In this episode of In Our Hands, Ramanan Raghavendran speaks with Lucas Joppa, Chief Sustainability Officer at Haveli Investments. They discuss his journey from environmental scientist to Microsoft’s first Chief Environmental Officer and transition to private equity. They explore the significance of sustainability in investments, the push for net-zero solutions, and the changing landscape of sustainable investing.
Time stamps and the full transcript are below. This episode is also available on Apple Podcasts and Spotify.
In Our Hands is a production of Amasia. Follow these links for more about our firm, the Amasia blog, our climate fiction podcast, and Ramanan’s blog.
Show Notes
02:22 Sustainability in Private Equity
08:30 The Role of Technology in Sustainability
11:28 Innovative Solutions for Net Zero
15:27 AI's Impact on Energy Consumption
23:32 The Future of Sustainability and Investment
26:46 Looking Ahead: 50 Years into the Future
Lucas (00:00) You could look at this and you could say one of two things. All of this electricity consumption is bad, or electricity consumption is good as long as we are consuming the right kinds of electricity.
Ramanan (00:13) Welcome to In Our Hands, a podcast about the challenges and opportunities presented by the climate crisis. Each episode features a new thinker at the front lines of the battle to save our planet. Join us as we delve into the complexities of this global challenge and seek actionable ways to build a sustainable future.
Welcome, everybody. I'm speaking today with Dr. Lucas Joppa, who is the Chief Sustainability Officer at Haveli Investments. He is recognized for his expertise in environmental science and data science and has been a global voice for sustainability in the tech industry. He was Microsoft's first Chief Environmental Officer and led the development and execution of Microsoft's sustainability strategy across its worldwide business, including ambitious goals to become carbon-negative by 2030 and achieve zero waste. Lucas, thank you for being here. Could you just talk us through your life and career? You began on an academic track, and you're now in a very different spot and path. How did this happen?
Lucas (01:23) Oh man, I wish I knew. I definitely am not going to bore you with my whole life and career, but yeah, I'm an environmental scientist by training. That's what I've always wanted to be. I just want to figure out kind of how the natural world works. I got really interested in trying to figure that out by using the tools of our kind of modern age. And that's really computing and technology writ large and ended up at Microsoft, where I was in Microsoft research.
Really blue sky kind of mandate, think 50 years out into the future at the intersection of environmental and computer science. And then left research to go become first the chief environmental scientist for the company and then the first chief environmental officer for the company. And then about two and a half years ago, I guess, I left Microsoft to go help start this new private equity firm, Haveli Investments, which is a technology-focused private equity firm that really focuses on investments in the gaming and e22erprise software space.
Ramanan (02:22) And can we just double-click on that a little bit? You know, Microsoft obviously is this global behemoth brand name all of the above. What led to your feeling like you want to join a much smaller organization, Haveli?
Lucas (02:37) Well, think a few things led me to want to leave Microsoft, and none of them were actually about Microsoft. They were about what was outside of Microsoft. And I think you mentioned two reasons in your question. The first and really the most compelling reason for me to leave was a criticism that I had gotten basically through my whole time at Microsoft, but which didn't really bother me until the end. And that criticism was, well, so what that Microsoft does this, right? Microsoft's big, it's powerful, it has a lot of resources. So the question was always like, well, if what the world needs to do is to normalize net zero, how does a highly abnormal company doing this help us? Right?
I always appreciated that criticism. I didn't discount it at all. But the reason it didn't bother me is because I always felt, well, sure, that's true. But also, if the Microsofts of the world can't do this, then we're in trouble. And so I always saw Microsoft and the big tech companies' actions in this space as an entirely necessary but wholly insufficient criterion for global net-zero success.
Ramanan Right.
Lucas (04:03) And I really wanted to show that. I felt like we'd made a lot of progress. I felt like we were on the path to achieving the sustainability commitments that we had made. And so then I felt like, then I started listening to that criticism a bit more and thinking, okay, maybe it is time to go and show that it's not just, you know, the Microsoft's of the world that can do this, that lots of different companies of different shapes and sizes, at least in the space that I know, which is technology, can do this.
And so that's why the private equity business model was so compelling for me, because you have this portfolio of companies that you help own and operate. And that gives you that operational ability to help influence these companies. At Haveli, we have an ambition to produce the first net-zero portfolio in the history of private equity, and because we're new, we have the fortune of trying to do that from Fund One. And so that was just a really compelling opportunity for me.
Ramanan (05:12) Got it. And I just I just want to double click, you know, we're going to wander all over the place here. I just want to double-click. You know, I am in the principal investment business myself. I'm a VC. I do climate and sustainability investing. And that has one lens on it. Presumably, Haveli is a broad-based tech investor with a portfolio that spans lots of different sectors and geographies. Without naming names, can you, how shall I put this, make it all a little real? You know, how do you in your position help influence how a portfolio company might change behavior or take actins to become more sustainable?
Lucas (05:54) Sure, and it actually starts in, for us, it starts in the deal process when we're looking for, and then looking at companies. We go out and we start by saying, what do we estimate this company's carbon emissions might actually look like? Some of this might be before we've ever even spoken to a management team or anything else. So we start thinking about that.
We include that type of information in our deal making kind of deliberations. I'm a voting member of the investment committee. And so of course, I'm making sure that that's kind of there all the way through. And then once that we've, once we've made the investment, kind of in that 90-day, a hundred-day kind of plan, you know, we're putting our sustainability objectives into our overall kind of value creation thesis. And we're doing the really basic, simple work that everybody has to do.
I think so many people are like, “What's the magic?” You're like, the reality is it is just so boring and so easy. It's really just going and saying, like, let's just focus on the four Rs right now. Record, report, reduce, and remove. It's just, do you know how much carbon you are emitting every year? If not, let's help you. I'm here. I have colleagues inside our firm that can help.
We go and work hand in hand with our portfolio companies just to get a handle on what their full scope one, two, and three emissions actually look like. And then we ensure that they're able to report that to us. We can share that with our LPs, our investors. We share that publicly. I think if you go on our website, you can see our sustainability reports.
And this year, for the first time, we included the emissions of all of our portfolio companies, the first full scope one, two, and three emissions of all portfolio companies. And then we start working with them on, what are the levers that you can pull, data center optimization, efficiency measures, all this kind of stuff, as well as different kind of procurement options. You could be looking at things like sustainable aviation fuel or different types of fuel for going from molecules to electrons for different parts of your facilities operations.
And then it's baking in the cost of carbon removal into annual budget processes. And I don't know, it's not that interesting, quite frankly. I mean, this is what I do. I'm passionate about it. And I don't even find it that interesting.
Ramanan (08:30) Our audience will find it just as you described it. Now, this was not the purpose of my question. It was not to set up a marketing platform for Haveli, but what you're doing is very different, right? You're not a sustainability investor like my firm is, for example. You're also not a firm with ESG sitting over here as kind of a support mechanism. You know, it sounds like the firm’s made a commitment to making this pretty fundamental to your process.
Lucas (08:57) Yeah, I mean, I think that that's a really important point. Like, we are not an impact fund. Like we are, we're an article six fund, you know, in, those relevant regions. Like we're just a fund, you know, out there buying and selling, investing in companies and trying to deliver outstanding returns for our investors. Like this is just part of the way that we see that happening. We have a particular thesis around that. I mean, at the end of the day, we're setting up shop in 2025, let's say. I mean, we're not setting up shop in 2025, but that's when you and I are talking. Let's look at the average maximum lifespan of a private equity fund of seven max 10 years. You're looking at 2035. You just see the pace. Yeah, there's blips and things happening here and there in geopolitics, et cetera.
You just see this inexorable rise of kind of regulatory pressure, stakeholder expectation, consumer desire, et cetera, to see companies making progress on this. And if we want to deliver great companies into the market, whether that's to the public markets, to new sponsors, or through strategic acquisitions, I think it's pretty clear that making sure that your sustainability house in order is just one thing that needs to be checked off in order to deliver the types of things that we want to get. I think it's no different for us than pretty much anything else that we do and go into these companies with. It's just part of what we do with them.
Ramanan (10:37) I got it. And I think it's important for our audience to know that because that is a different thing than many of the other things that get talked about in climate investing or sustainability investing land.
Lucas (10:51) Well, I'll just jump in and just say, think that I hope two years from now, it's not a different thing. I think for too long, sustainability or ESG, which is not a term I've ever really gotten along with super well, has always positioned itself as this other and this special other. And I think that those two things can't be true. Sustainability can't be core to the business, and it's a special add-on. And I'm boring, and so I just like everything to be part of just boring old business.
Ramanan (11:28) Yeah, I'm going to side track, and this wasn't meant to be an Amasia sales pitch either, but we also, effectively, if you look through to our thesis, it's very boring. But let's talk about something exciting for a second. So you've touched lots of, let's call them net zero solutions at Microsoft at Haveli, companies that are coming in and offering various solutions in this instance to your portfolio companies. And I presume you touch hundreds of these a year as they all pitch you. You don't have to name company names. One or two or three sort of ideas that seem especially exciting. What are you excited about this week?
Lucas (12:01) Yeah. Yeah. Well, I'll tell you, mean - man, you could have a whole podcast series on Net Zero Ideas. I think there's things that I'd like to see get more attention. I'd like to see on the kind of energy generation space, I'd like to see SMRs, small modular reactors, get more attention on the fission side. I think fusion's probably getting enough attention, but probably it hasn't for the last 50 years. I think people are probably overhyped about the near term potential. Historically, we've been underestimating the long term potential of breakthroughs in that space. It's this place where I think just pumping a lot more resources into is gonna deliver some rewards.
I love like...In the carbon removal space, I love all of these opportunities to kind of tag on to existing industries. So things like enhanced mineralization, for instance, out of like mining tailings and like just places where you can actually find that win-win, you know, I think is something that I'd like to see a lot more of.
I think stepping back, the thing that I am the most excited about, the reason that I'm probably like a little less jaded than a lot of my peers is, you know, I'm a tech guy and particularly I'm a software guy. And, you know, there's all these famous quotes about, you know, software eating the world, et cetera. But like what that really means is electricity eating the world. Because ultimately what we figured out how to do was create this massive value creation engine with, that's simple. It's like one of the, mean, in reality, it's one of the most complex things we've ever done, but like in theory, it's the most simple thing. It's electrons in, bits flip, and photons out. And the great thing about that is the inputs, electrons, we know how to create with very low to almost no carbon emissions.
We know how to capture almost infinite amounts of energy, whether that's from the sun or the wind or geothermal or, you know, fusion or fission or all these kinds of things. You don't have to think too hard to think about, at least from a generation capacity perspective, a world of infinite, you know, energy from electricity.
And so for me, I look at like this crazy rise of tech, this crazy digital penetration of our global economy and society, and the value that's created out of that, and then all of the opportunity for electrons to replace molecules across our real physical economy. And I just think, what a crazy time to be alive and what a crazy opportunity.
You know, there's lots of investors that are out there kind of investing directly in that. I'm upstream of that. I'm trying to invest in the beneficiaries, the software systems that actually consume those electrons, flip the bits, and spit the photons out.
Ramanan (15:27) So I'm going to take us in a related direction, just building on what you just said. You know, there's software. Software is being transformed now by AI, which I do think is an overused term. It's sort of been around for 50 years in different forms. But this seems to be a moment. And it comes at the cost of huge demand for electricity. Just your stream of consciousness commentary on pros, cons, risks, issues, you know, the obvious ones and maybe some of not so obvious ones as it relates to the planet.
Lucas (15:59) Well, I mean, everybody's worried about AI and its use of electricity. I get the concern, but the simple fact of the matter is there's only ever been one plan that ever really had a hope of working to decarbonize our global economy. If we actually do want to build a net zero world, at the core of it, there's just a four-step algorithm. It's decarbonize the world's electricity grids and then race to digitize or electrify, digitize, and then potentially virtualize as much of our physical economy as we possibly can. That's what everybody says, right? I'm not saying anything crazy there. Maybe on the virtualization side. So, okay, people could quibble with that.
But if that's true, and we still want to see the world grow and prosper and more people do better over longer amounts of time, then that means we've always needed to significantly increase the total amount of electricity that we consume.
Which, people seem to be forgetting, I'm like, well, yeah, as part of that plan, that meant that we were going to have to double, triple, maybe quadruple, who knows the amount of energy, electricity that we're going to have to do, because we're going to grow the total number of things that use electricity. We're gonna switch things from things that don't use electricity to using electricity. We're gonna grow the things that already use electricity. Everything's gonna grow, and it's all going to be driven by electrons.
Ramanan (17:49) And also, by the way, there's three billion people who need to be lifted out of poverty and that's not happening without electricity
Lucas (17:56) Without electricity. so, and so finally, this big demand driver comes. It's called AI right now. Sure, it could have been, you know, four years ago, was called crypto or whatever. Like it doesn't, maybe next year it's AI, maybe it's not. But all these things are, are proof points that digital technology is going to continue to drive the consumption of electricity. So A, that we weren't prepared for it. Shame on us, right, as a global society. But then B, as kind of on the sustainability side, that we're not embracing the opportunity, I think is difficult, right? Because You could look at this and you could say one of two things. All of this electricity consumption is bad, or electricity consumption is good as long as we are consuming the right kinds of electricity. Electricity generated from low to no carbon sources.
And I think most people, when they say this consumption is bad, what they really mean is they're worried that this consumption is going to come from non-renewable, high-carbon emitting sources, which is a valid concern, but just say that, right? And then work really hard to make sure that that doesn't become the fruition.
Work really hard to make sure that this unprecedented demand cycle that we are seeing drives unprecedented generation and delivery of the types of electricity that we know we need to transform our global economy. And if we do that, then we will have done the most important thing the world needs us to do in order to build a net zero global economy.
And if we don't, then A, that's really bad, but B, that's kind of, we were gonna have to come to that fork in the road at some point. And so I'd rather, A, come to that fork in the road sooner than later because we are running out of time. And B, I would rather that the people that are driving the demand be those that are the most advanced, the most ambitious, and likely the smartest, or at least the most well-educated on renewable energy.
And so for me, I look at them like, yes, it's kind of scary. All this demand is coming. We're not ready for it. We're not ready for it from a generation. We're not ready from a storage. We're not ready from a distribution perspective. But the demand is coming from companies that have been operating in the renewable energy space for the longest, that have the biggest teams in the world to buy it and to help foster the economy. That have the resources to pay the premium to do it, that have the existential angst about not having access to this electricity, right?
And so that is not me saying, hey, everybody calm down, don't worry, the world's got this. This is just me saying, yeah, you're going into a championship game. You could totally lose, but we have the best team you could possibly put together to play. That doesn't mean we're going to win. That doesn't mean, you know, anything.
Ramanan (21:21) But we didn't know we were gonna win before this too, right?
Lucas (21:27) We’re pretty sure we were gonna lose. I mean, so look, I would much rather if I had to go play in that championship game, I'd much rather have the best players in the world that have been training for this, you know, their whole careers as opposed to just grabbing, you know, a random team, JV team off the bench and telling them to jump in.
And so, yeah, it's highly uncertain. But I mean, when you say things like, transitioning the global economy off of the fundamental element, carbon, that it was predicated upon over a 20-year time horizon, and you can't handle a little existential angst, anxiety, worry, fear, excitement. I don't know. You're probably in the wrong game.
Ramanan (22:20) I could not agree with you more, especially about just the mindset, right? The mindset has to fundamentally be optimistic and positive as it relates to, as you said, playing in the championship. know, you want to be playing in the championship and we all are. So, please, please.
Lucas (22:40) Yeah, yeah. I think, can I just say one thing really quick, which is, I think it's so interesting because the biggest Broadway show of our lifetimes was Hamilton, right? And everybody loves it, and they all sing along to the soundtrack. One of the favorite scenes and favorite songs that so many people have is, "In the Room When It Happens", like the song about wanting being in the room when it happens.
And, people working on sustainability issues in 2025, historically, I mean, you know, if there is a future to write history about is going to look back and say, those people were in the room when it happened. And so, yeah, and so you should be excited. If you wanna be in the room…
Ramanan (23:21) They were in the room. They were in the room. They were in the arena, so to speak.
Lucas (23:30) …you better be excited and you better be ready to be there.
Ramanan (23:32) I'm going to sort of move us towards the end of this, and I have a couple more questions for you. One, we talked about tech, we talked about Haveli. I mean, obviously in your day job, you're running into lots of other investors, private equity firms, venture firms, growth equity firms, occasionally lenders.
What are you hearing or sensing about that whole segment, call it the financial sector, their interest and commitment to some of the things you're trying to do on behalf of Haveli? I mean, how do they respond?
Lucas (24:07) Well, I mean, I think it's as varied as the sector is varied. You know, some firms, you know, are super interested. Some firms are agnostic, and some firms it doesn't align with their investment thesis. And I think that's fine, quite frankly, I think. Look, if we all had the same thesis, there would only be one investment firm, you know. One giant global fund.
Ramanan (24:30) One giant global investment firm!
Lucas (24:36) So I think that that diversity is fine. I don't get bothered by it at all. And so I think what's important is that we're just out there doing what we think is valuable for ourselves and our investors and for the companies that we are stewarding. And may the best fund win.
Ramanan (25:01) Well, last two questions and the first one is tricky, but to not ask it would be tone deaf. So I'm going to ask it, which is, you know, there's been a change in the administration, and the new administration, and this is a neutral statement, has a different view of the climate and sustainability issue than the last one did. Does that affect your life in any way?
Lucas (25:20) Well, I mean, it affects my life in the sense that I would say a lot of my peers, I think, are struggling to figure out how to get their jobs done in this new world order. But at the end of the day, I just think, I don't know if the race has already started, the cat's out of the bag. I don't know the right analogy or metaphor or whatever. But at some point, it's just, I really am focused on kind of the electrification of our global society, the decarbonization of that electrification, and then the consumption of those electrons and what that consumption is used for.
And for me, I just think the unit economics are so clear. It's just...Look, there's different ways governments can act. They can do subsidies, can do tariffs, they can do whatever they want, right? And businesses will adapt around that. And I think long-term, what we've seen, both here in the United States as well as internationally, like, again, like I said, there's these blips, there's whatever, but long-term, the thing that makes the most unit economic sense for business is generally where we start going. I just, you know, maybe we'll go in the right direction a little bit slower, a little bit faster, but like the directionality, I don’t really question.
Ramanan (26:46) Thank you for that. Okay, last question. Get your crystal ball out. You know, you've said your role in prior commentaries, you've said your role a2 Microsoft involved looking 50 years into the future. So give us a little crystal ball. What does the world look like in 50 years? Can you just say it here for all time so that it’s time capsule day, open in 50 years, they say “Lucas got it right.”
Lucas (27:10) Well, I will tell you, all I've learned by having jobs that tell me to look that far out is that it's impossible to do it. Because what you learn is that the world moves so fast. The world moves so fast. I think, you know, it's often attributed to Bill Gates. I don't know if he actually said it or not, but this whole, you the world always wildly underestimates what it can do or overestimates what it can do in a year and wildly underestimates what it can do in 10. That's what I have learned in my entire career. Like the things that you're like so excited about, you think are gonna change the world in six months, you're gonna put it on your next performance review, you know, they kind of never work out. But then you look back 10 years later and you're like, oh my gosh, we are so much further than I ever dreamed we would be.
And so that's kind of like people ask me where my hope comes in all this and I'm like, well, I don't know. I don't really know if I have hope or not. Like, I just am doing stuff. But if my hope comes from anywhere, it comes from my experience looking back over five and 10-year increments and just every single time thinking, Whoa. Like, I cannot believe that happened. That's crazy. And so I just have to assume that that's going to continue.
Ramanan (28:37) You make a really interesting point, you know, as I think of now, you know, that you said it the way you said it. I think about the last 10 years, and I wonder, you know because things happen at an incremental pace in some respects, and we just get used to the world changing around us. But if I were sitting here in 2015 and came back at a point in time, you know, 2020 and then 2025, I would see this enormous shift in our society, right? Everything from how we travel to what we do and what we eat.
Lucas (29:09) I think it’s absolutely crazy. The thing that I always go back to in my mind to kind of level set what can happen in a lifetime. And I'm not old. I mean, I'm feeling old, but I'm not that old. But there are more than twice as many people on the planet today than when I was born. I don't feel that old, right? And you're like, literally, we have doubled the human population. So I just use that as like when I'm like, man, it's feeling a little more crowded. You're like, yeah, it literally is.
Ramanan (29:45) It completely is. That is true in essentially every country in the world.
Lucas (29:52) Yeah. But if you think about where birth rates are going, 50 years from now, we are, if current demographic trends hold true, we are headed in exactly the opposite direction. Most of the developed economies across the world are very close to, if not below, replacement rates, et cetera. And so these are just really, really, really core questions for what the world needs to, like, that are gonna play out in our lifetimes. I think the way I always think about it is, you know, if you take a basic economics course, they're gonna tell you that, you know, economists think about these four factors of production, land, labor, capital, and entrepreneurship.
And basically, in our lifetimes, all four things have fundamentally changed. Land was treated as this infinite resource that could be totally externalized farm economy. Now we are literally paying, you know, we borrowed from the environmental future to, you know, pay for our economic present. Those debts are coming due. We've got to figure that out or literally physical chemical changes are going to happen. Labor was also treated to be basically infinite, you know, through population growth.
That's fundamentally changing and will look completely different within the next 50 years. Capital went from kind of the steam engine to software and the digitization of our economies. And then entrepreneurship was fundamentally changed by the distribution of land, labor, and how capital changed.
And so you think like, wow, 50 years from now, we are either going to have figured out how to leverage this new form of capital called software with AI, whatever, right? But like this new form of digital capital to pick up the slack for failing land and slowing labor, or we're not. And so it's either gonna be unbelievably cool or pretty bad. And I think if you open up the time capsule in 50 years and you allow me to take those two positions, it's going to be really hard for me to be wrong.
Ramanan (32:21) I love it. We're gonna wrap up here. Lucas, I wanna thank you. You're a very busy person, and you made time for a little fun on the side here with us. I wish you the very best at Haveli. Stay in touch and come back on when you have more time.
Lucas (32:35) Thanks so much, appreciate the conversation.
Ramanan (32:42) Thank you for listening. Please email us at climate@amasia.vc with any suggestions or ideas and visit inourhands.earth for the full transcript of this podcast and other information.
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