Episode 129: Rodrigo Prudencio, Amazon Climate Pledge Fund
Today's guest is Rodrigo Prudencio, who works in Worldwide Corporate Development at Amazon’s Climate Pledge Fund.
Amazon started the Climate Pledge Fund with the goal of getting to carbon net neutral by 2040. Amazon is using the fund to invest in companies that will help them meet this goal, across transportation, sustainable products and practices, and other key areas of decarbonization.
Rodrigo has lots of experience in cleantech well before his time at Amazon, including 12 years as a cleantech VC, and as CEO of a cleantech software company during the last cleantech wave. Earlier in his career, he focused on policy at the National Wildlife Federation and later at the State Department, where he was part of the negotiating team during the Kyoto Climate Change Convention.
We discuss a lot in this episode, including what got Rodrigo initially passionate about climate change, the lessons he learned from the last cleantech wave, what led him back into cleantech and his role at Amazon, and a deep dive into the Climate Pledge Fund, its areas of focus, and how Amazon will measure its success.
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
This episode was recorded live on October 22, 2020 as part of the Co_Invest Cleantech annual flagship event. We’d like to thank Clean Energy Trust for putting on this event, and allowing us to participate.
In today's episode, we cover:
Climate Pledge Fund profile, focus areas, and early investments
Rodrigo’s history and background
How cleantech has changed in the years since Rodrigo last focused on it
Key lessons learned from Cleantech 1.0
Amazon’s Climate Pledge
Role of big companies like Amazon in the climate fight
Role of policy and regulation vs innovation
Role of activism
Future of capitalism
Links to topics discussed in this episode:
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Jason Jacobs: Hey, everyone Jason, here. Before we get going I just wanted to take a moment to give a quick shout-out to the new paid membership option that we recently rolled out. This option is meant for people that have been getting value from the podcast and want to enable us to keep producing it in a more sustained way. It's also for people that want extra stuff such as bonus content, a Slack room that's vibrant and filled with people tackling climate change from a wide range of backgrounds and perspectives, as well as a host of programming and events that get organized in the Slack room. We also have a virtual town hall once a month where you can get a preview of what's to come and provide feedback and input on our direction. We'll be adding more membership benefits over time. If you wanna learn more just go to the website, myclimatejourney.co. And if you're already a member, thank you so much for your support. 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, Rodrigo Prudencio, from Amazon's Climate Pledge Fund. This was initially a live broadcast at Clean Energy Trust's Co-Invest Cleantech 2020 event. We have a great discussion in this episode and I was very excited for it because Rodrigo is a Cleantech 1.0 veteran. And he left Cleantech, and now he's back doing awesome things at Amazon. In this episode we talk to Rodrigo about his key lessons learned from Cleantech 1.0, what elements he thinks should be done the same and what elements should be different in this next wave of Cleantech or Climate-Tech innovation, what Amazon's up to with the Climate Pledge Fund and the climate p- pledge in general. What types of companies they look for, what stage they come in, what kinds of checks they write, et cetera. And also of course, how Amazon can help the companies that do take investment from the Climate Pledge Fund.
And we also have a great talk about climate change in general and what the role is, not only at Amazon, but of capitalism and market forces in general, and what some of the roles are of policy and activism, and some other things that are so key in addressing this complicated issue. I should also say, I asked Rodrigo some tough questions along the way and while it's easy to cast stones, and they're important questions to ask, it's been really great to see Amazon stepping up in such a major way and setting an example for other companies to follow. And I hope more companies do exactly that. Rodrigo, welcome to the show.
Rodrigo Prudencio: Hey, Jason. How are you?
Jason Jacobs: I'm doing okay. Yeah. I mean, as I told you right before we- we hit record here, it's been an interesting couple days. I feel like I should disclose just to, uh, kinda get it out of the way in case I seem flustered or anything. But, uh, my- my kids, uh, were diagnosed with COVID yesterday. So no symptoms, but that's just kind of a thing in our house, it's like a COVID ward. So if I seem a little off, uh, that's why. But very excited to have this discussion on a happier note.
Rodrigo Prudencio: Well, thanks. I, uh, first, I hope your kids get better and I hope you stay healthy and safe. And of course, for everyone else who's out there, I hope everyone's been well and healthy, and the same thing for your families.
Jason Jacobs: Uh, thanks so much. So, now that that's out of the way we can have fun.
Rodrigo Prudencio: Yeah.
Jason Jacobs: Yeah, so you and I talk, gosh, I mean we, I think, exchanged some Twittered yams and then maybe we had a phone call. A quick one when I was just kind of getting started.
Rodrigo Prudencio: Yeah.
Jason Jacobs: Um, and for anyone that might not be familiar with my show, longtime entrepreneur, not climate focused and after having an unfortunate outcome and selling my company, spent the last couple years just kind of digging into climate change. And the podcast is just a way to kind of learn in public, so I'm not an expert by any means. But I talked to you early and you were fascinating because you were very entrenched in kind of the last wave of Cleantech Innovation, then you took sometime off, not time off but time away from Cleantech Innovation.
Rodrigo Prudencio: Yeah.
Jason Jacobs: And now you're back and you're in a pretty interesting role at Amazon, so there's like 100 different things I'm dying to talk to you about actually.
Rodrigo Prudencio: Let's get through as many of them as we can in the time that we're given here.
Jason Jacobs: Sounds great. So, I guess for starters, just tell us a little bit about the Climate Pledge Fund. What is it? When did it come about? Why did it come about? And what are you doing there?
Rodrigo Prudencio: Well, the Climate Pledge Fund follows... First of all, the important thing that Amazon did was be part of launching the climate pledge itself. And the climate pledge is actually an organizing, it's a coalition in a sense of companies that are all signing up to be net neutral carbon by 2040, 10 years ahead of the Paris Accord. And we were the first ones to sign up to that, but it's pulled together by an organization called, Global Optimism, which is run by, Christina Figueres who used to be the chair of the United Nation's Framework Agreement on Climate Change. And what we did was we signed up, but in doing so we, for the first time, disclosed what our own emissions numbers were to make it transparent about the challenge that we had as a company ahead of ourselves. A few months after that-
Jason Jacobs: Uh, fif- fifty trillion tons a year, is that, is that right, 51?
Rodrigo Prudencio: It's, I- I forget the exact number, but it's all in our disclosures and now we've done two of them in a row. So a few months following that, the disclosure, uh, that report, I started working with a couple of my colleagues, Matt Peterson, who's been interviewed in some other channels, and a few other folks on our corporate development team, to launch the idea of a fund that would help invest in companies that could help Amazon go faster across all of the commitments that we've made on climate. We had already made our investment in Rivion, and that became obviously a focal point of how we were going to decarbonize and take emissions out of our last mile vehicle portion of our logistics chain. But that was an investment that we made in a company that then could scale and grow with us, and over time, uh, we'd become a big customer also of Rivion's vans as they start to get produced.
And we wanted to take that template and say, "There's so much more we have to do across Amazon, let's create a fund that can both invest in the companies of the future but also have them work closely with Amazon." And we think Amazon can be a, in a sense, a good proxy of what's happening more broadly, uh, with other companies and across the economy.
Jason Jacobs: I have a lot of questions about Amazon, about the climate pledge, about the Climate Pledge Fund, and other topics, but before we go down that path-
Rodrigo Prudencio: Yeah.
Jason Jacobs:... it would be great to kind of, uh, go back in the time machine, because it seems in my prep, I mean, I- I came across one article in the New York Times that talked about Hara back in 2009 and it was this company backed by Kleiner Perkins that was helping large enterprises to monitor and improve their emissions. And as soon as the price on carbon comes, uh, you know, um, this is going to be really interesting, right. And that article could have easily been 2020 and not 2009. I certainly wasn't focused in this area in 2009 and you were. But I wanna go back even further than that. How did you first come to start caring about climate in general? Where did that come from and when did that come about in your life?
Rodrigo Prudencio: So I studied, um, international relations in college and with an emphasis on development economics. And the reason why I was interested in that topic is because my mom and dad are- are both, uh, from Bolivia, which is one of the poorest countries in the western hemisphere. And traveling with them throughout Latin America and- and other places, we used to go to and see some very poor places. And so I got super interested in development economics and carried that forward into an interest in environmental policy, sort of like kind of this overlap between how are the developing countries going to continue to develop economically, which was important for standards of education, standards of health, but also on overall improving an environment as their countries and their economies?
And I spent time in Washington, DC working on international environmental topics, um, policy, uh, first for a nonprofit, but then I spent a year at the State Department effectively embedded in a team that prepared the Kyoto Climate Change negotiations back in 97. That rounded out six years of work in the policy world in Washington, DC and then- then I came to California to do a- a master's, uh, of business at Berkeley where I continued to take an interest, I sort of double downed in my interest in energy technology, energy markets. California... UC Berkeley and the [Haskell 00:08:33] had some of the best academic programs in that space. And so I continued to follow that interest, uh, and then joined a company right after my MBA that was one of the first competitive energy retailers at a time where California was deregulating its retail energy markets. So I started working at a startup, I spent about nine months there and then moved over and joined Nth Power, which was at the time one of two venture capital firms that were completely focused on investing in energy technology. Stating there-
Jason Jacobs: What year was that?
Rodrigo Prudencio: That was in late 2000 that I joined that the that firm.
Jason Jacobs: And you were there nine- nine years, right?
Rodrigo Prudencio: I was there for 12, actually. Um-
Jason Jacobs: Oh, 12.
Rodrigo Prudencio: ... I started as a-
Jason Jacobs:So right- right through the whole, that whole wave then-
Rodrigo Prudencio: Yeah. Yeah. So, I mean-
Jason Jacobs: ... you were, you were right in the thick of it.
Rodrigo Prudencio: ... it became quite a... Yeah. I've got lots of, uh, observations [laughs] about sort of the waves that happened there. But effectively, was there for 12 years. Started as an associate, did a bunch of... wore a bunch of different hats 'cause I never had thought about pursuing a career or work in venture capital, so I just dove into a bunch of different aspects of it and did everything from portfolio management to raising capital alongside with our managing partners. And then ultimately became an investor with the team there.
In 2012, the writing sort of was really against the wall for lots of different funds across energy technology. Sort of the first wave, Cleantech was really sort of hitting the wall or- or- or it had already hit the wall. We were having trouble and sort of decided to not raise a fifth fund, and I decided I needed to get some operating experience. I wanted to be part of the experience that was on the other side of the table and to better understand sort of how to work entrepreneurs to better understand the process that they were going through. And some of our companies in our own portfolio were looking for leadership change, and I ended up taking on a role as CEO of Hara, which was, uh-
Jason Jacobs: Oh, I miss pronounced it. Hara, not Hara.
Rodrigo Prudencio: Hara, Hara.
Jason Jacobs: Sorry.
Rodrigo Prudencio: Yeah. And, uh, and the company was, uh, effectively an enterprise software tool to help large enterprises manage all the information flow that was coming off of environmental system, but also ultimately to help with their carbon reporting. Ended up selling the company after about 12, 16 months there and then started a ridesharing company aimed at kids. That went for a little while and then I ended up going back into investing, and that's when I joined Amazon. First with the Alexa Fund, which was the very first time that Amazon had organized a venture capital fund with a specific purpose. But then I started, as I mentioned, working on and- and ultimately, uh, helped launch the fund that we're talking about today.
Jason Jacobs: So I would love to kind of put guardrails around like day one at Nth Power and start of ridesharing, right.
Rodrigo Prudencio: [laughs]
Jason Jacobs: And if you look at that era with the benefit of hindsight and now you've had some time away from it as well, how do you think about that era and what went right, what went wrong, what are the key lessons that you learned as you reflect looking backwards?
Rodrigo Prudencio: Yeah. There's a bunch of different lessons, but I think if I were to kind of simplify them down, I think that, first of all, I love the fact that there's at a headline level, uh, people back then were calling it energy tech or clean tech, today everyone's calling it climate tech, but really important to understand that these are all very, very distinct industries in and of themselves. So, solar's different from wind and wind is different from energy efficiency, and within energy efficiency there's lighting, there's motors, there's control systems, right? And each of these are actually very, very distinct markets and you have to understand the investment dynamics behind each of these, the potential returns behind them, the capital intensity. So one of the really important things to me was making sure that we had a very specific and defined view of what these distinct industries were, because they all performed very differently.
The second is, and I've spoken about this. Back- back then I was talking about this a lot because I, uh, actually at Nth Power I was one of the early publishers of annual data that was being, you know, or quarterly data and then an- an annual data of what was coming into the energy technology world from, um, venture capital. Later, Eric Wesoff with Greentech Media, uh, what was then Greentech Media, and also the, Michael, uh, Liebreich also started, uh, New Energy Finance and they picked up sort of the- the momentum of properly reporting creating a professionalized product around reporting these numbers. But, I got a sense of how much was flowing into the venture capital world, and then there was this big surge around the 2004, 2005 timeframe.
I personally felt like the sector got over capitalized and largely because, I think, a lot of funding was coming into companies that were still not at a commercially scalable place and therefore, if you sort of work backwards to where will these companies go with more capital? Do they run? Do they get exits that were commensurate to the amount of capital that was coming in? And a lot of that wasn't penciling out. So really kind of if you look back there was a lot of R and D... really adventure capital as R and D that was fueling what then became very, very important downward trends, especially in solar and in batteries. I don't think we really got there on biofuels. I don't think we got there on other forms of renewable energy, but you today see the scalability of some of those sectors. Lighting became actually a place where tons of capital went in, but like solar it was ultimately dominated by large manufacturers who crashed the cost of LEDs, and now today we power so much of our lighting with very, very energy efficient light bulbs.
So, a lot of things where venture capital tried to enter that market was up against either large incumbent players or were at a stage of the capital markets where... Or a stage of R and D where a lot of that capital had a hard time finding markets because the products were still immature.
Jason Jacobs: And when you look back on that era, there's kind of two different lenses. One lens is, what is the type of innovation we need to address climate change? And then another lens is, what is the type of innovation we need and what are the right asset classes and how do they align so that you're not setting money on fire? So if you look backwards, how do you reflect on each of those in regards to kind of Cleantech 1.0?
Rodrigo Prudencio: Well, uh, I mean important. If you look at solar, for instance, and then a little bit after that came batteries. And wind was by then no longer really a venture capital, um, a venture capital target. There were a few companies that were trying to innovate around wind technology, but let's say, solar and batteries were two places where there was still a lot of venture capital coming in. Policy played a very, very important role. And policy in the form of improving the economics of deploying the first scaled, uh, systems. After that these technologies became, in the vernacular, bankable and then you started to see the entry of large capital pools to basically back and scale what became big solar projects, big wind projects, and now you're starting to see it in storage.
So one of the things that was really important back then, um, but it was coming sort of at the tail, you might say, of Cleantech 1.0 were policy programs that were providing the right tax incentives to get these systems built at scale and allow them to start bidding in at... And then you started to see the analysis around subsidized and unsubsidized against marginal grid power that would be added, and then ultimately utilities starting buying, in some cases, uh, where there were state mandates, utilities started buying renewable powers in certain chunks and percentages. Now you see that cost has come down such that on a levelized apples to apples comparison, uh, without subsidies, new power coming from wind and solar is very, very competitive.
Jason Jacobs: Well I've heard different narratives from different people who were working in these areas at that time and one narrative I've heard is that it was hubris from the Valley and not understanding the areas they were investing in and pouring too much money in too fast. How do you respond to that one?
Rodrigo Prudencio: So, uh, there's a couple different ways to understand it. I- I personally think that back in about the 2002 timeframe, one of the things that actually poured a lot of capital into this area was, if you really wind back the clock, at about the 2000 timeframe a bunch of venture capital funds had raised a lot of capital around effectively the turnover of the tel- telecom industry and the early days of internet. And then the 2000 market crash happened and there were a bunch of funds that had raised capital and didn't have anywhere to point it. And this is where you start to see some partners at venture funds start to go deep into understanding what the opportunities were around energy.
And if you just look at the large, the largest of the energy industry you start to see, oh, my God, this is the second biggest or first biggest industry [rit 00:16:54] large across the world, that should be a place that we should go and invest. And so a lot of firms started to dedicate partners who indeed, I think it's a fair criticism, who indeed didn't have any experience in the sector, but saw a big market, had pools of capital to go out and invest, and could attract really interesting entrepreneurs to pitch them on ideas.
Jason Jacobs: A few of the other narratives. Like one would be, oh, actually I don't know why everyone talks about it being a failure, there's like this big company and that big company, and these different successes that came out of it. And then another one is more like what you were just saying around the incentives and how the incentives weren't really mature yet. And as the incentives come makes the ground more fertile, so it was more of a timing thing and a lack of infrastructure on the policy side. Is that the Rodrigo narrative in hindsight or what's the soundbites to that era in Rodrigo's words?
Rodrigo Prudencio: So, here's a way that I've- I've framed this before, again, in conversations and- and it's, uh, I think a- a place where a lot of people will remember the stimulus package that came from the Obama administration. There were two elements to it, right, like one part of it was aimed at helping companies and part of it was aimed at actually subsidizing the cost of or underwriting the cost of projects. The pool of capital that went to underwriting projects was very, very successful. It led to more solar being built and put into the ground, more wind being put into the ground. That's a great example of where structured return capital began to really inject the market with growth and scale. And again, as I pointed back to this, ended up with companies that were, like for solar and sun power and others that were incredibly successful in effectively building out the infrastructure that we see today that's growing.
The other part of the capital that went to backing companies that were still early stage, there was a ton of risk, a bunch of failures there. Tesla was like one of the notable successes that came out of that, but it was reflective of, again, the risk that still remained in the venture capital area and as a result... Um, and you can go back and look at... There's a bunch of studies that have looked back at the returns that came out of that era, they weren't great. And I think a lot of venture capitalists, as a result of it, had to go and find new things to do. I went to go find something new to do, but several others stayed in it, doubled down on sort of like, where can we learn from this, improve on this? The investment sizes shrunk down. The capital shrunk down. And now you see sort of a new surge.
And what I love about what's happening now is that there's all this new energy. There certainly has been a lot of technology development that has continued to advance, which makes the companies very different then they were a decade ago, but everything still requires a bunch of market rigor, market investigation rigor and rigor into the companies and what they're claiming that they can do.
Jason Jacobs: So you left and then you did two or three different things in between then and what you're doing now. And- and even when you entered Amazon you, as we discussed at the outside of this discussion, you weren't focused in this climate area. So, did you miss it along the way? Did you plan on getting back in? Or, I guess, talk about how that transition happened and maybe what you first felt when Amazon started making rumblings in this direction.
Rodrigo Prudencio: Yeah. I, uh-
Jason Jacobs: And was there any PTSD, uh, as well?
Rodrigo Prudencio: [laughs] So, I stayed in touch with a bunch of friends and continued to follow and track the progress that they were making. And would talk to them from time to time and really try to understand sort of like where they were in their own journey of withstanding, in effect, what was a bit of a winter in terms of interest and enthusiasm, and sources of capital, et cetera, if you're a venture fund trying to raise capital from institutional LLPs. It was a really tough time to try to bust through that story. So I was following what- what my friends were doing and colleagues, but when I, when I got excited at Amazon was when I saw behind the scenes within the corporate development team. I knew that we were working on our initial investment in Rivion and how that was then projecting now to how we were going to use Rivion in our last mile delivery system. And then the climate pledge came out and of course you could see sort of how broad and challenging a bunch of the areas that we had to transform at Amazon.
And the thing that was really impressive to me was that this is a commitment that was coming all the way from, Jeff. Led a bunch of the sustainability work that was being led by our Vice President of Sustainability, Kara Hurst, was really getting entrenched into each and every single operating unit at Amazon. And I could tell that this was a very, very serious and public facing endeavor, right, it was a public facing commitment. And when Amazon gets committed to something we take it seriously and we have now a public commitment. And one of our, one of our, uh, leadership principles is to deliver results.
Jason Jacobs: Now I'm dying to jump into Amazon, but one last thing I feel like we should do-
Rodrigo Prudencio: Sure.
Jason Jacobs: ... to frame it before we do, which is that you've worked in startups. You've worked in venture capital. You've worked in nonprofits, right? I mean the National-
Rodrigo Prudencio: Yeah.
Jason Jacobs: ... Wildlife Federation. You worked at the State Department. So you've kind of hit it from all these different angles. So, before we talk about what Amazon's doing, let's talk about climate change. You've worked in this area a long time from so many different perspectives, how do you think about kinda where we are and where we need to go, and what the biggest levers are to address this problem?
Rodrigo Prudencio: I mean, you are asking sort of how, what was going on in the back of my head is like kind of. So, part of this is absolutely, you can't ignore the fact that the science was becoming increasingly more conclusive. I was raising a family or a- a daughter. I was thinking a lot about her future, what I was gonna contribute in that regard. Climate change is one of the biggest challenges if not the biggest challenges we will face across the world. And over time, on the one hand, our understanding and evidence of what is happening and what has caused it has gotten, uh, increasingly more solid and really without argument. On the other hand, what to do about it has become much more complex. And I think the what to do about it gets back to the importance of this being worked on at every level that you've been interviewing at, right, at the policy level, at the entrepreneurial level, at the local government level, at the individual level, and then I'm excited to be looking at it or working on it from a corporate level.
I sort of think about this in... I don't know whether this is an analogy that fits really well, but I kind of think about this in, from corporations as kind of a phenomenon around that has happened in a few different waves. Back when, uh, you know, you might take this back, you know 10, 12 years ago. There were a bunch of companies that were making their initial commitments to measuring and managing their environmental footprints were at large and carbon was part of it. And that was where Hara was born and a bunch of other companies that were helping large corporations manage and collect this information, and help them report on it. And that should have showed up in sustainability reports that companies were making.
But what was missing was companies saying, "Well, based on this information, we're now going to set a target to go here." There were a few companies that did that, but overall companies were saying, "The first thing is for us to be transparent about how we measure this stuff." And then there was a bunch of debate about whether they were measuring it honestly and whether they were green washing, et cetera.
The second wave, in general, I think we came when you started to see transformation of products. Uh, so companies started to say, "Well, we're gonna change the way that we make certain things. We're gonna change the way that... Some of it became environmental and social responsibility in the supply chain. Some of it became material changes. Shift to organics, whether it's in the food chain or in cotton. And so companies started to look at their own product footprints, or their own product sets and started to change their offering towards consumers.
And then the last piece. I think what's going on now is companies are saying, "All right, we have a destination that we have to get to and we have to operationalize a bunch of changes." And then for every company the operationalizing of those changes is very different. For Amazon it's across logistics, it's across products that we sell, it's across stores and facilities that we operate.
Jason Jacobs: I read as well, so the... And I said, I think I said trillion earlier, but it's 51.1 million metric tons of CO2 per year for Amazon. But two thirds of your footprint is indirect from the- the supply chain that's not from kind of Amazon owned.
Rodrigo Prudencio: Yeah. Of course, we're big consumers of electricity and I was like, that electricity or petroleum, right, like powers right now the airplanes that fly our products, our cargo around. They power the trucks and the delivery vehicles that- that people might see on their streets or on the highways. And it's also electricity that powers all of our facilities that, whether there are the buildings that we work in or the facilities that are sorting and moving around packages. Now on that front we've been very aggressive and- and you might have seen that we've moved up our commitment to be powered by 100% renewable. So covering all of that electricity load, covering it with 100% renewables. We had previously committed to doing that by 2030, we moved that up to 2025. We now have 91 operational project in, renewable projects whether they're solar and wind around the world. They produce close to three gigawatts of power overall and or- or sized at that scale. We have to do a lot more, but those are some of the ways that we've been tackling at least part of that footprint.
Jason Jacobs: So the two billion dollar Climate Pledge Fund, is that a fund that is optimizing for financial returns, strategic value to Amazon or both?
Rodrigo Prudencio: So we work backwards first from like, what are the problems that we need to solve at Amazon? How do they need to go faster? And then we... And then the discipline that we apply at within the corporate development team at Amazon is, "What are the investment opportunities where we can invest in the companies to help them go faster to help us go faster?" So, I think at the end of the day when we look backwards, this will be something that we can measure by, how much did our capital help our teams... help companies help our teams go faster towards their climate goals? And then, how successful were we in choosing the right companies that were obviously successful and grew as well?
Jason Jacobs: Is it a requirement for companies that are considering raising money from the Climate Pledge Fund to partner with Amazon in some way?
Rodrigo Prudencio: First I would put a distinction on... The kinds of companies that we're looking for are companies that can help Amazon. So, there's a bunch of entrepreneurs that are working out there. I've met with many of them whose companies don't exactly fit with the solutions that we are looking for. First of all, when we say no, it's not oftentimes because it's not a good idea, it's oftentimes because we can't see a path towards how working with that company can ultimately help Amazon solve some of its own challenges. Um, but to your other question about whether it's a requirement. It isn't, but at the same time I would say that like if we are engaging with a company, we, part of our investment case is, how is this relevant? Why are we spending time with this company? And how does working with them help us towards our climate pledge goals or overall in other sustainability in- initiatives that we have at Amazon.
Jason Jacobs: So if I'm, uh, founder of let's say, I don't know, a C round or an A round, or a B round startup and I'm doing something that's relevant and interesting to Amazon, on the one hand you have capital and you have reach, and you have different ways, I imagine, you could help me. And on the other, urban legend, whether it's true or not, kind of the warning to entrepreneurs is that don't let a strategic buy you without buying you, right? Like come in as a strategic investor but then end up kind of hurting your ability to be independent and work with whoever you want, and ultimately end up hurting your exit value over the long term. So what's the pitch to those companies and how can you help them?
Rodrigo Prudencio: Yeah, I love that question and it's totally fair. And I think for- for all the entrepreneurs out there, it's one that we talk to, we talk to about, uh, with them about, but it's a very fair question. So a couple things I would point to. First of all, remember that the Climate Pledge Fund follows in the wake of four or five years of work that we've done with the Alexa Fund. And in the Alexa Fund we have built a portfolio of over 100 companies where we have made investments and helped those companies both work with Alexa, but grow on their own. And some of those companies, by the way, were sold to Facebook, were sold to Samsung. So in the sense of like how we structure our investments, they're very straightforward for the entrepreneur. We're a small investor. We oftentimes are a terms taker and most importantly, we know that the success of the companies themselves should happen independent of Amazon's involvements from the, in term of like h- how the terms and how the decisions are for the companies whether they're contemplating a next round of investment or an exit, or something like that.
That's really important. If we didn't have that kind of trust with entrepreneurs, I don't think we would have the opportunity to invest in great companies. And so I think part of the way that we've been very focused is making sure that the way that we are investing gives us that opportunity to not breach that trust. On the other hand, we wanna be with the companies who show enthusiasm towards working with Amazon and there as well we want to, uh, do everything we can to let those companies be successful in their work with Amazon, with Amazon being a customer of their product. Again, we would point to a good example of that is a company like Rivion, right, where we've not only we started with an investment because of the conviction that we felt around that team and its ability to scale a new type of vehicle that could serve a more heavy-duty purpose. And we back that up with a 100,000 van purchase order.
Jason Jacobs: And in the success scenario, so let's say you back 30 companies and then fast forward 10 years, how many of those has Amazon acquired?
Rodrigo Prudencio: That's a very hard question to answer. I think that it happens from time to time. I the Alexa Fund we were first an investor in Ring and we ended up acquiring the company. But that happens because over time there's sort of that, the relationship becomes more organic and importantly, we see a place for the company to thrive inside of Amazon as a business unit or as an important solution. I'm sure it will happen from time to time across the work that we do, and if that happens it's, we think that it'll be a- a great success for the companies and obviously for us.
Jason Jacobs: And in terms of the areas that you invest in, what are some of the areas that you're most excited about right now?
Rodrigo Prudencio:Well again, uh, like we've got huge challenges in transportation and logistics, and it's fascinating. You know, that involves a variety of different types of challenges, it's ground transportation, it's air transportation, it's shipping of different sorts, so that's an exciting area. That also leads you to look at a bunch of different derivative technologies, whether it's hydrogen or batteries for either storage. For different types of applications they can be used in transportation and- and logistics, but they might have other applications inside of Amazon as well. But we're also looking across materials in manufacturing. We're looking at the way building operate, so enter, uh, lots of different other energy efficiency opportunities. We definitely look at the carbon markets and carbon opportunities. We made an early investment in, uh, or we joined a recent investment round with [inaudible 00:31:15] as- as-
Jason Jacobs: Same round as me, actually. Well, I was in a couple.
Rodrigo Prudencio:Yes, I- I-
Jason Jacobs: But- but yes, uh, we did that one together.
Rodrigo Prudencio: I re- remember that we had that... We- we ended up knowing that- that- that we had [laughs] th- that overlap.
We have a big commitment to improving Amazon's role in the circular economy. And then, of course, we have a place in looking at food and [ag 00:31:32] innovation as well.
Jason Jacobs:And do you care, as a fund, not as Amazon, do you care about things like capital intensity, time horizons, like breakthrough energy inventions, for example, as a 20 year fund because some of the stuff they're investing in just it takes longer? Science risk, uh, p- requirements for project finance, uh, yeah, I'm- I'm probably missing some. But, uh, but uh- uh- uh, do you look more like a sand hill road fund or- or will you go wherever the impact is?
Rodrigo Prudencio: Well, so, first of all, we're not constrained by a timeframe, but we also very purposely said that this is an initial $2 billion commitment. We think that if there's, as these companies, uh, get traction with Amazon and with the general market that there's gonna be opportunities to really invest more that the two billion. And- and that would be, again, a great success scenario. I think for us we think about creating an initial set of investments that have a bit of a barbell shape to them. There's going to be investments that will be upfront, more capital intensive, but the capital intensity reflects our confidence that the companies need for capital is also lined to their ability to scale and grow with Amazon. And on the other hand there will be a bunch of smaller investments that will be a combination of either companies where that intersection with Amazon isn't quite there yet, but we wanna stay close to the company. We think we can co-develop some solutions or look at things as the companies mature.
But second, they might also be companies where that intersection is right there, but they're just early companies and so we can't swamp them with, uh... We nor other investors can't swamp them with hundreds of millions of dollars. So we think that there will be sort of an element of big investments and small investments, but for now all of the investments that we're making will be equity in nature, in other words, we're gonna be joining the cap tables of companies and investing that way. Now that does not include where Amazon ultimately might become a customer. Again, we don't sort of cross-pollinate these dollars. So the purchase order, for instance, for the 100,000 Rivion vans, it's not part of the Climate Pledge Fund's investment numbers. That is a purchase order that that team made specifically in negotiating the volume with Rivion. That is aside from the investments that we've made in the company.
Jason Jacobs: And do you care about the metrics that normal VCs use, IRR and multiples on invested capital, and things like that?
Rodrigo Prudencio: We'll track that, of course. But, again, the biggest and most important thing is like how are these companies impacting and helping us go faster on our climate commitment? That is the most public commitment that we have made. We have as well... Of course, we wanna be good stewards and frugality is one of our [laughs] one of our leadership principles as well at- at Amazon. That means that we wanna steward the capital appropriately, but the most important impact that we can be making is helping Amazon meet that goal. And that's what we work backwards from.
Jason Jacobs: And maybe one more fund specific question and then I'd love to talk about some general Amazon stuff-
Rodrigo Prudencio: Sure.
Jason Jacobs: ... if that's okay. But, um, but on the funds, so these relationships does it typically go partnership then investment or investment and partnership? And is the entry point typically with you guys or with the lines of business?
Rodrigo Prudencio: I think it's gonna be both. In some cases it will go investment then partnership. In other cases we are discovering companies that were already being piloted or worked with certain business units and we learn from the business units. And they pull us into conversations and, "Hey, we've been working with this company. We really like what they're doing, would you take a look at them from the standpoint of the fund?" And, um, and so we've been having conversations that have been in both directions.
Jason Jacobs: So in terms of cleaning up the footprint, which is obviously important because you guys are 3X the emission's footprint of Google and 2X Apple. I think I got that right. Maybe that' flipped or it's three and two. I remember from my prep. A big piece of that is just understanding where you are today and a big paying point I've heard from talking to different companies is, a lot of companies have no idea. Where are you guys in being dialed into that data?
Rodrigo Prudencio: So we have a fantastic, like a world-class data team that has been... Again, before we put out our numbers it was a multiyear effort to really get a fine tooth comb look at where our emissions were coming from and we've set an initial bar internally but that team is constantly pushing up against that bar to go better and faster, or sorry, go better and deeper into our understanding so that we can really get into where do we then need to action our climate reduction... Or, where- where do we need to take action to meet our climate pledge goal. So it is incredibly data driven, it's detail driven and importantly, this is another public commitment that we've made. We've joined a coalition of companies that are using science-based approaches to meeting their climate pledge too. So in doing so we're making sure that we're being led by and transparent about the data.
Jason Jacobs: And one thing that comes to mind, especially with a company that's as big as and growing as quickly as Amazon, is that I've read and it seems like the ethos that's really ingrained in the company is that the customer is always right. In a world where there's no price on the externalities and the toll that are general activities, whether it's amazon or anyone else has on the planet and keeping it habitable of us and every other life form, is the customer always right or can unbridled market forces lead us astray?
Rodrigo Prudencio: The piece that we think our customers are most interested in is the commitment that Amazon has made to decarbonize and meet that climate pledge goal. That's one of the ways that Amazon has made that commitment to doing what we think is right for our customers, but also right for the planet and right for, in a reflective of the bargain that Amazon wants to set and meet and exceed constantly. Importantly though, we're also thinking about our customers and about helping them make choices. And, uh, two weeks ago or so we announced a climate pledge friendly badge that now can be found across products that are sold on Amazon.
Jason Jacobs: I saw that. I'm glad you brought that up. I was gonna ask you about that.
Rodrigo Prudencio: Yeah. So it's obviously... So that's a good example of an initiative that's led by our sustainability teams. It's not a Climate Pledge Init-, uh, Fund Initiative, so it's- it's led by a group of other people. But you can imagine the very difficult and detailed work that goes into looking at all of the products across Amazon that we can call climate pledge friendly and helping our customers discover products that they might wanna buy as part of their shopping choices.
Jason Jacobs: And I would imagine, I mean, for a bunch of things, cleaning up your act and profits are aligned and certainly if you stretch out the time horizons, at a certain point they're clearly aligned when you talk about existential threats. But even in the [inaudible 00:37:43] that's one of the reasons I just raised the fun in doing what I'm doing is that I think that impact and profit can be aligned in a really compelling way. But for certain things they're not gonna be aligned and then there's gonna be a slider where the closer you get to profit on some things the further away you're gonna get from impact and vice versa. How does Amazon think in those gray areas?
Rodrigo Prudencio: I think the right way to think about Amazon in this area is that we're willing to lean forward and be early because we see the opportunity to scale these solutions. So if you think about going back, when we started to make purchases and become ultimately one of the leading, if not the leading corporation purchasing renewable energy, we obviously were buying energy that was still more expensive relative to the grid energy that we could be buying. Today that's a lot more competitive. So everything going forward is going to be a place where we don't think we're gonna be making those trade offs.
Similarly, with last mile logistics, we can't talk specifically about the numbers related to our vehicles, but lots of studies out there have shown that over time an electric vehicle can be managed and maintained, and cost a lot less because of the durability of how the vehicle ultimately performs. You don't have to refuel it. It needs less maintenance, et cetera. Basically need to change tires. And so we look at those things and we're able to cast out into the future, but the biggest thing is that we are not shy about being early and taking a- a leadership position on some of these places where we need to make that commitment for the planet. Because again, we feel like it's the right thing for Amazon and it's the right thing for our customers.
Jason Jacobs: And I see, I mean, there's the climate pledge and then there's the Climate Pledge Fund, and then there's the climate pledge friendly products, and then there's the climate pledge stadium. And all that stuff is awesome. It seems like you make the pledge and the pledge is the North Star, and then everything kind of serves to then reinforce that pledge. I did see one thing recently that was all over the news that didn't feel like it was maybe as aligned directly with that pledge and that was around the Amazon PAC money and how it is, I think 70% of it that went to Senate went to Republican senators and many that have a- quite an anti, uh, clean energy transition and climate friendly agenda. I'm no expert, so maybe that's just a regular thing and lots of companies do it, and- and that isn't misaligned at all, but I'd love to get your take if it's something you're comfortable talking about.
Rodrigo Prudencio: Yeah. Unfortunately it's not an area that like that corporate development or the Climate Pledge Fund team covers and follows. And so, I would probably have to refer you to whatever public statements that we'd made on that topic.
Jason Jacobs: And then another question that I think about is just, I mean, I'm a capitalist through and through, I believe in market forces. I don't necessarily believe in unbridled market forces, but I do believe that innovation has an important role to play in corporations. Have an important role to play especially the biggest corporations with the, swinging the biggest bat like you guys. One thing I do worry about is a just transition with climate change and how there's tremendous wealth and equality already, and then as capitalism plays out seemingly those barbells are getting further apart. And then with climate change comes scarcity, and with scarcity that becomes even more pronounced. And we're seeing that today with the pandemic and what's been happening with small business and Main Street and things like that. And this isn't really an Amazon question, it's more of a Rodrigo question, what do you believe?
Rodrigo Prudencio: So I believe that there's an enormous amount... Uh, sol- solving climate doesn't obviously solve all of these things, but it certainly brings a bunch of environmental justice back to the front. We stop polluting cities. We stop polluting waterways. We make more efficient use of the materials that we have to take from the earth and put them into our, uh, into our consumption stream. But at the end of the day, I think by tackling the different slices of climate and environmental challenges we start to go a long way towards fulfilling that. I mean, and going back to what I told you earlier about a little bit of my personal history and interest in this area and what sorta got me into doing conservation work in general is, you look at communities in countries that are trying to grow, emerge from poverty, emerge from, uh, a long development and in doing so they definitely make different choices in the way that they use resources.
And those choices can be enabled by technology. Can be enabled overall by economic growth. But overall, making better choices, leapfrogging sort of the bad decisions that were made by previous countries and by previous societies I think could be, can all be a net positive for the planet.
Jason Jacobs: I saw a Tweet last week, or maybe it was earlier this week, by Chamath, formerly from Social Capital and he-
Rodrigo Prudencio: Yeah.
Jason Jacobs: ... said that... I think he said that people that work on climate change will create the first trillionaire. Um, so I have two questions for you. One, do you think that's true? And two, do you think that's a good thing?
Rodrigo Prudencio: If they've created solutions that have solved big problems with climate and that there was a market to reward them for that effort, I think that that is the right kind of mechanism to continue to spur the next person who wants to be, whether it's a trillionaire or a billionaire. I think the wealth effect of somebody who has founded and then pioneered an area is a derivative effect of their success. And the derivative suc-, uh, effect of their success is the fact that they knew what their customers needed, that they innovated against what those customers needed, that they did better than their competition. So, I think people are huge fans, for instance, of what Elon Musk has done to not only build Tesla, as just an example, but to push the entire automotive industry to take electrification seriously. Similarly, the team at Rivion is gonna do the same around heavy-duty electrified delivery vehicles and the very broad market that exists there.
They should absolutely be rewarded for the innovation that they're pushing and the risk that they're taking in building these companies. And I think that their economic success is a derivative of the fact that they pleased customers, built great products and ultimately built great companies that employed people and then ultimately had a positive impact on the planet.
Jason Jacobs: The last question I wanted to ask you kind of circles back to something you said earlier on about Cleantech 1.0, which is you said that one of the reasons why it wasn't successful is that the regulatory landscape wasn't mature in the right way. So, what do you think the role of government should be in facilitating this transition? What types of mechanisms should they put in place and how much carrot and how much stick?
Rodrigo Prudencio: I think that the places where we've got sticks are in the places that keep people's health and safety ultimately secured. So emissions should never be something that harms communities, shouldn't, uh- uh... Waterways shouldn't be polluted. Our oceans shouldn't be polluted. We shouldn't be over fishing. All of those places are the places where we see the boundaries for what's right and wrong in terms of caring capacity of our planet. I think that in terms of what incentives get created there, there's a whole s- list of options. I think back with, uh, again, we gave renewables the right kind of market incentives to then build into what ultimately became a thirsty signal from the market that they wanted cleaner energy. I hope that the same happens across transportation. We've already done it in a bunch of energy efficiency, uh, work as well. Buildings today are built to different standards, but the technologies that go into those buildings are now much mature, much more stable. Like I said earlier, lighting is a completely different view of energy consumption. And a building has been transformed by how those buildings are illuminated. Those are just some small examples.
Jason Jacobs: And when you look at the outside role that corporations can play, what do you think will be the most effective way to mobilize those corporations in the timeframes that we have since obviously we're way behind and, I mean, timeframes should have been yesterday. So given that, how do we get corporations to move the fastest?
Rodrigo Prudencio: I said this earlier and I- I do think that this is a new phase for companies to be making public commitments about the transformation of their operations and saying, "We need to get to a certain place in terms of our emissions, in terms of our impact and here's how we're gonna do it," or, "Here's ow we need to do it," and being transparent about that. That creates, I think, the best incentive because then it's all out there for customers to see, for competitors to see and for investors to see.
Jason Jacobs: And then, I guess, one final question is just, if I'm an employee, say I'm- I work in an Amazon warehouse or I'm a driver or really anyone throughout the organization. I mean, it's a huge company-
Rodrigo Prudencio: Yeah.
Jason Jacobs: ... and I am concerned for my family, my children and my children's children about climate change. And I look at the, you know, 50 something million metric tons and rising emissions that are coming from Amazon today and I wanna help, what should I do?
Rodrigo Prudencio: Well, I think you should continue to join us on the journey that we're on. You should get excited about those vans that are going to start to replace the diesel and gasoline powered vans that are gonna be bringing packages to people's homes. And soon hopefully we'll be doing the same with trucks and we'll be doing the same with airplanes, we'll be doing the same with ships. I think that we want to continue to invest in this transformation. I think it should make every employee proud.
Jason Jacobs: And some of the bottoms up employees vocalizing and using their voice to bring about change, has that had an impact on any of the things that Amazon has been doing, which is awesome that you guys are stepping up, but has that had an impact and do you think that's a good thing?
Rodrigo Prudencio: Well I think it's always great for employees to be able to voice their views and points of view, which is why they're open about it. But again, this transformation comes from Jeff, from the rest of the leadership at Amazon because we take the commitment to improving our climate impact very seriously. And from that top commitment it absolutely trickles to every part of the company. So maybe at the end of the day it's gonna all meet together with grassroots enthusiasm and leadership from the very top.
Jason Jacobs: So that was the end of the Amazon questions. The last question is just more of just a big picture question of, if you could wave your magic wand and change one thing that would accelerate decarbonization wholistically across the world, what would it be?
Rodrigo Prudencio: There's a bunch of different things, but, um, obviously-
Jason Jacobs: You get one, one thing. [laughs]
Rodrigo Prudencio: Just one thing, uh, all right.
Jason Jacobs: I'm like some weird genie, weird looking genie.
Rodrigo Prudencio: [laughs] Anything that, uh, frankly lightweights, uh, renewable energy that can be used in transportation I think would make have a massive, massive impact. Uh, absolutely, you know-
Jason Jacobs: Awesome.
Rodrigo Prudencio: ... air and heavy freight are gonna be some of the toughest places to decarbonize because of the weight and the nature of those vehicles that move stuff around. And moving stuff around and moving people around are an absolutely critical part of the economy, so we gotta attack that.
Jason Jacobs: Should we price carbon?
Rodrigo Prudencio: The reasons to- to price carbon, it helps a ton to give markets different signals and I know that there's different approaches to it. The Europeans have an approach and different industries have an approach. But again, this goes back to the transparency. If you can get agreement on what that means and get everybody working together or understanding and implementing together, then it becomes a cost of doing business and everyone can normalize around it.
Jason Jacobs: Awesome. Well this has been such an awesome long-form varied diverse discussion. I've learned so much. Is there anything I didn't ask that I should have or any parting words for listeners?
Rodrigo Prudencio: Nah, just keep tracking or keep following. I encourage everyone to keep following what we're doing at Amazon by visiting our sustainability page. And soon we'll have much more information about what we're doing with the fund within that sustainability page or within the climate pledge, uh, page. But I hope to hear from the investors out there that we're already working with and the entrepreneurs that we're- we're hoping to meet or already working with. And look forward to seeing many of you in the future and being able to meet your companies and consider what they might do to help us on our own journey.
Jason Jacobs: Now one disclaimer I should say too is that I feel like I asked you some tough questions at the end, and it's easy to sit in the peanut gallery like me and cast stones, but you guys have been stepping up in a major way, uh, and so I might be poking and, you know, pressure testing and looking for inconsistencies and things like that. But you guys are doing a lot and I know you're gonna do a lot more, and it's awesome. So, I just wanna make sure to kinda end of that note as a thank you for all the work that you're doing, you personally, the pledge fund, the pledge, the company and, uh, hopefully we'll see a lot more from you guys I the future 'cause you are a super important voice in the climate fight.
Rodrigo Prudencio: One of the pieces that maybe I didn't talk about, but has been really fun, is I get to work with some incredible people across the company that are deeply, deeply committed to helping Amazon transform, but also in the process of Amazon transforming, making a bigger impact across more of the economy, more of people's lives. So I'm just a tiny, tiny piece of this effort and, but I'm excited to be doing it.
Jason Jacobs: Well, Rodrigo, thank you so much for coming on the show. And hopefully we'll be on a lot more cap tables together as well.
Rodrigo Prudencio: Perhaps, that'd be great.
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 dot C-O, not dot com. Some day we'll get the dot com, but right now, dot C-O. You can also find me on Twitter @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.
