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Jake Levine

Chief Climate Officer

US International Development Finance Corporation

August 11, 2021
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Ep 39: Jake Levine - Chief Climate Officer, US International Development Finance Corporation
00:00 / 01:04

Bret Kugelmass
We are here today with Jake Levine, who is the Development Finance Corporation's first ever Chief Climate Officer. Man, that title rings of energy impact. Welcome to the show.

Jake Levine
Thanks, Bret. It's nice to be here.

Bret Kugelmass
Yeah, super excited to talk to you. Can't wait to hear what you've got going on at the DFC. But before we do that, we've got to learn about you. Start us off with where you grew up, and how you got into the sector.

Jake Levine
Oh, wow. Well, it's a complicated question. I was actually born in DC. I lived in DC until I was about seven. My parents worked in Washington, but they were both from LA, as were some of my grandparents who were the rare third generation Jewish Angelenos that from time to time you encounter. I consider myself someone who's from LA even though I was born in DC. I grew up in California from age seven on and I've always been drawn to the environment. I mentioned my parents. They were both very active in various environmental projects. When I was a kid, my mom was a lawyer for a couple of public interest law firms and she focused on various sorts of infrastructure and clean transportation projects. And my dad was in politics and worked a lot on California desert preservation, restoration issues, offshore drilling, and I guess the apple doesn't fall too far from the tree. I think the thing that- the other piece of this that maybe plays a part of it is growing up and being a relatively privileged Jewish kid, you get a lot of guilt from your grandparents about taking care of the things that you've been lucky to have.

Bret Kugelmass
That's the concept of tikkun olam, right? To give back?

Jake Levine
Tikkun olam, I like L'dor V'dor a lot. It means from one generation to the next. And I feel that has always resonated with me, feeling like I have an obligation to pass along something a little bit better to the next generation. That's where I kind of got my ethos in beginning on climate work. Then, when I was in college, I started in earnest really organizing and advocating on behalf of various climate issues. I think we were able to force a major university into one of the first - if not maybe the first - greenhouse gas reduction targets when I was leading what was then the Environmental Action Committee in my college. We ended up getting a referendum on the ballot that passed overwhelmingly. I think something like 88% of the student body voted in favor of greenhouse gas reduction targets and these were very modest by today's standards. It was something like, I can't remember, something like 10 or 15%, below 1990 levels by the year 2010. This was in like 2006 or 2007.

Bret Kugelmass
You were early.

Jake Levine
I'm really dating myself now. But I just loved the confluence of organizing and politics and policy and communications and I feel like all of these issues that you run into on climate are sort of complex and intersectional. It's just been- I feel lucky I've gotten to do this for my career.

Bret Kugelmass
Yeah, well, I'm glad that's how you kicked us off, saying that it's complex and nuanced and everything relates to everything else. Because sometimes you have these conversations, people who are very passionate and often in the right spirit of things, but are unwilling to go to that level of complexity and just have these simplified mantras, so I'm glad there are people like you who can dig through the nuance of it. Okay, so that was- tell us early career stuff. How did this passion continue?

Jake Levine
Like you want to know my first job ever?

Bret Kugelmass
If you think it's relevant.

Jake Levine
It wasn't a climate job, I worked at- we had a camera store in West LA called Bel Air Camera. It was on UCLA's campus and I was the kid who took your role of film and got it developed. That was my job during high school and then I transitioned from that into Ben and Jerry's and I felt that actually we were getting warmer, because Ben and Jerry's has always been sort of environmental-

Bret Kugelmass
Very socially conscious brand. Yeah.

Jake Levine
Yes, yes. So my first real job in this area, I went and worked on the Hill. Barbara Boxer was chair of the Senate environment committee, EPW, and this was like my dream job. I got to be a staff assistant. I still remember my salary was $26,000 and my job was basically to run things around from office to office. Also, I wrote a newsletter that was sort of a compilation of climate clips from the news that became sort of a popular newsletter on the Hill. Pretty soon we were distributing that far and wide, not just at EPW, but to all- a number of different Senate offices and offices in the House. And then one thing, now that I'm talking to you about this, I realized maybe it all is connected. The best job that I had on the Senate EPW committee was, I was the photographer. And maybe I was using my skills from Bel Air Camera, but it was actually a wonderful job, because most staff assistants wouldn't get to ordinarily attend the hearings, but because I was the photographer, I had to be in the room. On the committee - this was in 2007 - we had Hillary Clinton- so Barbara Boxer was the Chair, Jim Inhofe was the ranking member, Hillary Clinton was on the committee, Barack Obama was on the committee, Bernie Sanders was on the committee, Sheldon Whitehouse, Amy Klobuchar- I mean, this was like early days of a bunch of people who have gone on to have tremendous impact in this area. It was also the start of, I'd say, the initial conversations that ultimately led to the Waxman-Markey legislation, because in those days, we had what was then the Lieberman-Warner bill and hat included some of the cap and trade provisions that later went into Waxman-Markey. Then I had a chance to work- I left that job very happily to go volunteer for Barack Obama on his presidential campaign. I had been taking so much vacation to go up to New Hampshire, knock on doors at the end of 2007 that, at one point, Boxer pulled me aside and said, You know, you could just leave and go do this full time. I said, Okay, and I ended up basically joining the press team on the Obama campaign and was able to sort of parlay a communications job, and my very scant Hill environmental policy experience into a junior press and communications and policy job in the White House Office of Energy and Climate Change, which was headed by Carol Browner, who had previously been EPA administrator in the Clinton administration. That was really where I cut my teeth and got my start and had just incredible mentorship, particularly from Carol and also there was a- our senior counsel is a woman named Jody Freeman. She's sort of the foremost authority on the intersections of administrative law and environmental law. And in that office, she spearheaded what was then the first real sort of multi-agency joint rulemaking on fuel economy standards, greenhouse gas emission standards for cars and trucks. She's the person that convinced me to go to law school and said, If you want to keep doing this in a meaningful way, you should go and learn how the law works. That was like the early part of my career.

Bret Kugelmass
Very cool. Okay, so now you drum up some legal skills.

Jake Levine
Then, first of all, I never imagined how much I would love law school. I felt like it was just a totally horizon expanding experience where you realize that there are real levers of power and influence in the way that our government and society works and that are super meaningful to the work that we're all doing on environment and climate. And I managed to time things, I'd say relatively well, just somewhat serendipitously because I think that one of the real areas where litigation is a key tool is in providing a backstop and a set of real tools to bring to bear when you're seeking to challenge what would otherwise be unjust.

Bret Kugelmass
Do you think that experience that you had is like a Harvard specific learning or do you think all law students come away with a similar takeaway?

Jake Levine
No, I don't, I certainly don't think it's- no single law school has a monopoly on that. And I actually think in many ways the big and prestigious law schools, they attract so much talent and so many really just uniquely bright and motivated people. And then by the time you get out, the most prestigious thing that you can do is join a big law firm. And a lot of that talent goes into corporate client services. I think it's tough. I think the big law firms are sort of susceptible. The big law firms, the big law schools, excuse me, are susceptible to that and many of the people who I felt were the most inspiring colleagues of mine didn't go to the Harvards of the world.

Bret Kugelmass
Okay, but then- I mean, I guess- so I'm curious how you decided really not to go that route, to not go to the big law firm that sounds like that. You were just inspired by a different course of action?

Jake Levine
Yeah, well, so I went to law school with the benefit of having spent some time out of college. I didn't go straight through. I had a sense of what I wanted to do and I kind of got lucky. I mean, my first summer in law school I went to go work for a startup company that I heard was doing cool stuff in clean energy, Opower. It ended up being a company that was in hyper growth and had a future. So when I left law school, I just had to go back there and I didn't do a law job. I went and did business development and regulatory work. We were on the brink of an IPO and we were about to have this big cash infusion. We were growing into many markets, domestically and overseas, and it was a great experience as a young person in business who was bringing a policy lens to the work that we were doing and working in a highly regulated industry, like energy efficiency, demand side, sort of energy management.

Bret Kugelmass
And this is where you get the taste of the international landscape as well.

Jake Levine
100%, I spent most of my time in Latin America trying to do business in Brazil and Mexico and Chile. And in East Asia, we were doing work in China, Hong Kong and Mainland China. You get this exposure to the Wild West of clean energy and climate outside the US and it's a really dynamic place and market. But I want to go back to the earlier question, because then fast forward and President Trump had come into office, and all of a sudden, all the work that we had done in the Obama administration was all in jeopardy. Then you realize that, as a lawyer, you actually do have a real set of tools that you can use and you can go to court and you can petition to challenge these regulatory rulemakings and bring the law alongside to bear on some of the policy goals that you're working on. And in this case, I did join a big law firm. I was able to find a place that had the right set of clients who actually were on the right side of- well, on the side that we were on. I don't want to go into right versus wrong here, but you know who were on the right side of this thing. We had clients who were in the clean energy space, in the clean vehicle space who wanted to challenge these rollbacks. And I think some of the best advocates were the people who didn't have a fancy Harvard or Yale Law degree, but they were people who had come from business and they understood the way the markets worked. They understood the challenges that these companies were facing and they were motivated by the gravity and the magnitude of the broader climate crisis. That was a tremendous experience for me.

Bret Kugelmass
That's awesome. That's awesome. But then you got into public service at some point.

Jake Levine
Yeah, I mean, I've always- so, Obama administration, I actually went- after Opower- Opower went public and then got acquired by Oracle and it's now part of Oracle's utilities vertical. And when that acquisition was happening, I decided to go back to California, my native California, and help who was then my state Senator and had one year left in her term to pass a big piece of climate and environmental justice legislation. This was like the best public service experience I've had. Although my current, my new job, which I'm three months into, may eclipse it.

Bret Kugelmass
Yeah, don't say best yet. Hold on.

Jake Levine
But it's like everybody said to me, You don't want to go to Sacramento, it's going to- this is like a second rate city and state government and-

Bret Kugelmass
Hot in the summers.

Jake Levine
Hot, miserable, boring. People could not have been farther away from the mark. I thought it was- people were there for the right reasons. They wanted to do good work, they want to help their communities. It's actually a- state government is a place where you can actually see the benefits of your work, I think, unlike federal, the federal government, because you're working on community-driven initiatives, and you're sort of on a scale that is visible and relatable to a human scale, an individual human scale.

Bret Kugelmass
And California is not just any state. I mean, what do they say, where California goes, the country goes, or something like that?

Jake Levine
Yeah, it's- I mean, the legislators loved reminding everybody that it's the fifth largest economy in the world, depending on how you count, and there are 40 million people. But California gets this crazy rap for being just ultra-liberal, tech-focused, and some parts of California are, that's true. But actually, I think California looks a whole lot more like the US than people give it credit for. There's the whole sort of moderate and conservative caucus that runs up the backbone of the state to the Central Valley. It's very rural. It's an agricultural economy and it's largely poor. There are a lot of lessons to be drawn from California in terms of what could be translatable and relatable to places like the Rust Belt and Appalachia and the US South where communities and economies are really pretty similar to those in California.

Bret Kugelmass
I think that's true. Yeah. Okay, keep going.

Jake Levine
So we passed the legislation, it was really inspiring. We did a bill called SB-32 which set the state's GHG targets 40% below 1990 levels by 2030. It's going to be hard for California to meet that limit. We'll see how the noose of administration is able to do. The thing that, for me, was most meaningful about that experience was we worked in tandem with a group of environmental justice advocates led by an assembly member from the Coachella Valley, one of the poorest and most unemployed parts of the state on the southern tip of California by the Salton Sea. We had a bill that we ran alongside the climate accountability and transparency and oversight to ensure that as the state was doing its climate work, it was also pushing forward on environmental justice. Then that's when I went into private practice at Covington and spent four or five years working on these litigations. But the bug for public service came back and here I am in the Biden administration, feeling extremely inspired and lucky to be at the Development Finance Corporation and really focused internationally and on finance projects. Both of these areas, to me, are extremely compelling, because number one, if you look out between now and 2100, 95% of global carbon emissions are going to come from outside the United States. And number two, the biggest gap that we have in addressing the problem is finance related. We just don't have the resources, particularly in these economies, to really drive the kind of smart, climate-informed, resilient infrastructure that we need to be building.

Bret Kugelmass
And to be clear, the sources exist in the world. It's just not in those places. So part of the challenge that you're trying to solve is how do you get it to those places?

Jake Levine
Well, it's both. I mean, the resources exist in the world. According to Fatih Birol, who, in my view, is the foremost authority on all of this, the executive director of the IEA, the International Energy Agency, we right now have roughly $2 trillion of investment going into energy and the majority of that is in fossil based energy. What we need, in order to get to a 1.5 degree scenario, which is where we're all trying to get to, is we need $5 trillion dollars of total investment in the energy sector and we need to flip the ratio where the vast majority of that is going to clean energy and climate-friendly projects, and not to fossil projects. It's a little bit of both. We need more capital, the capital exists, it's just not at the level that we need it to be. And to your point, it's all being invested in the US and Europe and we need it to be in East Asia, Latin America, Sub Saharan Africa, the economies that are really experiencing growth and where there's a lot of economic activity. So it's a little bit of both.

Bret Kugelmass
And how much of that two to five trillion- I'm of the opinion that, given how fundamental energy is to prosperity and to growth of the economy, you can kill the two birds with one stone. You can both switch over the energy systems, do something that's cleaner and less expensive, and you can essentially enable energy access. Their local economies will thrive and make more pools of capital available for further investment. And then maybe we don't even have to do anything from here in America. They'll be able to solve- like you teach a man to fish type. It's like we're giving a man a fish pole by kind of getting their energy economy going, do you feel similarly?

Jake Levine
Yes, 100% and getting their whole economy going. This is why DFC is also really well-suited to do this, because a lot of the bread and butter work that DFC does is in the financial services sector, where say, for example, we would be providing a loan portfolio guaranteed to a bank or a set of local lenders in an economy with the purpose of supporting small and medium enterprises. Now, even if that loan portfolio guarantee isn't specifically targeted towards clean energy investments, it still provides the financial liquidity and the economic activity that then has the follow-on effects to be able to invest in decarbonisation and better infrastructure and higher productivity. There is sort of this virtuous finance circle that you can get into, but we also want to be affirmatively pushing into the clean energy and sort of climate spaces as well and doing explicit investments in those sectors.

Bret Kugelmass
How much of a learning curve was there for you to just kind of speak the finance lingo? Had you picked up enough of it in your previous legal work or was there still a bit of a learning curve, just to kind of even get the acronyms down?

Jake Levine
I'm still on the learning curve. I appreciate your implication that I may have already finished it. That's a big compliment. But no, I am not a finance person. I'm learning that, it's learnable, and I'm very grateful to my colleagues throughout the US government, at places like Treasury and the National Security Council and USAID that have come from the finance world and have been teaching me. Mark Gallogly, who was the founder of Centerbridge Partners, is one of the leading financial thinkers in the world, was up until just a couple of weeks ago, the lead private sector finance person on John Kerry's team, the Special Envoy for Climate. He and I had a weekly meeting and we were talking through the basics of various blended finance structures that we might think about using to mobilize private capital to come into the climate sector.

Bret Kugelmass
I was gonna say, when you say blended, does that mean public private partnership, and sometimes they call it that?

Jake Levine
Yeah, it's a little bit- I'd say public private partnership, to me, connotes more of a project-based sort of framework, whereas the blended finance framework is really about thinking from a fund structure where you're pulling in government finance and private finance is sort of the archetype of blended finance. But you could also be talking about foundation financing, and other philanthropic financing into a fund structure that then is going out and investing in, say, either other funds or individual projects.

Bret Kugelmass
And when you say, structure, does that mean these are like equity investments? Or could this still be a bank with debt investments?

Jake Levine
It could be both. And actually, one of the- could be either, it could be both, and one of the exciting things about the blended finance discussion is that you would actually have both in one fund. You might have someone that's taking on a more junior equity tranche, and then have debt portions of the overall capital stack together in that financing. It all just depends on how you're balancing these questions of risk, and focus on where the funding is actually going to be spent. But to your earlier point, I had said to Mark, I feel like this is like taking batting practice with Hank Aaron, and you must be really annoyed that I'm asking you quite dumb questions about finance. He never responded to that.

Bret Kugelmass
Let me ask. Actually, I'll just offer a quick comment. It's so funny how you describe going through this learning experience. I feel like I'm doing something very similar. In many ways, that's what this podcast is all about. Us coming from the NGO position, we were like, Where can we play the biggest role? And then after meeting with God knows how many subject matter experts, understanding the critical role that finance plays, in many ways, this podcast just kind of follows our organizational learning experience, which is great, because I get to talk to really smart people like you and many of your colleagues, and just ask them whatever I want to know, to try to solve this puzzle that we're all kind of working on from different angles. Like how do we deploy more clean energy projects across the world? At least that's our main mission.

Jake Levine
Yeah, I think- I mean, one of the things that so- that makes me feel hopeful and also feels challenging is that so much of the challenge that we face is solvable with the tools that we already have, but we haven't quite figured out how to get all of these pieces to sort of interlock with each other. We know we can do blended finance structures for infrastructure, and there are big private sector players that are putting together multi-billion dollar funds to do that. But how are we going to translate that? And what is the risk profile gonna look like when we apply that to climate resilient infrastructure? And then how do you layer on the right markets that you need to be in with those funds? That, of course, all needs to be layered in with the discussion on tech and innovation and policy. There are so many of these pieces that need to fit together. We were having a discussion with some of the leaders in the renewable energy space in Ecuador. And we were talking to them about our energy efficiency project that we were working on and they said, Well, in Ecuador, energy efficiency doesn't really- nobody wants to do energy efficiency, because the way that the distribution utilities make money is by selling electricity. There's that whole discussion from the regulatory side which is, how can we help emerging economies and developing economies decouple revenue structures from sale structures in the electricity sector, which is something that's been done since the 1970s in somewhere like California, but just takes reps and iterations to sort of make its way throughout the global economy.

Bret Kugelmass
What you're saying is that sometimes it's the market itself, it's defining the market rules to line incentives with our goals.

Jake Levine
Yes.

Bret Kugelmass
Yeah. It's funny, I come from the- I spent my early career in Silicon Valley where everything is about tech innovation. But I think what I've learned as I've gone around the world like you, spending more time, that there's still a lot of business model innovation, market innovation - not even innovation, but application of previous innovations - that can coincide with the tech innovation or spur the tech innovation on all on its own if it's set up properly.

Jake Levine
Yes, totally. And that's another place where the US government has just very unique and very badly needed resources. Not just the federal government, but state governments. Because in so many cases, these various sectors that bear on carbon and climate, whether it's the energy sector, transportation or buildings, especially thinking about buildings, where you're talking about local zoning and municipal regulations, there are so many lessons to be drawn around policy innovations that are really important for unlocking what then can come next around tech and finance.

Bret Kugelmass
Tell us about your entry to the DFC. And maybe I should just take a minute to say -because a lot of people, when I talk about the DFC, they're like, You mean OPIC? Is that a thing that confuses people, it used to be called OPIC?

Jake Levine
It's a big thing. My lanyard is an OPIC lanyard. We've been- it's the DFC, but it's also OPIC. The agency is essentially the amalgamation of two previously existing agencies, one OPIC, Overseas Private Investment Corporation, and then the other was an agency at USAID, which was their export credit agency called the Development Credit Agency, which is now a unit inside DFC called the Mission Transaction Unit. And because it was an export credit agency, which is really what DFC is - oh, I'm sorry, OPIC was - it just made sense to streamline those from an efficiencies perspective. And actually, in many regards, the work that ex-USAID agency is doing is the most innovative, the most risk seeking, the most impactful work that we have. And the other thing, of course, that the Build Act, which is our authorizing statute, did was it doubled our investment cap. Right now we have 31 billion of assets under management. And under our statute, we can go up to 60. We're in the process of taking on more assets now. The second thing that it did was it authorized us to invest in using new tools like equity investing, which will open opportunities for us and funds, and then we have this technical assistance authority. DFC is, in many ways, and I should say, the reason that this agency is so incredible, because the people who work here are incredible. We have finance officers who are just impeccable and they are working in the toughest environments that you can imagine, in many cases in countries that are experiencing civil wars or political strife and turmoil. Their mission is development. We've been lucky at DFC that we get to work off of this foundation of incredible finance officers and financial professionals who have been here for, in many cases, as long as 20 or 25 years. It's great and we're gonna grow. Our plan is to keep growing. Right now we're constrained in terms of our ability to move faster, because we just don't have enough people. We're hiring, and for anybody who's listening, if you're interested, please share, because we need to bring on more excellent talent and that goes from our legal team to our finance teams or our policy team or development office. There are a lot of opportunities here to come join the work.

Bret Kugelmass
Speaking of hiring, how did you get hired? Did they just call you up? Or like, what's the process? Was this a role that was crafted with you- how do you become part of the organization?

Jake Levine
Well, it's a little bit of a mix of luck and hard work, I guess. All of these administration jobs are a little bit hard to plan on. But in my case, I had been sort of volunteering on the climate policy team during the Biden campaign. I was working with a number of former colleagues from various parts of my career, but especially from the days in the Obama White House, people like Brian Deese, and who is now the National Economic Council director, and Ali Zaidi who's heading up the- he's the Deputy National Climate advisor working with Gina McCarthy. We had sort of a small but mighty team working on climate policy, so I had the chance to get involved in that project. I think that as it became more and more clear that Biden might actually become the nominee and then become president, I expressed interest in learning about how I could serve and I got very lucky, because I wasn't expecting this role to materialize. I didn't frankly know all that much about DFC, but I had been working closely with some of the folks who ended up filling out the Special Envoy team, John Kerry's team, and DFC, which is such a critical tool to our climate diplomacy. We're sort of top of mind for a number of them. And so, long story short, I learned about this opportunity and applied for the job. And I will say, I have an incredible- the thing that I feel maybe the most lucky for in this role is I had the chance to hire an incredible deputy. Her name is Aparna Shrivastava and she was doing international climate finance work in London for basically the last 10 years. She was at Mercy Corps most recently leading their climate finance work and she is a native Oregonian. She wanted to come back to the United States and she actually applied for her job on USAjobs.gov. To me, it was testament that she is, in fact, one of the most talented people I've ever met, because I've never met anybody that actually was able to sort of be at the beginning of a new administration, political appointee in that pathway, and it's just really impressive.

Bret Kugelmass
We'll have to get her on the show next. So sort of what- goals. You come in, you get the job, and the goals come up during the interview, and where have they changed since you've been on the job? What are you going to accomplish?

Jake Levine
The goals are pretty straightforward. They came up in the interview and they've been pretty consistent, and they are that we want to get big stuff done. The way that we're thinking about that is in, essentially, three, maybe four ways. Number one, we set a net-zero target that's very ambitious. We're going to be net-zero by the year 2040. If you look at all of the major economy DFIs, development finance institutions, it's the most ambitious goal and we think that the US has a really important role to play in this regard in terms of providing leadership and ambition in the global finance community. It's something that we're very hopeful and confident will be contagious with the other DFIs and with the multilateral development banks of which the United States is a big player.

Bret Kugelmass
What does that mean, net-zero, that you guys are gonna be net-zero? I mean, each project that you invest in, whether it's an energy project or not an energy project, has to consume its energy from carbon free sources?

Jake Levine
It's not on a project by project basis, it's from a portfolio perspective. The way that we look at it is, DFC is a bank, essentially a bank. We're taking a net-zero approach that would be best practice for a financial institution. What that means is, as we look at our exposure to various investments, how are we actually balancing the degree to which we're invested in projects that are going to have emissions versus projects that are going to be carbon abating? And as a practical matter, what it means is that to be net-zero in 2040, by the year 2030 we basically have to be out of fossil fuel investments. Starting now we have to be aggressively reshaping our portfolio so that we're essentially overweight in mitigation projects and carbon abatement projects, like nature-based.

Bret Kugelmass
Okay, I was gonna ask what are carbon abatement projects and really how much carbon can you- I understand the reforestation, okay, some preservation, I get it. But that typically, when looking at the global scale - and I know you guys aren't the global scale to your portfolio - but still, that's going to be a lot of how you're going to sequester or bait that much carbon.

Jake Levine
It's going to be a lot. First of all, it's going to be a lot of forestry projects. One of the things we did when we were modeling the net-zero commitment was - and we're still in the process of doing it, a lot of this happened prior to my joining and there are sort of important refinements that were that were making - but one of the things that I think was really well done and important is that we did not assume- we did not make assumptions on the improvement of technologies available for carbon abatement. Right now, in order for us to get to net-zero by 2040, we're only contemplating that the world of presently available, nature-based solutions exists. It's a lot of forestry, but it's also work that we hope can be accelerated, because we know that we're also going to be investing in ocean-based carbon removal solutions, geologic sequestration. We're hoping that we can find ways to support some of the riskier plays in this space around direct air capture and the like. Then we also feel to the extent that there are technologies that become commercially feasible, which can abate pollution that we would invest in those. I think the administration takes the view that we're not going to get to our carbon goals without carbon capture and sequestration technology, and if DFC can be a part of financing those types of capture technologies on projects that are key for development or strategic reasons overseas, then we want to do that.

Bret Kugelmass
Now, but these projects also have to be viable businesses, right? Make money somehow. And what happens if we have an amazing carbon sequestration project, but there's no real business model behind it? Is it just that like the government, the host government has to say, Okay, we're gonna be paying for this much carbon capture, and that's the revenue stream to support the project?

Jake Levine
Well, it's a critical point. We're having a lot of discussions right now with some of the countries who are, in particular, connected to the Amazon rainforests, places like Brazil, Colombia, Ecuador, Paraguay, and others who have sort of offshoots of the forest and they're working on these business models. Now, a lot of the business models depend on markets for carbon, whether those are voluntary markets or regulated markets like the ones that you see in..., or in California. I think we recognize that there are some important questions that are worth asking about, the measurement and verification and additionality of using those types of programs. But some of the areas that we see really exciting innovation in is around outcome-based financing, so development impact bonds. Also, in some of these places, there are key economic policy-driven measures that governments are exploring to use reforestation as a tool to reduce crime or to enhance economic mobility. Those governments are willing to invest on their own to stimulate the markets and we're hopeful that we can be a part of that. And then another model that has been really interesting, but it's from a finance perspective - it's something that hasn't quite taken off, and hopefully there can be some innovation and standardization to allow it to take off - is on the concept of debt for nature swaps, where you see particularly in a number of these regions, governments that are burdened by large debt obligations and have natural resources available to them and are willing to agree essentially to preserve or restore various critical ecosystems in exchange for reductions in their debt. DFC is excited and willing to help finance that.

Bret Kugelmass
Let's talk about energy or my audience is going to kill me. What kind of energy projects excite you or are coming up?

Jake Levine
I love it. This maybe goes to the second goal that we also had which was, we're going to invest at least a third of DFC's portfolio is going to be focused in climate-informed and climate-linked projects, and a huge part of that is going to be energy. The reason why a huge part of that is going to be energy is because DFC is best-suited to be investing in commercially viable projects and in the energy sector, we are lucky that we have a lot of those. We're already doing a tremendous amount of work in solar and wind, we want to be doing more in storage. We're looking at solar plus storage, wind plus storage, wind and solar, plus hydro. We've seen a number of really attractive proposals that marry renewable energy with hydro storage. And then all of the other sort of possibilities are on the table for how we can be supporting geothermal, hydrogen, other clean, baseload sources of energy, including nuclear.

Bret Kugelmass
I was gonna ask about nuclear. I mean, nuclear is a huge focus of our organization, just because we've looked historically at countries that have decarbonized literally their entire economy in less than a decade, like France or Sweden. South Korea didn't go the whole way, but they had tremendous build out. And by the way, South Korea is a great example of a development. It was developing at the time, dirt poor, built nuclear, became a thriving economy based off of just cheap and available energy. We love the opportunity around nuclear. Have you seen anything happening there? And then this was last on your list, is there reason it's last on your list or-

Jake Levine
No, in many cases nuclear feels like it's first on the list, particularly- first of all, the Biden administration is really excited about the possibility for innovation in nuclear. From what we hear from industry and from long-time authoritative businesses in the space, there's a real promise to the availability of small modular reactors really sort of having their breakout moment. I think we've been hearing that for a long time. But it feels like there are real demonstration projects that have been up and running. They've had the benefit of working in markets where there are key regulatory frameworks around energy and also nuclear safety and security, which are important considerations, particularly in the markets where we're working. But I'll tell you, we have to do- so DFC has a mandate under the Energy Security and Diversification Act - which is a bill essentially designed to help Eastern Europe achieve energy security, with respect particularly to the influence of Russian gas, but also just generally - and we talked to a lot of partners and allies in the region who really are super invested in nuclear, both conventional and SMR. And I think that it's a really important part of their pathway to energy security and the global pathway to decarbonisation. We want to be a big part of that and we're looking at opportunities in Poland and Romania, elsewhere in the region. And there's also this emerging sort of narrative, at least from my perspective, new for me, but around the promise that nuclear has to specifically decarbonize in coal contexts where you can take advantage of the existing grid infrastructure, the interconnection, the transmission, to be able to transition from heavy coal fire generation assets to nuclear and especially SMR.

Bret Kugelmass
And district heating, too. I mean, you got a lot of these countries, especially in the colder regions in the regions that you're talking about, that have huge district heating networks. And it's three times harder for the renewables to produce heat as it is, let's say for nuclear to produce heat, just because nuclear starts off as heat before it becomes electricity. I should put it the other way around. It's three times easier for nuclear to do it. That's something else we've been looking into if you really want to decarbonize a lot. Buildings are as big a chunk of carbon emissions as electricity is, and this could just be a huge opportunity to kind of take those emissions off the table. Maybe that's something else that your team can kind of peek at as well, district heating opportunities.

Jake Levine
Yeah, absolutely. District heating and also district heating of water, hot water, are two areas where, not only do we feel like there's a big opportunity for decarbonisation, but these are big public health opportunities, because when you look at the coal, generally the coal fired generation, say in a place like Ulaanbaatar, where the air quality is just horrific and that the impacts of that on vulnerable populations, children's health, it's massive.

Bret Kugelmass
I could not agree more. We're gonna wrap up soon, but I just wanted to ask, you want to go over one quick thing, and then I'll let you kind of just have the final note wherever you want to take it. The one quick thing is regions of interest for you. You mentioned Eastern Europe. Is that considered developing enough? Or are there certain countries- what is like the range of developing that you want to play in?

Jake Levine
Actually, Eastern Europe is not a good example, because the European Energy Security and Diversification Act actually gives us a bit of a carve out from our original mandate under the Build Act, which is to invest in low and low-to-middle income countries that there are a lot of demands on DFC's time and resources and a big one is national security, where there are opportunities to really provide meaningful energy security and national security investments. That's the type of scenario where we would sort of stray from our mission, from the development mission, I would say. But the main focus is development and that means low income and low-to-middle income. And unfortunately, there is no shortage of regions around the world where that is incredibly critical. We're doing a lot of work in Africa, especially Sub Saharan Africa, Latin America, and the Caribbean accounts for roughly a third of our portfolio, and then we're really focused on East Asia and South Asia.

Bret Kugelmass
Quick question, does the country itself have to be low income? Or could the region within the country- could it be like a middle income country-

Jake Levine
It's a really good question. It's so on point for some of the discussions that we have internally, because the way that we do our country eligibility is based on the country rating, but your comment, it reflects this fact that the country rating is sort of a blunt instrument to be assessing something like low income, because of course, there are regions- take an upper middle income country like Mexico. We want to be doing projects in southern Mexico, which is very poor and where there are opportunities to be working on alleviating some of the root causes of migration in the northern triangle, so it is more nuanced and the DFC doesn't take a one size fits all approach, and we look at opportunities regionally too, but as a starting point we do use this sort of country by country rating.

Bret Kugelmass
Got it, I'm gonna let you have the last note, because we're low on time. Anything that you think is critical to leave our audience with or just an inspirational message?

Jake Levine
I want to say one more thing, because I was attempting to get out sort of a handful of goals and there's one more which is really important and I think also follows from our discussion on where do we focus. That is to acknowledge that, in the world of climate investing, globally, everybody has done a bad job - including the United States - of investing in adaptation and resilience.

Bret Kugelmass
Hmm, good point.

Jake Levine
And we are very focused as an administration on dramatically increasing our ability to invest in adaptation, because we know that the climate impacts are here and that they are dramatically worse and more difficult to cope with in places that are low income and developing and don't have the resources to deal with them. These are, of course, places that are historically least responsible for contributing to the climate crisis, so it's a big part of what we're going to be doing. It's really hard. It's difficult to develop financing structures for adaptation projects, in many cases, because unlike a power project in the energy sector, there isn't a clear revenue model, so it's harder to find financing models. But it's something that we're really focused on and I'd be grateful for the hive mind of the podcast to help us figure that out. That was the last point I wanted to make, so I really appreciate it. It's really fun to join you and nice to have a chance to take a break from the grind and reflect on the work that we're doing.

Bret Kugelmass
Jake Levine, everybody.

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