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Christophe Defert

Head of Climate Technology Investments

HSBC Asset Management

January 19, 2022
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Ep 57: Christophe Defert - Head of Climate Technology Investments, HSBC Asset Management
00:00 / 01:04

Michael Crabb
Welcome to another episode of the Energy Impact podcast. We have a great guest today: Christophe Defert, Head of Climate Technology Investments at HSBC Asset Management. Christophe, great to have you on.

Christophe Defert
It's nice to be here.

Michael Crabb
A lot of energy industry experience from your chair, but let's start a little bit personal. Where are you from? Tell us a little bit about your personal background.

Christophe Defert
Sure. So I grew up in Paris. Mom was American, Dad was French, so I spent a lot of my summers in US, kind of grew up between the two continents. Left France when I was 18 to study in the US and never really went back other than in the summers. I spent a lot of my career between the US and UK. I started as an investment banker in London, then went into private equity in London.

Michael Crabb
Before we get too detail there, so you always wanted to go to the US? That was just part of the plan? I mean, what drove you there? You liked the summers in the US more than-

Christophe Defert
Yeah, look, my mom was American, so obviously I got exposure to it. She had six sisters in the US and she would just ship me in the summer and I would do a little bit of a tour and just loved it. It's something I've always wanted to do, so coming out of high school there was no better time to go and do something different. So I ended up in Colorado, which was a fantastic place. I'm a big outdoors fan. So that transition was very cool.

Michael Crabb
And was that- how deliberate was Colorado? I mean, had you explored the US a lot before?

Christophe Defert
Yeah, yeah I'd spent quite a bit of time kind of touring my aunt's. But Colorado was always the place where I spent the most time. I have cousins the same age, so all my summers were there and just the outdoors and everything was just fantastic. So I went to a small liberal arts school, because I actually went to a very French school in Paris, so I never really studied in English. I kind of thought a smaller school would be a good way to kind of ease into it, which turned out it was. It was good.

Michael Crabb
You must have spoken English growing up, though. You just didn't- it just wasn't in your school in Paris.

Christophe Defert
That's right. My mom would speak to me in English occasionally, but most of my English was picked up in the summers.

Michael Crabb
Got it. Yeah, I'm very jealous of folks that are bilingual or more. I can speak math, but that's maybe the limit.

Christophe Defert
Yeah, so French is my first language, but obviously now I do a lot more English.

Michael Crabb
Sure. Okay, so liberal arts college with your second language. You wanted to get into fin- I mean, what's the path to finance?

Christophe Defert
The funny- so this is the thing. The path actually went through venture capital. I was a junior in college and I ended up doing a summer internship at a venture capital firm in California and loved it. And I asked the guys there, I was like, How do you get into this? And they said, You're either an engineer and you understand the product or you're a financier and you understand the numbers - I mean, you know, broadly. And so I said, Look, I'm three years into college. I'm not an engineer, so I'm not going to start now. I'll go- I was an economics major and so I ended up going into finance. I moved to London where I went to London School of Economics to specialize in finance. That's where I had an internship at- Merrill Lynch is where I started my career. And I ended up staying there for a few years before I went to private equity. So principle investing was always something I wanted to do. I ended up having the chance coming out of investment banking to go into private equity at the time, which was a great opportunity. I joined a company called TowerBrook Capital Partners.

Michael Crabb
Before we get to TowerBrooks, so Merrill Lynch. Were you on advisory side or what- tell us a little bit about which group you were in?

Christophe Defert
Yes, a funny- we were coming out- it was in early 2000, so just coming out of the tech bubble. Obviously, the banks had adjusted to that by having a lot of people leaving. And so when I joined at the end of the summer, they kind of said, Look, business is picking back up, would you just stay on as a first year analyst? So I did. I was part of a pool of analysts at first - they were trying to kind of test that out - not industry teams. But then I moved into the real estate team. And so I did that for a few years, but I was still- at the time they were still moving analysts around, so I did a bunch of stuff with industrials and chemicals. And one of the associates I really enjoyed working with ended up going to TowerBrook as they were spinning out of Soros. And starting, I think it was Fund 2. so as he joined, he told me, Look, they're continuing to hire, do you want to just come and interview? And I did, ended up joining TowerBrook.

Michael Crabb
Awesome. Okay, so transitioned out of the banking side into sort of direct investing. How is that? I mean, do you have a focus or generalist? What did that look like?

Christophe Defert
Generalist. Loved the experience, because there was a pretty lean smart team, so as an associate you came in and you were kind of working directly with the partners and got exposure to a lot of things. A lot of kind of special situations, things that were off the beaten track. They didn't really participate in auctions, so they had to kind of go and find interesting situations. And it was super fun. But it's private equity, so there are two aspects to it which is, one is spending time with the management teams and the other one kind of crunching the Excel, especially as an associate making sure it worked. I would say that probably the most significant moment in that experience was actually working on the potential acquisition of Drax, which you might know is the largest coal-fired power plant in the UK. This was in the early- to mid-2000s and they were already thinking about moving away from coal. So I spent a lot of time on that and I thought, Look, there's something really interesting here. I think this is something that's going to stick. People are- it's a train that's gonna keep going. And so I thought, I really wanted to specialize in energy. That's really the thing that got me into it.

Michael Crabb
So looking at a coal plant is the-

Christophe Defert
Yeah, looking at a coal plant. Actually, looking at a biomass supply chain really, more than anything.

Michael Crabb
Because it was a conversion. It was a conversion play. You're still on the buy side, right, but you were downside protection effectively.

Christophe Defert
Well, your business case had to rely on that conversion happening. We didn't end up buying the business, but I got really interested. So I decided to take a break, go to business school to figure out how to kind of transition into energy as an industry. Went to Philly for two years and had an opportunity coming out of that to join Centrica. And that was a perfect opportunity for many ways. The big one being that, at the time, Centrica was an integrated energy company, so it was everything from the wellhead to the… . So I joined in the M&A team, which is obviously what I knew how to do. It gave me an opportunity to see through the entire kind of value chain of energy, which was fascinating and ended up staying there 10 years. Variety of roles, not always- you know, it wasn't by design. It's just the opportunities were were pretty fantastic. So I went from M&A to commodities. I ran the Gas Origination team, which was kind of pushed from the deep end to commodities, but it was pretty exciting and fun.

Christophe Defert
I mean, that's sort of a unique- like if I look at your resume, right, I mean, it all flows pretty logically and then there's this sort of commodities trading origination role that sort of pops out. Tell us about what that was about.

Christophe Defert
Yeah, I mean, it was- if you're gonna do a career in energy, you might as well try to see the thing up close, right? And this was an opportunity for me to do it. But at the end of the day, it was really a people thing. The lady who ran Origination at a time was a lady called Cordi O'Hara. She brought me in and said, Look, I'm looking for somebody to kind of think about this with a fresh pair of eyes. And I said, Look, I know nothing of gas. She's like, Well, what do you do? And that's exactly what happened, right? She was incredibly supportive. I would count her as one of my mentors and she was fantastic in getting me to kind of turn this business around. Now, the future of gas as we see it today, went through- it goes through LNG. So obviously, I came to a point after a couple of years. Cordi had moved on. She's now at National Grid and I had the choice to go into LNG or do something different. And I think LNG wasn't- it was fascinating, because I love that kind of geopolitical element of it, but it's also very kind of long-term thinking, long-term project, so that didn't really match. And I had moved away from principle investing and kind of wanted to do something that brought me back to that with the knowledge I had just acquired. And I got an opportunity to join the M&A team in the US. I had the opportunity to kind of do the second part of my Centrica career in North America, which I thought would be a great opportunity to learn. So that's what I did. I moved to Houston where I spent three years. A significant part of my experience, there was an acquisition I led of a company called Panoramic Power, which was a tech company out of Israel. And what they did is they had these little self-powered sensors that you would put on assets within a commercial space or an industrial space and you get asset-level meter reading, which today you're like, that's- you have that everywhere. But back then, it was pretty novel. And the idea there was that Direct Energy, which was central because a US subsidiary was mostly a retailer. So they sold a commodity, and they wanted to go into solutions. They wanted to sell something that was value add. And so this acquisition was kind of at the same time as a new CEO coming into Centrica. Ian Conn came into Centrica at the same time and they kind of fit within a strategy of pivoting Centrica from being an integrated energy company to a retailer customer focus of commodity, obviously, which was the core, but also solutions and so Panoramic kind of fit within that, so it was fantastic. And I had the opportunity then to start a US-based global innovation team for Centrica to support that strategy? That's what I did.

Michael Crabb
Yes. So talk a little bit about that strategy more. I mean, it strikes me that the retail side of the value chain is pretty competitive, homogeneous. What is the value add that we're- is this sort of early- or maybe mid-stage energy efficiency? Or like the Eskom? What really was that strategy?

Christophe Defert
Yeah, I mean, you're right. The UK is a deregulated market from a retail perspective, so it's competitive. I mean, you see that again, today, Texas, where we were present as well, same thing. And so the idea was we have this relationship with the customer, can we expand on it? It's worth saying that in the UK in particular, Centrica was very big in energy services, so their brand British Gas was a very important part of the business and one that had a service arm to it with engineers - they call them engineers in UK -in vans who would go to people's homes. And so it was trying to find a way to leverage all that with technology to help provide service- customer experience and services that were above and beyond.

Michael Crabb
And so you were kind of on the corporate VC side, right? You were fronting sort of early-stage Series, A, B? What was the- like were in those-

Christophe Defert
It's interesting, because that kind of feeds into where we are today. But we started the corporate VC arm in 2017. We had 100 million pounds of balance sheet money dedicated to that effort. And the idea was to find technologies that would support Centrica's strategy at the kind of A and B round where they were really businesses. They were already in market. A lot of technology was de-risked, but they were looking to scale, because that's where corporate VC can really help. So really, it was A plus. We actually did a C round in one of the companies. And that was the idea. And it started on the right path.

Michael Crabb
So you did that for a few years and now you're at HSBC. Take us through that transition and what you're working on.

Christophe Defert
We did that for, well, since 2017, so almost four years. I've made about 10 investments. And it was pretty symbiotic with what Centrica was trying to do. The thing is, particularly in a corporate, you have to make choices. That effort is still ongoing, but probably not as ambitious as we would have liked it to be. And so we had a chance to join-

Michael Crabb
Let's unpack that. I mean, what does that mean, not as ambitious? Not as aggressive or not as broad? Not as-

Christophe Defert
Well, first of all, when you commit to doing corporate VC like this, you have to commit to the same way that you're doing it with a VC fund. You commit to at least a 10-year period, because that's how you're going to see an investment through. And so depending on the corporate that's backing you and the different dynamics in the market, they may not have that time. They might decide to allocate capital differently. So Centrica is still working with the companies we invested in, but in terms of the pace of investment that we had at the time, it's not something that was going to be continued. So we found- and when I say we, it's because I came to HSBC with a couple members of my team, but the idea of joining a financial platform like HSBC could be a fantastic kind of starting point to really scale what we think is necessary in the market today of a venture fund.

Michael Crabb
Walk through that transition a little bit. Makes sense that such a big platform, right, I mean global connections. How do you start- but you're kind of starting from a blank sheet, right? Centrica had a pretty defined broad strategy and sort of the part of the energy transition where you were playing was relatively or sounds relatively defined. You brought in that- you have a lot more flexibility. So have you followed that mandate some or how do you think about that?

Christophe Defert
There were a couple of things that were key at Centrica. The first one is, you're right. We had the knowledge, that kind of energy knowledge, so the energy transition part is really your sweet spot. And I would argue electrification of transport is something we spend a lot of time on. And those are two of the four fundamental pillars of our strategy here. So these two, there's a lot of knowledge there. The other thing is, I ended up coming over to HSBC with two of my colleagues: one based in New York and one based in Tel Aviv. I moved from San Francisco to London, so we're really covering kind of three geographic areas, which is something we did at Centrica and for us was very important and I think continues to be increasingly important, because it gives you the ability to be local, to find the companies locally, but at the same time being able to work globally. So we've worked in this remote environment for four years and it's worked really well together. What's important is we were able to find category winners, as opposed to local champions. I think if you think about VC, particularly clean tech VC, in the past it's always been quite regional. I think that's changing quite a bit, because if you want to find climate solutions, particularly with the time we have, you really want to find solutions that are more global. So we have the opportunity to do that. And as you can imagine, HSBC provides a pretty phenomenal platform to do that.

Michael Crabb
Yeah. Talk a bit about your deal sourcing. I mean, everyone wants to find the sort of global winners, right? But without giving away too much of your secret sauce, how are you positioned to do that versus some of your competitors?

Christophe Defert
I think the local presence is a big one. The fact that we, as individuals, are spending time in these ecosystems, not just flying in and out. The fact that we work so well together and we can compare things. But I won't underestimate the kind of knowledge we've accumulated over time in order to assess those. So to give you an idea, I've been at HSBC six months, more or less. Our pipeline right now has about 350 companies in it. Wow. So the deal flow is not really the issue. And we're seeing a ton of funds coming in, of all different sizes, some asset managers, some independents. That's all fantastic for the ecosystem, so we're very glad. And it's very collaborative. Some of our default comes from other funds, ones we find. And we tend to try to find them early. There's a company we're looking at now. My colleague has been talking to them for three years. It was never the right time, but we really liked them. Now, may be the time, so we'll see.

Michael Crabb
And so is that sort of a thesis driven approach? I mean, you identify subsectors of mobility or transportation or electrical-

Christophe Defert
Exactly. And it's worth- it's probably worth saying that our mandate here is a little bit broader than Centrica. Centrica was obviously energy and services, very much driven by Centrica's strategy. Here we're looking at climate more broadly. So I already explained energy transition is one. Electrification of transport is another. The last two are sustainable supply chain, which I think is a big one, and what we call climate risk mitigation, so carbon markets, insurance products around climate, things like that. Market-based solutions. I would suspect that a large part of what we'll be investing in, given we're targeting top quartile VC returns, will be software more than hardware, but we have a little bit of flexibility there.

Michael Crabb
We can get into that in a little bit, because I always find that discussion really interesting. But maybe talk a little bit about the structure. Is this a true sort of VC fund? You're in the asset management group. Are you beholden to a number of sort of institutional and maybe high net worth individuals? How does that- how do you structure that?

Christophe Defert
Let me just put it in context, right, because I don't think I completely answered your question around HSBC. When we saw the HSBC platform, we obviously saw a large global platform. But it's also a platform that's been involved in kind of sustainable investing since the early 2000s, so they've been in this for a long time. They were one of the first ones to set up the UN PRI and they're trying to inject this in everything that they do, which we saw as very encouraging. We also saw the JV with Pollination which is on the nature-based solution side called Climate Asset Management, their recent partnership with Radiant ESG. So there's a real commitment of the platform, of the asset manager to be in the space, so that was very encouraging for us. Where we sit, to give you an idea, is we sit with an HSBC asset management. HSBC Asset Management probably manages about over 600 billion in assets under management. Within that there's an alternatives business. That's just over 50 billion and it's one of the kind of strategic growth area for the business. It's an important part. Within that part, we have a venture and growth team with two funds that we're currently launching.

Michael Crabb
Have you- so are you on that sort of client facing side at all? I mean, have you- you've been in the energy industry now for some time. The whole ESG sustainable green investing has really started to come on strong. Are you seeing trends on that side of the business that maybe you didn't see back when you were in Centrica? Or didn't expect to see when you made the transition?

Christophe Defert
Look, I'm really early in that journey. So I think we're now starting that whole process of o3f- we will soon be starting the whole process of going out and talking to people. But from the ecosystem I operate in and all the people I talk to, I think the enthusiasm is better than it's ever been before. We're very optimistic on that and we're seeing a lot of peers with new funds coming out. That's very encouraging.

Michael Crabb
Yeah, there's certainly a ton of velocity, right? So maybe this comes back to the software versus hardware question and sort of the broader- you made top quartile sort of VC returns. How do you sort of maintain investor discipline and quality deal flow in a market that's increasingly awash with cash?

Christophe Defert
Yeah, it's a hard answer- it's a hard question to answer. I mean, I think the deal flow is not the problem. I think there's a lot, particularly in the- we made the conscious decision of going after A and B - Series A and B - with a 200 million fund when asset managers- I think Wellington was trying to raise a billion and there are many other asset managers. General Atlantic is 4 billion. There are many more. Because we feel like that's a place where the deal flow is there. Opportunities are still there.

Michael Crabb
Meaning smaller check sizes, because it's a smaller fund, meaning earlier stage?

Christophe Defert
Yeah, I think A- and B stage should take a size of kind of five to 10 million. We feel that there's a really good pipeline of companies that are looking to scale at that maturity level. And so for us, it's a great opportunity and we feel that being on the HSBC platform, we can really help these companies scale, whether it's leveraging a group or other parts we feel we can be a good partner. And that's where we, as a team, feel we can add the most value. From that perspective, I think the deal flow is not an issue. Staying disciplined is going to be the challenge. Obviously, there's a lot of capital, as you said, coming into the space. As I see it, there's a lot of capital coming in at the top. And by that, I mean, at the later stage. That's gonna- you know, SPACs are part of that, but that's going to pull the whole industry up. So expectation on valuations and things like that are going to be things we're gonna have to stay disciplined about. But we need to be- this industry needs to have all this capital going in if we want to make a difference. We just have to make sure it's allocated properly. What I will say - and this is really where our team's belief is - is that this is not clean tech. And by that, I mean, 15 years ago, I think there was a lot of enthusiasm around solar and wind and rightfully so. Except I think, crudely there was- let's just say VC capital allocated to infrastructure, so the returns were not there. But all these assets are there now and they can- they're producing data and they need to be optimized. And it's a real opportunity for software solutions out there to play that role. And so we feel like that's ripe for some software investments in the whole ecosystem.

Michael Crabb
Sure, sure. Yeah. I mean, I'm sure you saw it at Centrica. I guess, not to dig on Centrica, but sort of the old oil and gas- the incumbents, right? They haven't had to really modernize systems and think a lot of the ice platforms and some of those. It's a little bit of optimization, but they are still probably a little bit dated, I would think, in their functionality. Or maybe that's unfair, maybe-

Christophe Defert
I would see it slightly differently. I think they were actually very good at improving processes. I think they spent- they were- oil and gas companies were phenomenal at using technology to make the processes better. It's just they stuck to oil and gas. Right? The problem is- the idea is - they're all, a lot of them are doing it now - they have to pivot to a different source. And so I think they'll be able to apply the same skills. And we see them as some of the most active in the space. I mean, on the energy transition side, you can't really look at the ecosystem without considering the BPs and the Shells of the world who are major actors in that space.

Michael Crabb
Yeah, just too big of a balance sheet to be ignored, right? I mean-

Christophe Defert
Yeah and it's great they put it to work for this type of- for this kind of pivot, so I think it's fantastic. And it's all part of an ecosystem that's hopefully going to collaborate around getting this done.

Michael Crabb
And the numbers are astounding, right? I mean, you mentioned HSBC's asset management business, 600 billion. You could put all of that towards energy transition and probably wouldn't be where we need to be right. And you hear some of these numbers and they're sort of really hard to get a sense on. Maybe let's dig in a little bit on the hardware versus software question, because I have- we've talked to a lot of different folks. There's a lot of activity on the software side. And I get it. The SAS business model is proven. It can generate outsized returns. You have sort of clarity of revenue. But to really make a dent in this thing, isn't it still a hardware problem? Or is it just-

Christophe Defert
For sure. Yeah, you need the hardware. You absolutely need the hardware. And I think there's a form of capital for that, too. And so venture- I don't- in some cases, venture money may go into it. But I think- and this is also why HSBC is a fantastic platform for this kind of stuff, if you protect yourself long term, is that they're the kind of organization that can have all these different forms of financing to support the transition. So we just play a small part on the venture side. We' like to fund the enablers that helped, but it takes a village. Right? And we have in for that that and we have all these other things and that's going to continue to grow too. So I think the asset managers like HSBC are going to have a big role to play going forward. And you're absolutely right. I mean, I spoke to a lot of infrastructure funds and they were all looking at how they're going to handle tech risk. Because traditional infrastructure returns were difficult and they all were willing to take more and more tech risk and we're getting there. So I think we're setting ourselves up the right way now. But with a lot of capital flowing into this space, you just need to make sure you allocate it the right way. That's going to be the challenge.

Michael Crabb
It's all well intentioned, right? But you're spot on. If we sort of feed into our own bubble, it'll put us back- we'll be one step forward and two steps back, instead of just steady improvement and steady progress.

Christophe Defert
That's right. But some people will say we don't have time, so that's gonna be the challenge here.

Michael Crabb
Right. Yeah, yeah. No, that's very fair. So maybe talk about some of the collaboration. I know you haven't been at HSBC very long, but you do have all of these pockets of capital and advisory services and everything else. How do you connect the dots across such a massive organization? Is it pretty easy to sort of pass things off back and forth? Do you get inbounds from other folks or it's-

Christophe Defert
Like everywhere, you have to establish a network. And once you have that network, yeah I think information exchange and just collaboration is definitely there. So we're- like as I said earlier on, I'm kind of six months into this, so I'm still kind of in the network building mode, but I certainly see the potential and I see enthusiasm. Now, that said, what's also really nice is you have teams, like Responsible Investment team and those teams that kind of cut across that enable some of that connection, which is really good. So I'm pretty confident in that.

Michael Crabb
And you can speak so many different languages, you can network with people from all over, right?

Christophe Defert
Yeah, I'm not sure I can connect with everyone at HSBC. That would be-

Michael Crabb
I had to tease you. Okay, so you've seen a lot of stuff, right? I mean, your four pillars are incredibly broad. You've had all this sort of direct investing experience. Any deals or opportunities that really stuck with you that were key lessons learned? Whether you were successful or not, any- are there a couple deals you could share with us that sort of were really impactful on how you approach it as an investor?

Christophe Defert
God, that's a big question. The answer is yes.

Michael Crabb
There always are.

Christophe Defert
How much time do you have? Yeah, look, I mean, when we were at Centrica, we invested in a hardware business - I mean, pure hardware business - and there were a lot of skeptics. And to be fair, I don't think I could have invested in a company like this at the seed or at the A stage. We ended up investing Series C, because it took them probably 12 years or so to get to where they are today. But what really made it work was obviously it's a great technology, but the management team is just- it's been phenomenal. And I think that- and it's not just the founders. It's the people that they surround themselves with to execute. So as a company, I've learned a ton from that process, particularly when it's as complex as hardware technology. And then once you set it up- and by the way, it's kind of like a- it's a company called Mainspring Energy. They do linear gas generator. So they had to get the technology right and then they had to build up the whole manufacturing process to build these machines with this added complexity you don't always have in software. They're doing phenomenally well. And I think a lot of that is on- is credit to the management team. That's huge.

Michael Crabb
That's a theme that comes up over and over too, right. All business comes down to people. I mean, you mentioned when you were at Origination, but really investment- businesses are all about people. What sort of lens or what sort of evaluation can you do to know- I mean, every founder thinks their business is the one and you wouldn't want to invest in a founder that didn't think that, but you also have to temper some of that enthusiasm with realism to make sure you're tackling problems.

Christophe Defert
And I don't think you have a secret sauce. But I think what you- first of all, you have to do a lot of listening to the management team. And it's not really what they're saying -although that's obviously important - but it's kind of how they're saying it, how they're structuring it. But the interesting thing- so I started, obviously, my career in banking and in private equity. And those were- management teams had to be captains. They had these big ships that were already there, right? And it was about whether your EBITDA was going to go up five or 10 million year on year or down, so it was more about steering the ship. The interesting thing in venture capital, which I personally love, is the fact that, not only is that person a captain, but that person has to build the boat that they're actually going to drive. So the skillset is pretty impressive. And it's part of what I love about my job is that that process and the fact that we can help in that process in different ways is phenomenal.

Michael Crabb
That's a great thing about building the plane while you're flying it- but building- yeah. Captain versus the builder in capital. I like it.

Christophe Defert
Planes, boats.

Michael Crabb
Part of your marketing.

Christophe Defert
That's right.

Michael Crabb
Well, it's great. So any experiences there that were like you thought? I don't know it. Maybe it's yeah, it's just my experience. It's so hard to know, right? And you're- I guess you're distributing bets. I mean, any lessons learned that, man, you thought this team was the team and you had some blind spots? Or anything you can share?

Christophe Defert
Yeah, I mean we had an experience where the boat was just too complex, to continue the analogy, right? What they ended up doing is building essentially two technologies in parallel and we hadn't really appreciated that upfront. And obviously you're spreading your resources - both financial and people resources - between two different projects and that's not- so it's something that's always at the forefront of my mind when somebody is pitching us is, do you know exactly what you're building and you're building one thing? Or are you kind of spreading yourself with three, four technologies and seeing which one hits? That's a big one for us. But evaluating- most people within VC, evaluating the management team is a fundamental thing, because that's really who you are backing.

Michael Crabb
It's always interesting. A lot of the early stage venture conversations that we've had comes back to the same thing. It really comes back to people. It must be- maybe have you seen any challenges there around the labor market that we're in today? I mean, I think it's- you read the headlines. It sounds like it's harder to find good people to sort of build around founders or are the teams mostly set by the time the businesses land on your desk?

Christophe Defert
No, they're pretty set by the time they come on our desk. I don't see big issues. I mean, look, I have the anecdote here and there, right? Sometimes trying to find software engineers in the Bay area can be tricky, because you're competing with all the big guys, so things like that. But I think people are pretty resourceful in this space, so they always find a solution around it. That's part of what I like is people are so dedicated to what they're trying to do that they don't just bring you a problem. They bring you a problem and a bunch of solutions and then it's a matter of trying to steer towards the right solution. That's what's exciting about it. So from a people perspective, I think it's actually a fantastic time to do it. I mean, the climate space is unbelievable. Again, I'll always come back to there's a lot of capital flowing into space. It's about making sure it's allocated properly. I think it's all about execution.

Michael Crabb
Yeah, execution for the- there are multiple levels to that execution. It's got to be allocated well and then it has to be built well.

Christophe Defert
They have to execute. We have to execute. I mean, there are a lot of things that have to kind of connect.

Michael Crabb
That's what you can aim for those top decile, top quartile returns, right?

Christophe Defert
Yeah. I mean, that's why you try to get all these things to line up. But we're - I say we, as the team - pretty excited about the platform we're on and what we can try to build here. I mean, the other thing is it's an opportunity for us to build something beyond this first front strategy is to expand, work with the other teams at HSBC and hopefully play a significant role in the climate space, not just climate tech.

Michael Crabb
Has that been- I mean, to stretch our bad boat analogy, I mean, you're kind of building your own ship, too, right? It's part of a broader platform. I think kind of a fun experience.

Christophe Defert
I mean, to continue the analogy, we're building let's just say one engine of the boat. So one thing that's really clear from my team and I is like, we're sticking to climate tech and we want to get this first fund off the ground. Other people are doing other things. Climate Asset Management is doing nature-based solutions. But if you can get all these parts to kind of collaborate down the line, that's very powerful. That will come in time.

Michael Crabb
Very cool. Maybe talk a little bit about projections for the future. We love asking what does this whole vehicle and industry look like five, 10 years from now? And all the investors always get very "lawyerey"... with the disclaimers aside, what are you kind of seeing into the future? We have this great challenge ahead of us, but all of this opportunity as well.

Christophe Defert
Yeah, look, I mean, maybe this is simplistic, but I think we're on the right trajectory. I think I see the future as one where we're going to do everything we can to hit the goals, the climate goals that we've set. I don't think we have another solution. I don't think there's a silver bullet and that's where I get a bit cynical around everything that's being talked about, because there's enthusiasm today. And I get that. I love it. It's needed. But I don't think somebody is going to come up tomorrow and just fix it all. And that's why we're very happy to look at enablers to this climate tech transition, because it's going to take a lot of Legos stacked up together for this to work and everybody has a part to play in it. I think if we all do our part, we'll get there. The infrastructure folks need to put it down. The software guys need to optimize, all that kind of stuff. But I think it's gonna- I think we're gonna get there. The capital has to be, as I said. Again, I keep repeating myself, but the capital has to be allocated the right way. There's goning to be some of it that is not going to be, but I'm hoping the majority is.

Michael Crabb
How do you talk to investors about that, right? I mean, how do you separate, obviously, your history, your experience, pattern recognition that you and the team have built, but how do you convince people that that you're the right ones to allocate for this specific angle versus others? Are you prepared when folks kind of bring up poor experiences? How do you sort of talk about that?

Christophe Defert
Yeah, you have to cherish the poor experiences for sure. And look, we've all made mistakes and I think that's how you learn, so that's okay. I would never go into a meeting saying we're better than everybody else and we can do it better. I think we can do it well and I tend to stay in my swim lane. Everybody else can do their thing, but this is what we're focused on and that's what we're trying to aim. And I would hope that potential investors or partners kind of- that resonates with them. We certainly can't do it alone. One thing that is critical to our success and I think the success of the ecosystem in general is collaboration. Our network and all that stuff is fundamental, whether it's co-investors, seed investors who have invested before us, people who will invest after us. All that needs to continue to gel more and more. We spend a significant amount of our time speaking to people in the market about that. And sometimes we'll co-invest with some people, sometimes we won't, but as long as we can all share openly, I think that's the way to do it.

Michael Crabb
And you think that trend- we hear that as well, but you feel good about the trend line that collaboration is on? I mean, I get a little scared that as it gets more competitive, people will be a little more hesitant to be so open. But you're not concerned about that.

Christophe Defert
Some people will be. I don't think we will be, because I think it would be counter to just the way we operate. So we'll just- I think if you continue to do what you do well, things will happen. We'll continue to collaborate with entrepreneurs and others and be a good partner. And I think, naturally, that will create opportunities for us. Again, keep in our swim lane and do what we do well.

Michael Crabb
It's a wide lane, but it's a well-targeted one, right?

Christophe Defert
But it's so important. I mean, it's a wide lane. It's also a pretty small ecosystem at the end of the day. And I get reminded of that all the time, so I think it's important that we all collaborate in our ecosystem.

Michael Crabb
Yeah, definitely. Create your own karma a little bit, right?

Christophe Defert
So far it's been great. So far it has been great. People are super supportive. We've talked to some awesome entrepreneurs and co-investors. One thing that I absolutely love about our space is it evolves constantly. Every morning I wake up and there are new things coming out, happening and talking to new people and new startups and super excited entrepreneurs. People who have amazing technologies to even convert waste into rocks and things like that. It's just awesome.

Michael Crabb
There's a lot out there. It's certainly very fun. Those of us that are engineers, taking you way back to something you said earlier, certainly enjoy the tech side of things.

Christophe Defert
And it's super cool to even- one of the things I enjoy the most is like, I just don't know much, so just soaking in all this information is very cool. It's a principle that, back in the days of my Gas Origination days, I'm kind of happy to go into a meeting and say, I know nothing. So just show me. That's pretty cool.

Michael Crabb
Yeah, totally. Alright, well we're getting a little bit close on time. Anything that we haven't- I know it's very wide ranging. I certainly appreciate the comments. Anything that we didn't hit or that I should have asked and I didn't?

Christophe Defert
I don't think so. No, I mean, so far it's been a great conversation. No.

Michael Crabb
That's what every host wants to hear, that we covered it all. It's really great talking with you. I can't wait to see the success that you and the team have here in the near and distant future.

Christophe Defert
Thank you. I appreciate it.

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