Amos Wittenberg: 0:03

Where does that break down? Both in terms of the holdings that are driving it, so which are more risky than others? And at a level below that, what's causing it? Is it that energy costs are changing? Is it that the market for the products that some of these companies are producing is in decline. Is this a direct impact of government policy related to climate change, so a carbon tax for example. Is it a particular raw material cost? That's the sort of information that we're surfacing.

Tom Raftery: 0:31

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Climate Confident podcast. The number one podcast, showcasing best practices in climate emission, reductions and removals. And I'm your host, Tom Raftery. Don't forget to click follow on this podcast in your podcast app of choice, to be sure you don't miss any episodes. Hi everyone. Welcome to episode 128 of the Climate Confident Podcast. My name is Tom Rry, and before we kick off today's show, I want to take a moment to express my gratitude to all of our amazing supporters. Your supporters has been instrumental in keeping the podcast going, and I am really grateful for each and every one of you. If you're not already a supporter, I'd like to encourage you to consider joining our community of like-minded individuals who are passionate about climate. Supporting the podcast is easy and affordable with options starting as low as just three euros or dollars. That's less than the cost of a cup of coffee, but your support would make a huge difference in keeping this show going strong. To become a supporter, simply click on the support link in the show notes of this or any episode, or visit tiny url.com/climate pod. Now, without further ado with me on the show today, I have my special guest, Amos. Amos, welcome to the podcast. Would you like to introduce yourself?

Amos Wittenberg: 1:49

Yeah. Good morning. I'm Amos, CEO and founder of Dovetail Finance helping investors drive capital towards the Net Zero transition.

Tom Raftery: 1:58

Okay. Tell us a little bit more about Dovetail Finance. Amos. Let's, let's start with, first of all why did you found Dovetail Finance? What was the, the thinking behind it? What was the kind of genesis? What made you wake up one morning and go, I know what I should do? I sh you get the idea?

Amos Wittenberg: 2:17

Yeah. Good question. I'd been working in the tech sector, I was working at Palantir, the, the, the data company on climate data for a couple of years. In fact with my current co-founder at Dovetail Philip, and so we'd been helping a range of customers work on different types of sustainability issues that were also data issues. For example, how do you use very complex operational data to come to a really good understanding of your emissions across different scopes? That's that sort of thing. And. We came across a potential customer in the asset management space working with different kinds of ESG data, and I think it sparked a bit of a fascination for both of us. I had a background as a financial journalist. My colleague Philip, in sustainability modeling, and we looked at the data that was driving both disclosure of risk for this asset manager from a financial perspective and the allocation of capital. And we thought, you know, from an engineering perspective, I suppose we think we could do better. We, we don't think that this is a particularly coherent way to describe the relationship between these securities and ways in which climate change could play out. And we wonder if as model developers, rather than what we were doing at the time, which was selling software, perhaps we could do something better. I think that sparked a bit of a fascination with the climate tech startup scene more broadly. And I started to explore it in London and in the States. I was living in New York at the time and found it very warm and inclusive and just kind of thrilling, and I felt like I really wanted to be part of it.

Tom Raftery: 3:54

Okay, cool. Cool. And so tell us a little bit more about what Dovetail does.

Amos Wittenberg: 4:01

So, we're a pretty early stage startup. We've been around for about a year at this point. Our product is financial data, financial intelligence, specifically projections of valuations, revenues and costs for public and private equities. And our customers are the capital allocators, which I've been told is very academic term. I really mean investors of different sorts. The theoretically, most of the capital stack at the moment, really active public market investors and, private equity investors. And we are helping those investors think about different ways in which the transition to net zero could play out and what that would mean for asset valuations for their portfolios for the location of different kinds of risk, and also where opportunities might lie to invest proactively in the transition

Tom Raftery: 4:54

So they can use your software to look at their existing portfolio. And also look at potential investments to see, to see what, what, what would they see if they look in at their profor portfolio using your software? Or if they look at a potential investment, what, what are you exposing for them that they might not know already?

Amos Wittenberg: 5:17

So the, the first thing to say is that the the information we're unlocking is scenario analysis. So, So we're not claiming to be able to predict the future, but we can describe a range of plausible futures and work back from those to understand what they would mean for valuations and other core financial performance indicators for different securities. So looking at a portfolio say of publicly traded securities as an investor, you would see what is your overall value at risk under a particular scenario for a particular portfolio. Where does that break down? Both in terms of the holdings that are driving it, so which are more risky than others? And at a level below that, what's causing it? Is it that energy costs are changing? Is it that the market for the products that some of these companies are producing is in decline. Is this di a direct impact of government policy related to climate change? So a carbon tax for example, is it a particular raw material cost? That's the sort of information that we're surfacing.

Tom Raftery: 6:31

Okay. Okay. And where, where are you on the startup scale up kind of, arc of development right now?

Amos Wittenberg: 6:43

We have a beta product, an mvp. We, I sent an email at six 30 yesterday handing over a username and password to a customer for the first time. So we've, we'd been, we'd been driving up to this point, so we'd been demoing and talking people through things. So that, that was a, that was a big moment. Congratulations. Thank you very much. Yeah, we have a, a number of testing partners of different sorts. We're, we have a small team, we just, we're just hiring a couple more people actually on the engineering side. And we've gone through one round of, of venture fundraising, so a pre-seed round. So I, I suppose you could say that we we're still kind of solidly in the, in the r and d early concept development and, and proofpoint stage.

Tom Raftery: 7:24

Okay. And who are potential customers? Is it, you know, are, are we talking the Morgan Stanley's of the world or are we talking mom and pop investment houses or everything all of the above and everything in between.

Amos Wittenberg: 7:40

It, it at the moment, it tends to land somewhere in between. So we've certainly had a lot of conversations with some very large household names and there's interest, but to actually sell into organizations at that scale, takes the kind of time that you don't necessarily have at the very early stages of developing a startup. And you also tend to run into more entrenched interests. So are there. Are there existing contracts with, with large providers doing some of this? Or are there internal teams developing some aspect of it? So the middle of the market, so medium sized public market and PEs tends to be a, a sweet spot for us cuz they are aware of the need. They're very smart investors but they don't necessarily have the budget or the internal resource to be way ahead doing their own thing. And they you can get to the decision maker a little faster and have slightly fewer stakeholders. Sure. Makes sense. I mean, makes, that's basically describing a piece of textbook startup strategy. I would, I would guess It's not surprising about that, that answer.

Tom Raftery: 8:42

Fair, fair enough. Yep, yep, yep. And if I am an investor, What should I be looking for? What kind of things, you know, are you helping me find to, you know, direct me in, in best, best practices and investment in this space?

Amos Wittenberg: 8:59

The perspective that we are providing is really an economics perspective. So I think it might be helpful to take a step back and, and unpick what I mean by the, by the transition that way I'm using that term cuz I'm sure I'll say it about a hundred times in, in this podcast. But the shift of our societies and our economies towards a future state that is sustainable within planetary boundaries, you know, that that shift is inevitable. It's been happening for a long time already. So it's, it's well underway and it's increasingly disruptive to a a very broad range of industries. We obviously don't know how successful that transition's going to be in mitigating the worst effects of, say global warming. So, so we, we have a limited sense of what the end state will look like with regards our success, but we know that there, there will be a transition in one way or another. And since we know that, we can think in quite specific ways about what different transitions might look like from a global economic perspective, and then the economies in different regions and the relationships between them. And really the work we're doing is placing companies into that context. So if I'm a company producing plastics in Europe, for example, how are my suppliers going to change? What's the demand for my products going to look like? What are my costs going to be for things like energy and raw materials? How would I need to invest to transition my infrastructure and my operations? And then finally, how will, how will I be affected by the policy and technology landscape that would need to exist to align with that transition outcome in, in a particular scenario. So it's quite, it's quite different from rating how green the operations of the company are now, or describing the emissions that a company has.

Tom Raftery: 11:05

Of course, of course. But there's a huge amount of unknowns in what you just said there. So, I'm, I'm guessing those scenarios have lots of very large confidence limits bars on the, on the axes.

Amos Wittenberg: 11:25

Yeah. Some signal is better than no signal and models can be wrong and but useful. That's the sort of world in which we're operating in. I suppose. Often what you're really unpicking is, is I guess the relationships between things. So, for this, you know, for this number to be X, what are, what number would have to be y and what does that tell you about the the way an investment might perform or how you could hedge against a particular kind of risk. You can often unpick relationships much more easily than you can predict future states.

Tom Raftery: 11:58

Okay. And if you're looking let, let's say for an investment company you're looking into x, y, z technology company for investment. What, what are you looking for there to decide whether or not it's a good investment? Are you looking for, do they have science-based targets laid out? What are their current emissions? You know, what kind of factors say, yes, this is a good investment or away, run away. Run away.

Amos Wittenberg: 12:28

Yeah. Well, I guess we're already doing a small part of that work. And that is in the end, we're not professional investors, we are trying to build tools, help professional investors. And I guess something that I've discussed with a couple of customers is just how weird companies are cuz companies made up of people and people are weird and, you know, there's a great deal of idiosyncratic consideration you'd want to put into any of those sorts of decisions. But what we'd be saying would be in the realms of what does this company do and how does it do it? And, What might you have missed looking at the future and the assumptions you have about how it'll play out in terms of climate change, what could climate change do to that company's revenues and costs that you haven't considered? If you think about the, the way in which you, make an investment quantitatively in general as an investor, it's already something like that. So you're, you are, you are looking at the future, you're making a set of assumptions about the future. You are discounting the cashflow associated with those assumptions back to the present and saying, based on that calculation, do I think that this company at present is over or undervalued or has strong growth potential, whatever it is. And so what we are laying onto that conducting a relatively similar process from specifically a climate transition perspective is how could this transition scenario affect those future cash flows, and how might you want to modify your assumptions as a result?

Tom Raftery: 13:55

Okay. Okay. For, I mean, the, the amount of data you must be taking in to, you know, feed these models that you're creating must be pretty enormous. Where, where are you sourcing that data. I mean, just to give you some context to where I'm coming from with that question. I read just this morning about a new deforestation law that has been rolled out in the eu which looks to be quite comprehensive, and I hadn't heard anything about it. And suddenly I'm, I'm reading about it this morning. I'm thinking, wow, that's good. I mean, they can, the, the enforcement of it seems quite good as well. It's that companies can be fined up to 4% of their revenues within the EU to comply. And it's, it's up to the companies in the EU to make sure that they are in compliance, not their suppliers. So, you know, and that's just one new bit of legislation. There are many other bits of legislation coming in as well. And you mentioned that those can impact on your customers. And so you're building those kind of things into your scenarios. And so how do you keep on top of all these different regulations and things that are coming through and where are you sourcing your data for, for a lot of those models?

Amos Wittenberg: 15:14

Yeah, it's, it's a great question. I, I think there was bit of our thinking before we founded the company. That was either great observation or completely hubristic. Which is that neither, neither Philip nor I had much experience at all with financial modeling, even really economic modeling. Philip's PhD was in modeling energy systems from a molecular perspective using supercomputers. When I was working as a financial journalist, I was looking at financial crimes, so certainly in the risk space, but, but a relatively distant one. I think the observation that we had is that we were very, very good at developing data infrastructure with a lot of complexity, pulling in a range of different data sources, making them speak to each other meaningfully, and producing information that was actionable, that took this hugely complex landscape and distilled it into a range of decision inputs for a set of users. And I think we felt that we could translate that skillset to a different kind of modeling if we brought the right people in to help us. Cuz what we could do is provide the theory and the engineering and the infrastructure and get the support we needed to bring in the domain knowledge and the understanding of the specific data sources and the specific equations and so on. That so far seems to have worked out all right. You know, we're not limited by having to model things in Excel, for example, where you have very immediate scale constraints and that's, that's pretty helpful for developing models with a lot of complexity. But to answer the questions specifically about the data sources that we work with there are two types on the whole, there's financial information, so information about companies. How they make money, how much where, and what energy sources they use and what their emissions are. Those, those sorts of things. And then there's information about different economies, so, scenarios themselves from the organizations that develop scenarios. Input output, input, output information, excuse me. So information about how global trade flows work, how different areas trade in different things, and to what degree. And then information about specific policies and policy constraints. So we're not yet in a place where we are looking at each new policy and factoring that into the model. It's a plausible future state, but we are looking at things like how have carbon pricing regimes and markets emerged, and what are some of the basic constraints of those markets. So is it plausible, for example, that a carbon price would rise more than 10 or 20% year on year? Is that ever going to be politically viable? And so let's build that constraint in to make sure that the projection that we have for our carbon price in 2040 is at least reasonable within the bounds of those sorts of constraints.

Tom Raftery: 19:22

Okay. Okay. And where do you see a lot of that going? I mean, In Europe, we have a, a mandated reduction of emissions of 55% by 2030. Will we get there? And the Biden administration wants to reduce their emissions 52% by 2030. China has stated aims of its emissions peaking by 2030 and reaching 40% energy from renewables by 2030, both of which aims are going to be well met long before then in fact as it happens. As China generally does set ambitious goals and then blows through them ahead of time. But what about the likes of the EU and the US and the aims and mandates that have been rolled out there?

Amos Wittenberg: 20:13

Yeah, I always thought the the China 2060 piece was a, a brilliant bit of expectation management. Yeah, I lived in Beijing for a year and I think learnt at least a little bit about how that sort of target setting works. And it's very interesting.

Tom Raftery: 20:27

But they've, they've done it every, every five year plan for the last, I don't know how many, the 2015 plan, they reached it in 2014. The 2020 plan they reached it in 2018 and reset ambitious goals again for 2020, which they went, got through in 2019. And now Bloomberg is saying that their 2030 goals will be reached either late this year or early next year. It's like, whoa.

Amos Wittenberg: 20:50

Yeah, I, I would, I would not challenge the, the, the, the Bloomberg prediction. As for European US decarbonization goals. I dunno. I think as, I think it's, I think it's, think it's possible. I, I think the political will increasingly exists and that's very reassuring. I think it's, a little insane that we continue to fund projects of different sorts in, for example, the fossil fuel space that we, we know are not, don't have an economic future. And that runs, that runs counter. There's there's certainly a lot of wanting to have it both ways, I think in both the capital allocation and policy making spheres. One thing that's been quite interesting to us from the Biden administration, particularly the IRA, it's quite a significant modeling challenge, is the subsidization of good behavior versus taxation of bad behavior approach. So, the EU's being quite comfortable introducing different sorts of direct pricing for carbon, whether it's the Border Adjustment Mechanism or the ETS and creating ever interesting and functional markets around them, but essentially it's, it's a tax on bad behavior. Whereas the structure of the IRA is to say we'd rather provide subsidies for things we do want and then bring in the funding for that in a range of different ways, as opposed to increasing the cost of of behaviors we don't want. And modeling out subsidies and tailwinds it turns out it's much harder for large macroeconomic models at least the ones that we're working with the modeling costs because to arrive at a cost you're, you're trying to understand a hypothetical price. What would the equilibrium price, what would the price of this thing need to be for it, for a, for a rational actor to make a decision to do something else? So it's, it's like classic economic question. But the subsidy piece, for some reason, It just plays through in a different way and becomes a little more complicated.

Tom Raftery: 22:53

Fascinating, fascinating. You mentioned as well at the start, you know, how early stage you are in, in the process of, of the startup. How is that going? I mean, this is your first startup. How, how is the whole startup process going? Because I, I've done a couple of startups myself and it's always fun and, and interesting and lots of late nights and weekend work and, you know, how are you going with that? Finding, finding people to work with, finding customers, finding funding, all that kind of stuff. How's that going?

Amos Wittenberg: 23:31

It is intense. It's, it's the most fun thing I've ever done. I think I've really enjoyed leaning into it in every, every possible way. But there's a ratcheting effect that maybe I didn't expect, where the more you do, the, the greater the obligations are that you create for yourself and the more pressure there is a, as a result. I should say, almost didn't do it. I think I talked about this time when I started exploring the climate tech scene startup scene and getting really excited about it. My, my actual take at the start was I'd like to become an investor. So I'd, I'd like to move into, into vc. And I spoke to a couple of people about it, kind of career mentors, basically saying, who'd you know in vc, who can you introduce me to so I can start doing some networking and find myself a job? And one of them a successful entrepreneur himself said don't do it. Investors are basically journalists sitting there on the sidelines watching the action. And I was like, that's a bit rude. I was a journalist myself and I quite liked it, but you, you know, you should be, you should be building first. And the other person made a similar obs observation, but framed it a little more analytically, which is if that's what you really want, why don't you try building something and learning about the world that you're interested in from the other side of the table, and then if it all goes tits up, then perhaps you can use your knowledge to find a job as an investor. But in any case, I, I ignored both of them and kept looking for jobs in, in VC for about three months. Until until like Phillip and I kind of had come to a much stronger formulation and a lot of excitement about the specific idea that became, became Dovetail. I've not answered your question at all there.

Tom Raftery: 25:19

You have to, to an extent, but you know, how's, how's the whole process going of finding employees, finding customers, you know, finding funding? How's all that working out?

Amos Wittenberg: 25:33

I, you are always operating in a market, I guess, and I've learned what that feels like and each of those things are their own kind of market. So we raised our pre-seed round in October, November, which is, you know, one of the lowest points for the, of the VC market for a long time. I mean, climate tech was a little more resilient. Early stage was a little more resilient, but still, we could feel that shift. You know, we, we felt the nature of conversations change as the market cooled off after the summer of 2022 and we saw kind of threads go dead, or people who'd been talking about all the pre-seed investments that they were doing previously suddenly say they were only investing in later stage or post revenue. But we also found people who were excited about what want to build and, raised the investment we needed to kind of push the business forward and, and try and build it. So it worked out In the end. I think we've seen a very similar sort of thing on trying to hire people, which is that depending on who you're trying to hire and when the market's going to feel very different and you'll become very quickly aware of your power or otherwise within it. So we've been hiring a couple of junior software engineering kind of grad roles. And there we've found, we have, you know, 70 applicants for a single role because it's the right time and people are excited about impact tech working in the space they feel they feel good about. And junior software engineering roles can be harder to, to come about. And I think our approach there has been that we felt a certain amount of responsibility as a result. So if we're going to reject people for a role who are early in their career, what can we do in a small way to make the process as constructive and supportive as possible? And then to give feedback when we, when we say no, that's, that's actually helpful and bouys people up rather than it being just another application that didn't work out.

Tom Raftery: 27:34

Right. Okay. Nice, nice, nice. I often reference when I'm giving talks the impact my own father had on my getting into sustainability. He was a university professor. He brought me for, you know, trips out to the countryside most weekends. He inculcated a, a love of nature in me. I went on to study biology in university and do post-grad for that reason. And from what you were telling me, you've had a somewhat similar introduction or inculcation to sustainability.

Amos Wittenberg: 28:18

Yeah. Yeah, absolutely. My my dad is a masorti rabbi, so somewhere between Orthodox and reform. And we grew up in a very strong very active, quite activist in some ways, community north London and my parents have been environmentalists for as long as I can remember in different ways. And it was a strong part of upbringing. They, it always went on family holidays in Scotland in part cuz the dog, or at different points dogs always had to come with. So it was easy to take the train and to go, abroad. And my dad in particular has been, using his pulpit to talk about environmental issues with increasing stringency and urgency for, for, for a significant amount of time. I also think that through my twenties as I was mapping out different steps in my career, it wasn't just about an interest in working on the climate crisis, but a sense that my career had to be meaningful and impactful in one way or another. So, both of my parents have had quite issue driven, impact driven careers in very different ways, and I've felt that I was trying to retell that story to myself in the hope that I've eventually convinced by it in a whole range of different jobs. So when I was writing about financial crime, it was the story of the power of objective journalism to make people aware of issues and change their behavior and unearth criminality. And then working at Palantir, I spent my first couple of years working on the government business. It's a very different world, working with people who'd come out of the armed forces and I was sort of thinking maybe it's supporting the defense of the West in some way or another. It's the impact of my career. I think I was a bit less convinced by that one to be honest, but it was, I think it was a big relief to eventually arrive and, and feel that I could work on and hopefully contribute to solutions in an area that I'd always cared about. I didn't have to work quite so hard to sort of tell the story of why it mattered.

Tom Raftery: 30:44

Good, good. Sounds great. Your dad must be very proud.

Amos Wittenberg: 30:49

I'm very proud of him.

Tom Raftery: 30:51

Good, good, good. Amos, we're coming towards the end of the podcast now. Is there any question I haven't asked that you wish I had or any aspect of this we haven't touched on that you think it's important for people to be aware of?

Amos Wittenberg: 31:04

I think something you must have a very strong sense of is the way that different communities have been growing and emerging around working on climate in different ways. I'd actually be quite interested in your observation of what you've seen of that through interviewing guests on the podcast, and I'd be very happy to talk about my experience of it.

Tom Raftery: 31:27

Absolutely. So I initially approached this because I was working in SAP. I approached it from an enterprise tech background or that kind of area. But of course there's so many other actors and players involved. I've talked to startups like yourself. I've talked to people in the InsureTech space. I've talked to the, the, the most recent episode I published was with Kathy Boughman MacCleod, who is director of the, gonna see if I can get this name right now. I'll, I'll call it ar Arsht Rock found not, not a foundation, it's a Center for Climate Resilience. And, you know, they they work with cities to mitigate the effect of heat, for example. Particularly on people who are the most impacted by heat, who are often the, the poorer and women. And they, they've, they're setting up with cities, they're setting up chief heat officers and things like that. So there, there's that. There's I've, you know, talked to people in all kinds of aspects of, of climate, the investment space as well. It's been fascinating to see how employees are pressuring the companies they work for to be better actors in the space as well. So, yeah, no, I've seen, I've seen it from lots of different perspectives and it's, it's, it's really encouraging to see how customers are pressuring their suppliers how employees are pressuring their employers. How investors are putting pressure on the companies they're investing in, we see activist investors taking stances as well. So, no, it's been, it's been really interesting to see all the different ways and directions that this is being tackled from.

Amos Wittenberg: 33:19

Yeah. And that, that absolutely, that absolutely resonates. And I think that one thing I love right from the start about engaging with other people, working on climate solutions was just how diverse a crowd you've got. Everything in one way or another, I suppose, can be a climate solution. And it encompasses absolutely every, every kind of career in, in every part of in every part of the world. So I really enjoyed meeting such kind of broad group of people with this shared focus.

Tom Raftery: 33:50

Tremendous, tremendous. Amos, if people would like to know more about yourself, or Dovetail or any of the things we discussed on the podcast today, where would you have me direct them?

Amos Wittenberg: 34:01

Take a look at our website, which is dovetail.finance and drop a note through there if you're interested in learning more, seeing a demo of the product or something like that.

Tom Raftery: 34:12

Fantastic. Amos. It's been fascinating. Thanks a million for coming in the podcast today.

Amos Wittenberg: 34:17

No, thank you. It's been great.

Tom Raftery: 34:19

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about the Climate Confident podcast, feel free to drop me an email to Tom raftery@outlook.com. Or message me on LinkedIn or Twitter. If you like the show, please, don't forget to click follow on it in your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks, catch you all next time.