a de-risking function, something like a guarantee, something like insurance coverage, something like here's one that comes up a lot and which we have the ability to work with, which is investing in local currency because local currency exchange risk is a huge problem for projects that are say taking off in a market where you're gonna to experience a lot of inflation in that local currency.
And I was talking to someone in one of our regional development bank partner organizations who- who made this comment that I thought was really spot on, which, you know, a lot of people are talking about these net zero commitments. You've got $130 trillion of assets under management now directed towards a net zero commitment. And that's great, but it's in the wrong currency. Because in order to invest in these markets in a way that encourages the private capital to come off the sidelines, you have to eliminate that risk among others. And so you're spot on on this question of, you know, how is DFC catalyzing.
We also work really closely with the foundation community and philanthropic capital to- to think about catalyzing DFC investment. So like for example, we have a partnership with the Rockefeller Foundation where they'll put in $50 million of grant financing to source distributed renewable energy deals which we can then come in and contribute at scale in a way that also unlocks further capital. And we did an initial call for applications with them and we're now looking at evaluating sort of in half of that first tranche about 220 million projects for distributed generation. All of that is capital that wouldn't have come off the sidelines but for this sort of Rockefeller DFC partnership to de-risk these markets. It's a core part of what we're focused on.
Jason Jacobs: How do you think about returns? Do they matter?
Jake Levine: Yeah, for sure it matters, but that's sort of the beauty of this agency. You know, we're, I would say that we are not in the business of losing money, but we're also... we don't require the types of returns that private investors are typically looking for. DFC is a new agency, but it's also the aggregation of two previously existing federal agencies. One called the Overseas Private Investment Corporation and one called the Development Credit Authority at USAID. And OPEC had a very proud tradition of returning money to the treasury. And I think culturally, that's still an important part of- of who we are.
But we're beginning to think about, you know, from a portfolio approach, how can we increase the risk of our transactions so that we are really providing transformational capital deploying capital that can take greater risks so that the private sector feels a little bit more comfortable coming into these deals and, you know, for us being less focused on what the actual return profile of a transaction is. But I think, you know, one of the things, there's a bit of a misperception in the market, that- that we're not lending at commercial rates. We are.
But we provide other ways to- to help companies and- and projects get off the ground. And I think one good example is that we would provide a loan tenure of say 15 or 20, maybe more years in a market where you might see commercial banks only willing to lend up to five or six or seven years. So we can really provide patient capital at scale in a way that helps move these financial transactions along and is unique in the market because the private lenders aren't doing that.
Jason Jacobs: And so have there been in situations where you come in to be catalytic and commercial loans show up? And if so, from the recipient's standpoint, how do you compete? Like if they were evaluating options or, I mean, does that situation ever occur or by definition, if you're there, it means no one else is around the table?
Jake Levine: I mean, we don't wanna compete with the private sector. There are plenty of projects where we will participate together. But if we're in a situation where we're crowding out a private investor, then we're not doing our job because the idea is that we're really focused on the markets where the private sector wouldn't take the risk without us.
Jason Jacobs: How are the companies that need the money finding you or how are you finding them?
Jake Levine: Well, there's a lot of work to get the word out. I'm excited to share this podcast far and wide [laughs]. I hope that people will learn about us. And I think that part of my- what my goal is, you know, maybe fast forwarding four or five or six years down the road is to be able to look back and say that we really diversified our pool of borrowers and clients. And so we're working closely with the leading private sector financial institutions in climate to do that. And that means, you know, talking all the time with leading funds.
You know, we've seen so much capital move into this sector and the various asset classes that are focused on climate and infrastructure. And so much of that capital is focused on North America and Europe. And so a lot of what we're doing is we're reaching out to the big funds. You know, we're talking to the TPG Rises, we're talking to the BlackRocks, we're talking to the tech corporates like Stripe Climate and, you know, the major technology companies out there, whether that's a Microsoft or an Apple or a Google to learn more about where are they interested in potentially moving their projects into emerging markets and how can we help to facilitate that?
But it also will take us having successful transactions, which we can then share as a model and say, hey, we wanna do more of this work. We wanna do it with a- a more diverse set of partners from the private sector and from civil society and, you know, getting the word out the old fashioned way just by knocking on doors and introducing ourselves and- and sharing what we can offer.
Jason Jacobs: And from a criteria standpoint, so, I mean, you mentioned catalytic in terms of not wanting to crowd others out or maybe going in when- when others won't. But from an impact standpoint, there's a wide range of criteria that different firms and organizations that I've come across use. Some are very carbon and- and gigaton focused and others maybe are softer and harder to quantify. How do you think about impact and- and the climate bar? What criteria do you use when assessing if a project is a fit from that non-financial lens?
Jake Levine: The carbon emissions is a- is a big one for us. It's true it's sort of a... more of a quantitative of hard measure. But I think when we look at this crisis that we're- we're facing, we're really focused on reducing the amount of carbon and other GHG emissions that go into the atmosphere. We're gonna do a lot of work hopefully on methane abatement projects. And so, you know, those projects will be evaluated based on their ability to reduce methane emissions. The agency has a very sophisticated, complex view of impact and we have a tool that we call the impact quotient, which takes in a variety of sort of socioeconomic factors that are designed to measure community impact, economic impact in the countries where we're working.
And we're actually in the midst of reviewing and sort of revising that set of calculations and sort of integrating a climate lens into that. And I think that on the softer side of- of that calculation, you know, what will be a challenge but really critical for us in this next year is thinking about how are we measuring the impact of our adaptation projects, where you're talking about providing communities with the tools that they need to survive and cope with flood, drought, increased risk of storms and- and severe storms. And it's a work in progress at the moment. So I'd be happy to come back and share more as that takes shape.
Jason Jacobs: That'd be great. And when you go in it... I mean, it sounds like a lot of the, if not all, I mean, correct me if I'm wrong, but that these transactions are happening with corporations. So is it a requirement when you go in that the countries in which these organizations do business welcome you with open arms and- and want to help, or are there situations where you're going in and the- the local governments in these countries may feel like it's meddling or where there's some tension there?
Jake Levine: Yeah. And this is a really good question. So the answer is yes. Like we can't invest without the host countries, you know, having welcomed us in so to speak. And I think that for the most part, we found that we are a welcome addition to transactions because not only are we bringing the financial tools, but we can bring other parts of the US government along to help provide support in enabling environments, regulatory support. We work with our partners at USAID, for example, who have thousands of people across the world in missions who are really deep in stakeholder process and community consultation, and working to make sure that any given project that we're working on has buy-in from local stakeholders.
And that's a really important part of what we do. This also gets formalized through agreements called international investment agreements. And without that, what we call the IIA, without an IIA in place, we can't do an investment in market. So that's a key piece and we work hard to maintain those bilateral agreements so that we can keep doing this work. And then it's, of course, you know, each transaction sort of has its own flavor of how- how those consultations play out.
Jason Jacobs: And how do you think about breakthrough technology versus deploying proven technology. And I'm... and I'll ask that two different ways. One, it just in terms of what we need to address this big, gnarly problem or problems, but then also as it relates to the DFC specifically.
Jake Levine: Yeah. Well, we need both. I mean, how do I Jake think about it is we need to be investing in both. And I love the work that I mentioned Stripe Climate. Like I think this is a good example of a super innovative team of investors and technologists and product people who are thinking about creating a new market for carbon removal. But that's not something that DFC can just jump into right now because when we're talking about our deals which are typically at a large scale, we kind of need them to be commercially viable. We need the technology to be operating at a scale that we can invest in already.
And so, you know, from that perspective, the way I think about DFC is it is a tool to scale up and accelerate the technologies that we already have available to us that we know are proven, that we know can work. There are things that are happening that you would take for granted in the United States like for example, maybe battery storage as an add-on to a renewables project to provide stability and reliability into the grid where that's still very difficult to deploy in many of the markets where we work, whether from a technical perspective or a pricing perspective.
And so that's where I think we can sort of move the needle and kind of help bring relatively nascent technologies to scale but we're not talking about investing in seed stage or a series A stage tech companies that are creating something completely new. Nuclear is another example, you know, where the administration sort of feels that nuclear has a really critical role to play in decarbonization and is very supportive of innovation efforts around small modular reactors and sort of the next generation of nuclear projects. And from a DFC perspective, probably the best place for us to deploy our capital is proven light water reactor technology that can be built and run through sort of the regulatory and safety and- and licensing traps without contemplating a brand new technology.
Jason Jacobs: Uh-huh [affirmative]. And as you look at the future, what do you think are the gaps and, or the opportunities that would help DFC move faster in your mission? And then relatedly, what are the gaps that are not part of your charter that you think would unlock faster progress overall?
Jake Levine: That's a really good question. [Laughs]. I mean, I think that where DFC experiences gaps is in a c- couple of areas. One is in... You know, there's sort of an important distinction in the world of risk analysis between actual risk and perceived risk. And in a lot of the markets where we work, there is a very high perceived risk but when you go and execute a transaction, the actual risk is less, it's lower because you've brought parties to the table who can mitigate various risks, whether it's... if you're talking about a- a power project and you have a PPA and you're talking about off-take risk and you've been able to sign an off-take agreement and you've been able to provide a guarantee and you've brought in multiple parties who can sort of ensure that the project is gonna move along.
And I think for us, the major constraint that we see is not the availability of capital, it's the availability of a project that has been able to demonstrate that it is actually what the, sort of the community calls bankable because they've managed these risks. And that's why I love... We have this new tool which is a technical assistance tool. And it's a relatively very small amount of financing that we're talking about for technical assistance. We're talking about 500,000 to a 1.5 million or $2 million transactions.
But it's potentially transformational because it allows you to take projects and transactions that would otherwise have been perceived to have been too risky and you can work on a technical study or a feasibility study, or you can de-risk some of these issues to go back to the off-take example, you know, by bringing in parties and getting some of the sort of the pre-financing agreements in place. And so I think about, you know, from our perspective, how can we really focus on providing project support at the early stages with technical assistance and grants to help create greater bankability that will help then the private sector come into these transactions.
I think in the broader community and- and sort of thinking about gaps, I really... I've been spending a lot of time thinking about adaptation. Because this is an area where we just don't have the ready financial models or revenue models that you see in mitigation. You know, on a power project, you've got a... you can project finance that. It's been done a thousand times. People know how to do it. You can quickly get capital into these projects. The environmental and social reviews are sort of to a certain extent, relatively standardized and people understand how that works.
But when you're talking about an adaptation project, it's like, okay, what's the revenue model, who's providing financing? How are you evaluating the actual impact or risks from an environmental or social perspective? We've seen so much work on carbon markets in say the forestry sector, for example, but there's still so many open questions about verification, permanence, monitoring. And I think about this as a major risk to what we're all contemplating because- because we just don't have the kind of repetitions in the transactional work to give people a level of comfort to come off the sidelines and invest in- in adaptation and resilience and carbon [inaudible 00:42:15]. So that's a big gap I think.
Jason Jacobs: Well, thousands of people listen to the show and they come from a very wide range of backgrounds. You've got entrepreneurs, you've got financial people, you've got government agencies, you've got elected officials, you've got activists, you've got NGOs. And so for me, what I heard there is one, we need more bankable projects to help the DFC put more capital to work confidently to get more of these projects in motion which will accelerate the transition. And then two, we need clearer models and repeatability and understanding around how to think about finance and execute these adaptation projects. So given the breadth of the stakeholders, maybe take each one of those separately and- and put out a call for- for help or a rallying cry to our listeners for what they should do to help.
Jake Levine: Definitely. I mean, I think you summed it up really well. I would say to the world of policy makers, advocates, civil society, I think, you know, getting greater visibility into where these markets could- could use essentially policy support to bring projects along is key. A number of organizations are doing this and they're doing a really great job. I think about, you know, someone like the Rocky Mountain Institute has an incredible program that they're running in the Caribbean where they are actually working with the policy community, they're working with stakeholders, they're working with regulators to create the right environment, but they're also putting steel in the ground on actual projects.
And one of the things that is clear from all of these various projects underway and stakeholders is that we just need to do more of it. And so a part of the, I think the call to action for our political and- and policy leadership is we need to scale up, we need to support more of this, we need to incubate other nonprofits, other think tanks, other accelerators and tech support organizations. I would say for the private sector, please give me a call. [Laughs].
If you- if you are an investor and you're focused on this issue and you are interested in expanding into emerging markets and developing economies, where- where we really have an opportunity to make a meaningful dent in both the emissions and the ability of communities to be more resilient to the impacts, this is what we're doing. We're completely focused on this and we need your help. And so if you weren't previously aware of DFC, let's get on the phone and set up a call so that we can run through some ideas to collaborate together and coinvest. And we wanna learn about your portfolio and we wanna share ours. And so I hope that people will reach out.
Jason Jacobs: Awesome. Well, I hope you get a ton of inbound from this show. You're doing important work and wishing you and the whole DFC team every success.
Jake Levine: Thank you so much. I appreciate you having me.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note that is .co, not .com. Someday we'll get the .com, but right now, .co. You can also find me on Twitter at Jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
