Vikas Gupta & Geert van de Wouw, Shell Ventures
Geert van de Wouw
Today's guests are Geert van de Wouw and Vikas Gupta from Shell Ventures.
Shell Ventures was established in 1996 as one of the first corporate venture funds in the oil and gas industry. Although we’ve published over 300 episodes to date, Geert and Vikas are actually the first guests we’ve had from the oil majors come on the show. Although tons of anger has been directed at the oil and gas industry, we also acknowledge that they are critical to the clean energy transition. Collaboration is ultimately key to unlocking our future potential.
Vikas Gupta
In this discussion, we check Geert and Vikas’ Shell business cards aside and talk about their personal views on climate. We also discuss how they think about negative sentiments towards oil majors, as well as their role in the future. Then we cover Shell as a company, what percentage of its energy portfolio comes from fossil fuels versus renewables and other clean energy, and how those percentages will shift over time. Finally, we talk about Shell Ventures, how they invest, and how those investments fit into the bigger picture of what the company's trying to do.
This conversation only scratches the surface of the role oil and gas will play in the clean energy transition, but it also begins building necessary bridges between the traditional climate world and our realistic future. We know climate touches every facet of our lives and appreciate Geert and Vikas’ time in helping to tease out the nuances of this complex crisis we’re facing.
Get connected:
Jason’s Twitter
Geert van de Wouw LinkedIn
Vikas Gupta LinkedIn
Shell LinkedIn / Twitter
MCJ Podcast /Collective
*You can also 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.
Episode recorded on September 27, 2022.
In this episode, we cover:
[4:11] An overview of Shell Ventures
[5:58] How Geert found his way into Shell and his motivations
[8:20] Vikas' background and climate journey
[10:11] Geert and Vikas' level of concern regarding climate change
[13:18] Anger geared towards big oil and realistic expectations for the energy transition
[16:11] Shell's net zero commitments and investments on clean technologies
[18:43] Strategic priorities for Shell vs. Shell Ventures
[23:16] How Shell Ventures thinks about general impact, strategic value, and financial returns
[26:45] Shell's level of collaboration with entrepreneurs and founders
[29:01] The role of behavior change and consumer mentality to the transition
[32:44] Thoughts on if we've reached a tipping point and how they see the transition playing out
[35:17] Carbon removal and capture as one solution in the mix
[38:49] The role of policy in Shell's investments
[40:26] Reskilling oil and gas workers for the clean energy transition
[43:47] How collaboration with oil and gas can accelerate the transition
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Jason Jacobs (00:02):
Hello everyone, this is Jason Jacobs.
Cody Simms (00:04):
And I'm Cody Simms.
Jason Jacobs (00:06):
And welcome to My Climate Journey. This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:16):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
Jason Jacobs (00:27):
We appreciate you tuning in, sharing this episode and if you feel like it, leaving us a review to help more people find out about us so they can figure out where they fit in addressing the problem of climate change. Today's guests are Geert van de Wouw and Vikas Gupta from Shell Ventures. Shell Ventures was established in 1996 as one of the first corporate venture funds in the oil and gas industry. I was excited for this one because Vikas and Geert were actually two of the first guests that I've had from the oil majors come on the show, and that's out of hundreds of episodes. At the start of this discussion, we check their Shell business cards aside and just talk about their personal views on climate. How concerned they are about it, how big of a problem it is, and their theory of change for how to address. Then we get into some of the history and some of the anger that has been directed towards the oil majors for some of their past wrongdoings, how they think about that and how they think about the role of the oil majors in the future.
(01:35):
And then we get into Shell and what percentage of Shell's energy portfolio comes from fossil fuels versus renewables and other clean energy. We talk about how those percentages will shift over time, why they'll shift and what's driving that. And we talk about the role of Shell Ventures. How they invest, what stage they invest, how they evaluate investments, and how those investments fit into the bigger picture of what the company's trying to do. We probably could have taken this episode five hours more than it did go, but overall I thought it was a good entree into what's going on in the big oil majors and I hope you get a lot out of it because I certainly did. Geert van de Wouw and Vikas Gupta from Shell Ventures. Welcome to the show.
Geert van de Wouw (02:22):
Thank you Jason. Thanks for having us.
Vikas Gupta (02:25):
Thanks Jason. Good to be here.
Jason Jacobs (02:26):
Vikas we met when MCJ had a meetup in San Francisco a few months ago.
Vikas Gupta (02:31):
That's right. You had a happy hour at Zeitgeist where we met and had a brief conversation. It was good to finally meet you in person. We've been hearing your podcast for the last, I think more than a year now. I was always been impressed by the guests you've had and now I'm on the other side, I'm a guest on your podcast. It's a pleasure to be here.
Jason Jacobs (02:46):
As I was telling both of you, I think you're the first fitting representatives from an oil major to come on the show and I've been asked historically, why is that? And as I was explaining to you, it's not because I don't believe that your perspectives are important, I very much do. And it's also not because I don't believe that you have an important role to play in the transition, which I also do. It's more just because this shows about learning and we try to have really candid discussions because otherwise you're not learning. And big companies have historically, maybe this is my bias, but their teams have just been more sensitive or allergic to that, and so I've been assured that that won't be the case here. But I am really excited because as I said, your perspectives are so important and it's long overdue to have the perspective of Shell and your peer group on the show, so thank you so much for doing it.
Geert van de Wouw (03:41):
No, thank you Jason. And the reason we also wanted to be on your show, your podcast, is because you do provide that nuance in your podcast. Climate change is such a nuanced subject. There's so many angles, which is part of the problem in communicating the approach to mitigating it to a larger audience. It's a complex and nuanced subject, so let's go.
Jason Jacobs (04:00):
Great. Well for starters, maybe talk a bit about where you sit within Shell and what Shell Ventures does and your charter, and then we can get into a bit of each of your personal backstories, if that's okay.
Geert van de Wouw (04:11):
I'll take the honors there Jason. So Shell Ventures is one of the oldest corporate venture capital organizations globally, full stop. Certainly one of the first in energy. We are about 50 people located in seven locations globally from San Francisco, Boston, Houston to London, Netherlands, India and China, from where we source early and late stage investment opportunities for the wider Shell all focused on the energy transition and the transformation of the mobility system. We are 100% green energy and mobility focused as a fund. We have about 110 companies and funds in our portfolio today. We raised another 1.4 billion fund last year again targeting the energy transition. We probably are one of the largest, if not the largest, investor in renewable energy startups and scale ups globally. Vikas leads our efforts in San Francisco and has been doing so very well, invested in a lot of exciting companies from San Francisco.
Jason Jacobs (05:07):
And Vikas, before we get into your personal journey, I'm just curious how much has that geographical purview been blurred with COVID and the acceleration of distributed work?
Vikas Gupta (05:18):
Initially there was a challenge. I've been living in the Bay area for 20 plus years here, so I already have a network, and the way we're structured is we are very geographically focused, so I'm mostly focused on the west coast. My colleagues are focused on their geographical regions. So initially when COVID hit in early 2020, there was definitely a lull and obviously the industry was challenged as well. But I think we've gotten used to it, we've gotten comfortable with it and in 2021 we started doing in personal meetings and obviously by now, things have pretty much moved back to normal.
Jason Jacobs (05:48):
Maybe for each of you, talk a bit about how you found your way into working at Shell and what motivated you to do the work that you do. Geert, do you want to start?
Geert van de Wouw (05:58):
I'm a little bit of a tree hugger by nature Jason, and you may ask me later why do you work at Shell, but I'll try and explain. So I come from a family of social geographers and geologists. At the Christmas table we would talk about fossils and stones and rocks. My dad always made us very aware of the earth and that we had only one of them. Always brought us hiking into nature, sometimes tireless in hiking nature, and connected us with Earth. Basically. I then decided to go study at the Agriculture University, biomolecular sciences to really study the biomolecules and the impact of enzymes and large proteins. I decided I wanted to work for a large energy company to have an impact from the inside in terms of making that transition to a more decentralized and renewable energy system, which I felt was extremely exciting and I still do believe is very exciting to work in this sector. I had my aha moment when it comes to climate when I was hiking in Canada, which I now do with my kids following my dad's example.
(06:56):
And we were hiking in 2018 in British Columbia and there were more than 2000 forest fires ongoing in British Columbia, besides about a third of New York state was on fire. 20,000 people were evacuated and there was this enormous haze across north western Canada that basically blocked the view that we previously had. And that's when it really sunk into me that climate change is having a real impact already today on our lives and that we need to look very actively at mitigating the impact it has. I then proceeded with doing several post academic studies and read up on the subject. I am originally of course, educated as a scientist and I'm now a public speaker on climate change. I often talk about the subject in scientific matters. I'm also an investor in this domain with Shell Ventures and I bring my family into nature and teach them the impact of global warming and how this works and what they can do. But the Canada experience was a real aha moment for me.
Jason Jacobs (07:53):
And you didn't mention that you are an avid listener to the My Climate Journey podcast. I would've surely thought that would help your climate credibility a lot.
Geert van de Wouw (08:03):
Your pod has made it to Europe, Jason, so congratulations. But no, you're one of the three pods that I listen to quite regularly in fact, in the car back home. Electric car, I may add.
Jason Jacobs (08:14):
And what about you Vikas? What is it that motivated you to do the work that you do and how did you find your way into working at Shell?
Vikas Gupta (08:20):
As you can tell by my name, I'm originally from India. Having grown up in India, I did my undergrad in India. In India, nature has a very critical connection to the culture. It's a predominantly agricultural economy, has obviously changing over time. So I remember when I was a kid, there used to be lush, green forest, clean water everywhere, and as I was growing up, I could easily see as the country was developing, there was a lot more pollution in the air, the trees had a thick layer of dust everywhere. Right after I finished my graduate school in the US in Cincinnati, my first job was actually in the climate space or the clean tech space where I as the chief engineer of this startup, was working on building a filter for diesel exhaust, the particulate matter that comes under diesel exhaust. And that's when I got the startup bug.
(09:04):
Since then, I've moved to the Bay Area. I've worked in multiple startups in the climate space, in the clean tech space, in solar, in fuel cells, in software, in semiconductor equipment. So I've had experiences at a bunch of startups in operating roles over the last 10 plus 15 years. And then before joining Shell, I used to work at First Solar, which is a large solar module manufacturer and developer based out of the US. That's where I got my experience in investing. [inaudible 00:09:30] invest in a few startups, which was strategic to First Solar. And at that time having worked there for five years, Shell was expanding and they were opening an office in the Bay Area. They wanted to be in the heart of Silicon Valley where a lot of innovation was happening, and I thought Shell was one of the leading players in the industry in the energy space who was taking climate change seriously and was the right fit for me at that time. And that's how I made the change and I'm glad I'm now at Shell Ventures.
Jason Jacobs (09:55):
Thank you both for that. Before we jump into Shell specifically, it'd be great just to get some context in a personal capacity on a few things. My first question, and this is for each of you separately, how concerned are you about climate change?
Geert van de Wouw (10:11):
I am concerned, but I'm a climate optimist Jason, and that's because I invest in the innovation that will help accelerate the energy transition and also the transformation of the agricultural system. And I think the two are starting to merge in terms of interest areas, looking at the biosphere and soil as a way to capture carbon at scale in the future. I'm very concerned but I do believe we'll get there in the end. I take an example, although it's a much less complex problem, but was still something we solved cross country and cross region, was the ozone layer.
(10:40):
We can say we materially closed the ozone gap through international collaboration between governments and we have shown before that we can do this. Now that was in terms of its size and impact, a smaller problem, I understand, but still that gives me hope that through the workings of VIPCC and collaboration across countries and regions, we can make this happen. The technology is in full development, there's already a lot there that can help in the short term and we can talk about that a little later, and there's a lot of capital currently being put into innovation in the climate space, which gives me hope.
Jason Jacobs (11:11):
And what about Vikas?
Vikas Gupta (11:12):
I am definitely very concerned about it, but I am an optimistic as well. Having worked at startups, you always have to be optimistic of the future. Now that I work in a company where we have a view on what's going on externally, we see opportunities which give us hope. Definitely as Geert mentioned, there's some technology which is there today that can be installed and help with climate change, and there are some that are being developed for next five, 10 years that we are actively investing in, which gives us hope that we will be able to, obviously not completely convert that climate change, but slow it down and hopefully in the next 20, 30 years try to stop it completely.
Geert van de Wouw (11:46):
Jason, we're engineers. We like to fix things.
Jason Jacobs (11:49):
Hey look, I work on the solutions side too and I'm also an optimist. I'm not sure if I'm allowed to ask you some of these questions, but to be honest guys, I'm having trouble jumping right into Shell without asking a few more questions up front so I hope you'll tolerate me here. I think one reason that some people are quite angry with big oil... And you can say big oil, is that the workers in big oil, is that the executives in big oil, is it even the current executives, because the current executives might not even be the people who were around decades ago? But the magnitude of the problem was quite known for a long time and there was some willful misleading, whether it was people or entities or only a small subset, but it happened. And if it hadn't happened, we would be in a different position and the transition would be less bumpy.
(12:36):
On the one hand, I understand that it's human nature, it's Clayton Christensen has a whole theory of change about it, disruptive innovation. Are you really supposed to advocate not in the best interest of your business? As a business person, you have a fiduciary responsibility. But on the other hand there's just some ethical implications. And so I'm asking you these questions in a personal capacity, but do you think that people have a right to be angry and relatedly, do you think that there should be any consequences and if so, to whom? And the answer might be no and no, but I just have to know before we get into, well, what kind of investing does Shell Ventures do and what target and stage and check size? Its first, do people have a right to be mad at big oil?
Geert van de Wouw (13:18):
People have the right to be mad at anyone Jason, and my response to it is as follows. I understand why people are mad, but there's a couple of things here. First of all, let's all recognize that oil and gas has brought in a tremendous amount of wealth and prosperity to the world. We have seen an unprecedented amount of wealth creation in the last couple of decades, certainly since the Industrial Revolution as a result of the availability of cheap, affordable and relatively clean energy. Whether we like it or not, from the moment we got born, we were enjoying the virtues of oil and gas. That is a reality. In that process, we've come to the conclusion that the emissions of CO2 and other greenhouse gases from fossil use is a problem. Could we have been faster in acknowledging and moving on? Maybe. I think all of humanity is slow.
(14:04):
If you ask the question, are we too slow? The answer is yes. And so are we all. Problem now is that we are having to communicate a timing issue, which we can get into later Jason, in terms of the energy transition. The expectations of the public in terms of how fast we can move to this new energy system are not always very realistic and that makes it hard to communicate, given that the credibility as an oil and gas company is not always high with some of that audience. So that's a real dilemma we are having as a sector, is how do we communicate that we are making a genuine move to this new energy system, and certainly Shell is one of the leaders in that space. We were the first to actually communicate a net zero target for 2050, and we are very serious about investing in this space and growing capabilities. But communicating that timing issue is a real challenge that I think we are facing as an industry.
Jason Jacobs (14:56):
I get that fossil fuel historically has done a lot of good. Not all good, but nothing's all good. Everything has trade off. There is no perfect. It's certainly embedded in my everyday life as everybody, even the activists, whether they admit it or not. And I also get why it will take a while to transition. I think one thing I get concerned about is incentives and how if it's someone who's truly neutral, and you can argue no one's truly neutral, but someone who maybe is more objective who says, "Look, it's going to take time for these reasons and therefore it has to go in phases. And realistically if we push too hard, it's unrealistic and we're going to break progress."
(15:35):
That feels different than someone who is incentivized to hang on to dig up the last drop, if you will, the venture arm, given that you are green focused or I forget the exact words that you used, but green or clean or renewables. One way to look at it is that, well, that's the future so you're investing in the future. The more cynical way to look at it would be that it's a marketing expense to serve what a rounding error for the overall company and that the bulk of the attention in mind share is still focused on the old stuff. How do you think about it and what gets you out of bed every day for the work that you're doing at Shell Ventures?
Geert van de Wouw (16:11):
It's certainly not window dressing and there's not a single company and certainly not Shell that can say that spending the amount of money we do on startups and scale ups here in the hundreds of millions of dollars is window dressing. Plus, if you look at the impact that these technology companies have within our corporation, it's becoming quite material. In fact, it's becoming very material. If we worked with a company like Axelos that is developing a digital twin technology, allows us to really reduce the cost of windmills with 20 plus percent, that's a huge impact for a company like Shell. The impact is not so much on just investing in these companies, the impact is even more in getting these technologies deployed, whether it's by reducing the cost of windmills or by improving a value proposition to our B2B customers in power.
(16:57):
That's where the real impact is. And so what gets me out of bed is two things. One of them is, I find the entrepreneurs we work with totally inspiring every day that I work with them, and my job is to engage externally and to understand what the trends are and who's investing in what and look at the individual companies together with Vikas. It's usually inspiring to work with the entrepreneurs. And the second one is then to see how we can create value together with the entrepreneurs by introducing them within Shell and create revenue generating opportunities for them to really accelerate the energy transition. That's where the real energy comes from in my case. I don't know how that is with you, Vikas.
Vikas Gupta (17:32):
Similar. So I just wanted to add, in addition to Ventures at Shell, we do have a big team that's focused on renewable power development. So we have large scale solar wind development, we have large scale investments in hydrogen biofuels. We have a big team for nature based solution where they're looking at how to create credits to address the carbon footprint of companies and our customers. So Ventures is not just one aspect of Shell, there are lots of other businesses where we're investing as part of the decarbonization journey we have. Personally, what gets up me out of the bed, working for Shell is a dream job in the sense that whenever I get exposed to interesting people on a daily basis, interesting technologies on a daily basis, if I find something in the media about something that is interesting, I can just send an email to that person and within a few hours I get a response. So I keep myself educated and updated on all the interesting and cool things that will help us with this climate journey.
Jason Jacobs (18:25):
Getting into more specifically your work then, when you think about decarbonization generally, what are the strategic priorities for the overall company, what are the strategic priorities for Shell Ventures and are those directly in lockstep or are there any differences that it's worth highlighting?
Geert van de Wouw (18:43):
You probably know Jason as Shell is quite famous for its scenario work. We use scenarios to paint different outcomes of the future and prepare the company for those different outcomes to basically create resilience as a company. And so we have regular engagements with the corporate strategy team, the scenario team, to really inform corporate strategy on what's happening in our space and also to align corporate priorities and interest areas with our investment thesis. So it's a dual edge sword in many ways where you have to line both in order to be effective. If you speak in general terms, there's a couple of challenges that we are trying to mitigate and invest in as Shell Ventures. One of them is okay, you can't electrify everything. So there's a couple of sectors in the economy that you can't electrify such as cement and steel and aluminum and chemicals and aviation. So we look at solutions that help decarbonize those hard to decarbonize sectors.
(19:37):
Another one is scale. We look at things that can eventually be scaled to a size that is meaningful in the new energy system. Another one is energy transport across long distances. In the old worlds we had oil tankers and carriers that would carry oil and LNG and other fossil fuels and products across the globe. In the new world we still will have to match areas that are densely populated and need a lot of energy with areas that are dense in terms of the renewable energy resource. So how can you ship hydrogen from the desert of Australia to the harbor of Rotterdam or Houston? So looking at things that can allow us to transport energy over long distances, but also to store energy over long durations. Beyond typical six or eight hours that you would store with a normal lithium ion battery that you have in your cell phone, how can we store some of the intermittency that comes from the new energy system between day and night rhythms and seasonal rhythms? And so those are definitely challenges that we use as our base for an investment thesis.
Vikas Gupta (20:38):
To add on that, obviously with the venture side, we invest in companies across different stages. So we look at startups in three buckets. Horizon one, horizon two, horizon three. What's immediately applicable for Shell as a business is RND horizon one, horizon two buckets. And then there are horizon three buckets as well where Shell currently may have no business today but may have something in the near future. So for example, we invested in a nuclear fusion company. Shell has no business in that today, but when it happens potentially, it could work for Shell to set up this nuclear fusion system when it's commercialized. So there are certain stages of companies that are immediately applicable to Shell's strategy and there are some which are not. Another way to look at our thesis is we divide our investment into three themes or three verticals.
(21:20):
One is the power vertical where we invest in the complete value chain of power generation to distribution to consumption to storage to trading. Some of the aspects in there are venturable, some of them are core to the business. So that's one vertical for our venture team. The other is the mobility transition where it's transitioning from fossil fuel to electrification. So electrification of road transportation, of marine, of aviation. Those are the areas that we look for innovation. I don't know if you know this, but obviously you've seen the Shell gas stations, but globally there are about 46,000 Shell stations, so we are one of the largest retailers in the world. So we look for innovation in the retail side where Shell could use those assets to provide more value to our customers and obviously generate revenue for the company. And the third bucket is what we call resources or it's more focused on the industrial side where we have carbon capture and utilization, hydrogen, biofuels, carbon trading, all hardware based sector that Geert is mentioning falls under that bucket in our investment thesis.
Geert van de Wouw (22:21):
A good example also Jason, is Aurora, our autonomous driving technology we invested in in China recently. Why would Shell Ventures invest in autonomous driving technology? Well really to inform us about what the impact of autonomous driving will be on, for example, our retail proposition or our fleet proposition to our customers, and how fast will these technologies be adopted by the industry and how do we need to adopt. So it's really informing our own business strategy on innovations that have the potential to be either quite disruptive or quite complimentary.
Jason Jacobs (22:52):
Is it set up like a typical fund? Is there a fund life cycle and dedicated capital that comes in the form of investment or is it more balance sheet investing?
Geert van de Wouw (23:03):
No, it's a dedicated fund that we'd raised last year with the executive committee at 1.4 billion. We basically have a lot of gun powder to invest in the coming five or six years.
Jason Jacobs (23:13):
And that's with a single LP and that's the parent company?
Geert van de Wouw (23:16):
Yep.
Jason Jacobs (23:16):
So there's three buckets. There's impact, like impact on the world, there's strategic impact, so strategic value to Shell across its portfolio of businesses, and then there's financial returns as a standalone investment. How do you think about those or said another way, what's the charter of the capital that you're deploying?
Geert van de Wouw (23:39):
As a corporate venture capital organization, you have to balance between the financial return and the strategic return. I know it's not the answer you may want to hear, but you need to do both in order to be credible in the market. So having financial discipline, investing in companies that on average, will survive and grow and be profitable as an investment, is really important also for us to build credibility in the market with our co-investors and with the entrepreneurs. The venture capital ecosystem is a system where it's a relatively small ecosystem where people work together based on past experiences.
(24:13):
Having financial discipline and showing that you can create exits on a regular basis is really important. Having said so, of course we have a second value stream which is how can we generate value for entrepreneurs and for Shell by deploying these technologies and business models at scale? And arguably, there's even more value for us there than there is in the financial return side. But it's really important because in the end of the day our motto, our vision is to invest in technologies and business models that accelerate the energy transition and the transformation of the mobility system. So it's got to have impact. You need to balance between the two. Don't know Vikas, you want to add something to that?
Vikas Gupta (24:48):
I agree. I think for me, and I think it's true for Shell Ventures in general as well, I think if you're making a venture investment, financial return is a given. I think the strategic aspects and the impact had additional benefits that we bring as an investor with a startup.
Jason Jacobs (25:02):
We're going to take a short break so our partner Yin can talk about the MCJ membership option.
Yin Lu (25:08):
Hey folks, Yin here. Our partner at MCJ Collective. Want to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019, have since then grown to 2000 members globally. Each week we're inspired by people who join with differing backgrounds and perspectives. And while those perspectives are different, what we all share in common is a deep curiosity to learn and bias to action around ways to accelerate solutions to climate change.
(25:38):
Some awesome initiatives have come out of the community. A number of founding teams have met, nonprofits have been established, a bunch of hiring has been done, many early stage investments have been made as well as ongoing events and programming like monthly Women In Climate meetups, idea jam sessions for early stage founders, Climate Book Club, art workshops and more. So whether you've been in climate for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to MCJcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Jason Jacobs (26:11):
Back to the show. When it comes to collaboration with Shell is collaboration and essential criteria for investment and are there any rules in that regard? So if I am a current founder evaluating investment from Shell, what expectations do you set with me or with them since I'm just a podcast host, about how to think about Shell? And I'll ask that two ways, both in terms of what's required to make the investment, but also in terms of how they could potentially benefit from having Shell on their cap table.
Geert van de Wouw (26:45):
We try to be very entrepreneur friendly Jason, in the way we work with our entrepreneurs. First of all, we invest alongside the same terms as you would typically see in the industry. So we don't ask for special rights and [inaudible 00:26:57] and [inaudible 00:26:57] and what abbreviations you have. We basically use plain vanilla investment terms just like normal VCs do. Secondly, and we started quite early with that at Shell Ventures, we have a team of implementation managers in our organization Jason, that continuously broker connects between the start and scale up that we invest in and the various Shell businesses to help them grow their business inside Shell. But increasingly, we also being asked by our suppliers and our customers to be introduced to some of the portfolio companies that we have invested in so that they can help decarbonize our suppliers or our customers business as well. You're really starting to develop this mesh and network between customers, suppliers and Shell to help grow the pie for the entrepreneur and for ourselves.
Vikas Gupta (27:43):
To add to that Jason, as I mentioned earlier, there are different stages of the company. So if there's a company that can immediately use Shell as a customer, that would be one segment of such startups who would come to us for investment. As Geert mentioned, we have a full implementation team who can handhold and market that startup to our businesses as well as our customers if they want additional revenue from there. So that's one angle. The other, they should come to us primarily if they are in the energy transitions. If it's healthcare, if it's gaming, those areas are obviously not of interest to us and we would immediately say no to those. Again, correcting myself there, I had a thought. Gaming is an important area where if you can gamify energy efficiency, energy savings, those would be areas of interest to us.
Jason Jacobs (28:24):
We've talked a lot about decarbonizing things that are already a staple of our everyday life like transportation or aviation. Where does the demand side fit into all of this? And this could be a Shell question or a personal question. Do you feel like behavior change is helpful and or required or should the message to everyday people out there living their lives be that the future is abundant and any changes will be invisible other than jobs and prosperity for all?
Geert van de Wouw (29:01):
I think it's really important that there is a change in mentality with consumers in the way we consume energy and by the way, food. A good example is I took a friend of mine to the beach during the summer for a beer. And he saw the windmills offshore the Netherlands, some of which were actually a joint venture that includes Shell. And he was complaining about the windmills wasting the horizon and his view, how old are they far offshore. And it makes you realize that when I started talking with my friend about the source of energy that people are quite disconnected from their source of energy and their source of food.
(29:33):
And I think one of the beauties of the new energy system, but hopefully also the new agricultural system that is in full development, is that they will reconnect people again with their source of energy and their source of food because in its nature much more decentralized Jason, than it was before. I think that's really important. So another example is, I recently became a very small shareholder in a farming cooperative that grows food for about 150 families in my neighborhood on regenerative practices. It forces me to go on my bike, not by car, on my bike to this farm every Saturday to collect my food and where needed, to help out on the farm, reconnecting me really with the source of my food which feeds my family. I think it's those kind of need innovations, albeit business model innovations almost, that will bring us closer to the source of food and energy. Vikas I don't know, how do you look at it?
Vikas Gupta (30:24):
Living in the west, it is the region of plenty and people use that to the way they waste food, waste energy. But if you go to the developing world, it's not the area of plenty and there's a totally different mentality there. We need to find a balance on both sides. Obviously the people who don't have it should get it and people who have too much of it should like to conserve. I think from what I understand, a third or more than a third of the food in the west or at least in the US is wasted. That is something that has to change. We should look for innovation, a way you can stop that or reduce it for sure.
Jason Jacobs (30:54):
I want to come back to a point here that you mentioned before about hard to decarbonize sectors. I recently had Rebecca Dell from Climate Works on the show, and what she talked about was that she doesn't love the phrase hard to decarbonize because in her mind it's not necessarily harder to decarbonize, it's just earlier in the journey to decarbonize and just needs more dedicated resources and attention to ride down the cost curve and ride up the scaling, et cetera. And she worries that, without putting words in her mouth since she's not here, that using that word it's almost an excuse not to do it or to do it slower and we'll just offset the rest. How do you react to that?
Geert van de Wouw (31:38):
I think she's right. It is earlier on the curve. Goes back to my story about how long does it take for a new energy system to reach materiality. It takes decades, not years. And the same as with steel and cement. It just takes a lot of dedication, a lot of innovation and a lot of capital to decarbonize those sectors. And we need to get going because we're running out of time. The IPC report in 2020 said we have another 500 gigatonne available to us to stay within the one and a half degree Celsius with about a 50% probability, and that was a report in 2020.
(32:09):
Meanwhile, we are emitting 42 gigatonnes a year, so we basically slightly over 400 gigatonnes still available to us. We need to also find ways by which we can increase that budget. And I think we should get away from calling it offsets, we should call it increasing our carbon budget to stay within the one and a half degree Celsius and allow us to make an orderly transition. So not use it as an excuse, but as a way to stay within our carbon budget. We need reframe it as a society to enable people to understand that this takes time and it's merely a timing issue that we're trying to manage here.
Jason Jacobs (32:44):
I'm sure you're going to look at it differently than how I look at it and pick it. And correct my phrasing, but from my cheap seats here, it seems like the big oil majors, they're tipping a toe in the water cautiously, they're waiting to see what happens with the regulatory landscape, but there's still a lot to protect in terms of the core businesses. You know it's coming so you don't want to miss the boat, but at the same time, if you jump too early, you can actually be hurt competitively in the market relative to your pure set who maybe takes a more foot tracking approach, for lack of a better word. Is that how you see it? And I'm not asking about Shell, but just the general landscape. Is there a tipping point where just everybody starts moving super fast or is it just going to be slow and steady? How do you see this transition playing out and what are the biggest barriers that are preventing the oil majors from moving full speed ahead and burning the boats behind them?
Geert van de Wouw (33:34):
I think we have reached already the tipping point. I cannot think of anyone in Shell today that is not concerned about climate change and is working towards addressing the problem. We set ourselves very aggressive targets as a company in terms of where we want to be in 2050. We want to be a net zero carbon business, which is quite something for a company that today, makes most of its money for oil and gas, let's face it. And so setting those targets and living up to those targets I think is where the rubber hits the Jason, and we are taking very serious steps to meet those targets as a company. We are growing our renewable energy business like never before, and that means we also need to grow competencies and capabilities and hire lots of people that are familiar with this space, whether it's renewable energy or in hydrogen, et cetera, et cetera. The reason I work for Shell is because it's a company that I believe makes very serious strides in the energy transition and wants to be a leader in this space. I cannot judge about other oil and gas companies.
Vikas Gupta (34:29):
As you said, some of them are investing little, some of them are investing more, but I see of many oil and gas companies now actively looking at this space. Will they get to the commitment that Shell has? That's their individual decision. But I see a lot of action from most oil and gas companies.
Jason Jacobs (34:42):
One particular bucket of innovation I feel it's important to talk about specifically, and that's... Well whether it's one bucket or several buckets, I guess we can talk about that, but carbon removal, carbon capture, direct air capture. There's a lot of critics out there, critics in terms of viability critics in terms of it giving permission to stall. And also, there's an open question that it'd be great to get your take on about whether that is one bucket or whether those should be looked at distinctly. So take that in whatever order you'd like, but it'd be great if you could just weigh in generally on those areas and how you and Shell think about them.
Vikas Gupta (35:17):
Generally speaking, carbon capture and utilization or CDR, all those things are important. Obviously these are all early technologies, so they cannot be commercialized in the next two years or so. So these are something that'll happen in the next 10, 15 years. There are still companies who are working on making it commercially viable. That's one angle. The other is on the financing side of these things where some of the big tech companies are initially funding these projects, but they have to reach a stage where they can be commercially viable. Currently the carbon credits that we see are mostly nature based credits because they are in the 10, $15 range. Carbon capture, I think the best case scenario I see is somewhere in the hundred dollar range. That has to go down with innovation, and that'll take some time. So I don't see that as something negative. I think it's an essential thing that we need to have, it's just going to take some more time to reach critical mass.
Geert van de Wouw (36:08):
And there's a limit I think, in the end of the day what it can do. But if you look at the total capacity of nature in terms of its ability to capture carbon for us, depending on which report you read Jason, it's anywhere between five and seven gigatonnes a year, which is not insignificant, but it has a limit of course. I think it's important that we don't see that as an excuse to offset and continue with oil and gas at the same pace. Meanwhile, we need to build the new energy system and taper down oil and gas. But it's definitely one of the solutions we will need in order to stay under that one and a half degree C curve because it's a timing issue.
(36:41):
We need decades to transition to the new energy system. The current carbon budget doesn't allow us to spend that kind of time and still stay within one and a half degrees Celsius. It's essential that we develop technologies, whether it's in bio energy, CCS or it's in DAK or it's in nature based solutions. And that's definitely a space that we are actively looking into and we'll do quite a bit more investments going forward. Again, not as an excuse, but as a necessity to meet our targets.
Jason Jacobs (37:08):
Is there any hope within Shell or within pockets of Shell that some magical technology will come along and enable fossil fuels to be burned in perpetuity and just capture it all at point of emissions and call it a day?
Geert van de Wouw (37:20):
No, that's not the philosophy that we are pursuing Jason.
Jason Jacobs (37:24):
One question I have, it seems like there's a tension between the traditional environmentalists or conservation, biodiversity loss, that historical principles and ideals, with decarbonization and clean energy and infrastructure and transmission lines and permitting and all the stuff that needs to get built. How do you think about that tension and also where does environmental justice fit into all of this?
Geert van de Wouw (37:50):
We firmly believe also in the way we build out our nature based solutions assets, Jason, that biodiversity and water use and circularity are critical criteria for us before we make those investments. We don't believe in creating monoculture to underpin a nature based solution investment. So the quality of those credits and those carbon offsets are really important to us. It means you need to enhance biodiversity, you need to look at the efficient use of water circularity principles. They need to contribute to UN sustainable development goals.
Vikas Gupta (38:22):
And from my side of all the environmentalists are essential as they keep the check and balances any project that anyone pursues. So overall, I think we welcome it.
Jason Jacobs (38:30):
Jumping around a bit, but back to the technological solutions. Betting on future policy. How do you think about that as investors if you're investing in something that requires policy change that is not in place yet directionally. Clearly you have a lot of policy resources, certainly more than young companies. Is that something that you'll do and what's your philosophy there?
Vikas Gupta (38:49):
When you make an investment you don't rely on a policy to help the economics work, the business should work on its own. But obviously we welcome policies that accelerate the commercialization of the technology, but we don't rely on it.
Geert van de Wouw (39:01):
And to be honest, you've recently seen quite a bit of positive policy that really enable our space. In the US you have a funny way of naming laws. I think it's called the... What is it? The Inflation Correction Act or-
Vikas Gupta (39:12):
Inflation Reduction Act.
Geert van de Wouw (39:13):
The Reduction Act, but that provides a lot of positives. I may add, not a lot of sticks but a lot of carrots, for investing in our space. Whether it's in hydrogen or any other new energy space, both as an investor of startups but also as an investor in first of a kind projects. So that's certainly very encouraging. You see the same trend here in Europe where the European Union has set itself some quite aggressive targets in terms of the transition. And of course that's being helped by the tremendous calamities that we now see in Ukraine where suddenly energy security is front and center with every politician, but also every business leader in Europe. And so that helps the environment in which our entrepreneurs can innovate and can accelerate the energy transition.
Jason Jacobs (39:54):
Starting to run up on time a bit, but I have a few other topics it'd be great to touch on quickly. One is just talent. When you think about the clean energy transition as that percentage of total portfolio within Shell continues to increase, will there be skills that will be required that haven't historically existed within Shell? And by the same token, will there be skills within Shell that used to be required that won't be required anymore? And how are you thinking about hiring? Where are the gaps? How are you thinking about rescaling, if at all?
Geert van de Wouw (40:26):
There's certain areas that are transferable. If you've been an oil and gas process engineer and you work in hydrogen, you can reskill relatively efficiently. When it's about molecules, gases or liquids, that's stuff we understand and it's relatively, I wouldn't say easy, but it's relatively straightforward to retool an organization into something like hydrogen. Renewable power is obviously a different domain, albeit that as a company we are a big user and have always been producing a lot of our own power in the past. So there's a basis we can start from. And we're definitely hiring a lot of people with experience in that space, whether it's from utilities or regulators, to help us understand how we can grow in this space and provide affordable renewable sources of electricity to our customers in the B2B and the B2C space. And there's a certain level of experimentation needed as well. What does the customer value proposition in the retail space look like going forward?
(41:23):
It's most likely going to be much more of a data driven proposition where, as a provider of the electricity you don't necessarily make a lot of money on the electricity, but you make money on enabling the customer to create insights in his or her energy consumption and optimize the use of the various decentralized energy assets like the battery in their car or their rooftop solar or their heat bump. And on the other side, the smart home appliances they've got running and optimize that mix of producers and consumers of electricity to the benefit of the customer. So it's going to be much more of a data driven, a data-centric type proposition that not many people are mastering today. Through developing innovations on the business model side and on the technology side together with the entrepreneurs that enable us to, in the future, offer such a proposition to our customers, take some experimentation, and that's what we are working on.
Jason Jacobs (42:17):
Is Corp Dev a distinct function from Ventures or is it under one roof and how much interaction is there across those groups, if any?
Geert van de Wouw (42:25):
It's different. And so we have product development groups in our renewable energy solutions business, with whom we work very closely together to basically identify what are some of the critical control points where we want to have technologies or new business models that we can integrate in that broader value proposition we want to be able to sell and offer to our customers. And so there's a lot of interaction on, what are some of the innovations we want to develop in house? What are some of the innovations we want to get access to through venturing or through partnering with entrepreneurs or other suppliers in the market? And it requires quite a lot of collaboration across that value chain. And at times we make investments in things that the business may not know yet that they may need five years from now. We invested in electric mobility before that was a thing, and we do the same with nuclear fusion and other technologies. We create those eyes and ears because we believe it's important for the company to understand what the disruptive power of those technologies could potentially be and what the timing thereof is.
Jason Jacobs (43:22):
If you think outside of Shell for a moment, if you could change one thing that is outside of your control and outside of Shell's control that would most accelerate Shell's progress and your progress on the Ventures team of accelerating the clean energy transition, what would you change and how would you change it?
Geert van de Wouw (43:41):
It's a difficult one. Vikas, you take the honors on this one.
Vikas Gupta (43:47):
This is more of a philosophical answer, but it is what comes to mind right away. I think the debate we have around climate change, the way we have this debate, if we could change it in a way, it's us versus them or make the other side the evil. If we can change that where we make it more collaborative, where we can understand the other side's perspective and as well as explain our perspective to bring people together, if I can do that, that would help me accelerate the energy transition. I think we waste a lot of time in fighting over the other side and claiming each other to be the evil. I think if we can change that, that would help.
Jason Jacobs (44:17):
I'm hoping that anyone from the more traditional climate world invests the over an hour in listening to this discussion that really humanizes. It's hard to have the pitchforks out when you listen to two humans that are mission driven that get up every day and do this work just like the people that have the pitchforks out. So I think building bridges is what we try to do without letting anyone off the hook. It's a difficult balance sometimes and we don't always get it right, but I really do hope that discussions like this can play a small role in building those necessary bridges.
Geert van de Wouw (44:46):
It's time that we start rethinking our traditional relationships across the various layers and boundaries that we have in our society. Because if anything, my answer to your question, it would be collaboration. This is the biggest challenge that human mankind has faced thus far in its existence in my mind, the energy transition and the transformation of the agricultural system. And it will require a huge effort, not just in terms of capital and in terms of innovation and technology, but also in terms of collaboration. We spoke about changes in customer behavior, consumer behavior, and it's something that's going to touch our lives at every level. And so collaboration is going to be key. And that includes collaboration between parties that traditionally didn't collaborate a lot but had the pitchforks out.
Jason Jacobs (45:29):
And maybe just speak to that group for a moment, to the haters that say, how can MCJ even give a company like Shell audience on their climate, in quotes, podcast. They aren't credible, they aren't serious. What would you say to those people?
Geert van de Wouw (45:43):
Look at the results in terms of where we are as a company and as Shell Ventures. We are one of the most active, if not the most active investor, in innovation in the whole climate and renewable energy space. We even venturing into agriculture at the moment and nature based solutions. This is a serious effort. We need collaboration across the various value change in order to address this tremendous challenge ahead of us. The coffee is fresh and warm at my office, so come and visit us, I think would be an open invitation, and we'll show you around.
Jason Jacobs (46:12):
And last question, who do you guys want to hear from? If anybody, for anyone listening who's inspired by what you're doing, how can we be helpful to you?
Vikas Gupta (46:20):
I would love to hear from more innovative companies who are coming up with new business ideas, new innovation, that we can partner with and collaborate and make this big change happen.
Geert van de Wouw (46:30):
At the web summit in Portugal in a few weeks time Jason, we'll have our... Gosh, I don't know which version of our new energy challenge. But it's a challenge that we've had every year where we invite 10 finalists from a wide selection of startups to come and pitch their early stage technology propositions to us. In this case, the focus is going to be on decarbonization technologies. So come visit us at the web summit in Portugal, and if not, we can meet at the Shell House at South by Southwest. When is South by Southwest Vikas? I think it's always in April, right?
Vikas Gupta (47:00):
March, April.
Geert van de Wouw (47:00):
In March. So I'm going to be there, Vikas is going to be there. We happy to engage.
Jason Jacobs (47:05):
Great. Well guys, I want to thank you so much for taking the time to come on the show. This was the first of what I hope will be an ongoing dialogue. I learned a lot. I know it might be an intimidating audience, but from my seat, you guys are peers in accelerating the transition and I'm looking forward to working with you more collaboratively. Doesn't mean I won't ask you hard questions in the future, but I'm really thankful that you're doing the work that you do and excited to see you do more of it. So thank you.
Geert van de Wouw (47:30):
You do important work. Keep inviting the unconventionals to your show and appreciate being part of it.
Vikas Gupta (47:35):
Thank you so much, Jason. It was great to be here.
Jason Jacobs (47:38):
Thanks again for joining us on the My Climate Journey podcast.
Cody Simms (47:42):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity. To do this, we focus on three main pillars, content like this podcast, and our weekly newsletter. Capital to fund companies that are working to address climate change, and our member community to bring people together, as Yin described earlier.
Jason Jacobs (48:04):
If you'd like to learn more about MCJ Collective, visit us at www.MCJcollective.com. And if you have guest suggestions, feel free to let us know on Twitter at MCJ pod.
Cody Simms (48:19):
Thanks and see you next episode.
