Resilience in the Built Environment: Unlocking the Social License for AI (with Hunter Maats and Ameet Konkar @ Resilience Investments)

Welcome to the Climate Capital Podcast, where we speak with founders tackling the most important and difficult decarbonization challenges in the world. This is a special episode of CCPod featuring a live conversation during San Francisco Climate Week, hosted by RSC, Resilient Systems Capital, our latest firm. Today's episode is led by me, Cynthia Pahujif, where I am a general partner. In this session, we sit down with the resilience investments as they explore the resilience in the built environment, unlocking the social license for AI, and our real estate, energy, and community trust are shaping the future of AI infrastructure deployment.

This event was hosted in partnership with Goodwin. For full disclosure, CCPOD is not investment advice and is intended for informational entertainment purposes only. You should do your own research and make your own independent decisions when continuing centering any investment decision. Climate Capital started 2018 to just invest in the best climate founders in the world.

We've now built a portfolio of over 500 companies, most of which 95% plus are still executing across sectors. What we are doing with RSC is sort of starting a new firm. So, Climate Capital predominantly has been SPDs and microchecks and our currency fund, of which Resilience is a portfolio company of 100K check. Thesis overlap is very high with what Climate Capital does.

And sort of this concept of, you know, when we started Climate Capital was like, hey, climate change is coming, we should do something about it. And Resilience is like, climate change is here, we have to do something about it. And that's really Delta. So with that, I want to welcome our guests here, Hunter and Amit from Resilience, a portfolio company of ours.

The company we invested in last August was going to use AI models to figure out where they could operate as a sort of an acquirer of real estate. Realizing that most real estate companies were not necessarily using climate models to understand kind of climate risk. That is not where we are today. So we'll start there.

Maybe before that, maybe some backgrounds, actually. Maybe you can introduce yourself, Mead, and Hunter. Sure. I'm Mead Konkar.

I have been in clean tech for about 15 years, kind of financial services. Before that, caught the climate bug, moved to the Bay Area, and then have been doing in some form or the other of residential energy for 15 years or so. Right before leaving and helping start Resilience, I was the chief sustainability officer at Airbnb, trying to decarbonize about 10 million homes across the globe, which in some ways kind of formed the fundamental thesis that we are using to start kind of resilience and build what we're building.

So thanks for being here. Hunter Motz. So our other co-founder not represented here, Jay Lipman, co-founded a company called Ethic, 8 billion under management, sustainable asset manager. And while I was there and working with Jay, we became obsessed with what was next.

Public equities are great, but we wanted more impact. And it was clear that it was real estate. It's the world's largest asset class. It's 40% of emissions.

We saw insurers pulling out of Florida and California. And there's other great things about real estate. It's the cornerstone of the American dream. It provides a huge platform for the skilled trades.

And so I think what is true is that we believe that one of the best levers for climate impact is real estate. And it's just a question of where we find the immediate opportunity. Thank you for that. a background perspective.

So you converged originally on sort of that. Now the company is a bigger version of that. So maybe we can talk about what resilience is today. Yeah, I was almost going to wear all birds right now and say we're an AI company and try to do that kind of a pivot, but not that hard.

So resilience basically narrowed in on what is the biggest thing affecting kind of the data center build out today. And it is not actually energy. It is not kind of connection to the grid, but is more of the community permission to build these data centers. So the stat is something like $150 billion worth of data centers are actually stuck because the communities have just said no.

And we think that that's a shame because here we have one of the largest buildouts in energy infrastructure happening in our lifetime. And if we can't connect that back to the people and the residents of these communities and find a way to reduce the cost of electricity, then kind of shame on us. And so what Resilience is doing is we kind of solving two big problems, and I'm sure we'll get into this in detail. But one is what I've seen through kind of the 15 years of my career in kind of residential decarbonization is customer acquisition.

So we have romanticized this view of like knocking on doors and having this kitchen table conversation and talking to the homeowner why like the five or seven year payback is like the best thing since sliced bread and like people don't think that way i don't think that way and so how can we truly scale customer acquisition and we go about it through large portfolios and so institutional owners municipal assets low-income housing so we go at it through actually people who own thousands tens of thousands of homes and we actually finance solar and storage on it to create essentially energy infrastructure.

And on the other end, we started thinking about where can we get the most money from it so that we can reduce the utility bills for these folks. And where it's not net metering, it's cents on a dollar. It's not the capacity markets in PJM or anything like that because they fluctuate a lot. At best, it's a three-year kind of contract, so it's market risk.

But the data centers need a lot of energy. They need a lot of energy during peak time. And they need kind of proof that they're helping the community. And so this kind of taking it, not just selling energy, but selling them the community benefits that they are creating is what's the connection that we're making between the homes where we are putting the infrastructure, energy infrastructure, and where we are selling it to the data center.

So that's what resilience is. Something that was in your email earlier was for this concept of trust. I'd love to hear a little bit more about that as it relates to the problem that exists today and the solution that you are taking to market. Yeah, I mean, if you think about where the data center build out is happening, places like the, you know, they hate this, I hate this, Rust Belt, right?

But historical industrial communities that took real pride in what they built and then through a variety of forces, like, lost that. There's basic trust issues there day one. Like these communities have been promised a lot that hasn't shown up. People haven't delivered for them and everything else.

And then you have, you know, these data centers coming in. The narrative whether it correct or not is a lot of people are taken to build the data center Once it up and running only 20 jobs They see their utility bills going up They don necessarily know why their utility bills are going up They're concerned about water. Bear in mind, you're doing this in the backyard of Flint. It's not like they haven't seen water issues before.

And then you start to compound the noise and everything else. And they start to hear about tax breaks. And understandably, I think, you know, they're like, what's in it for us? Why is our community better off having this thing there?

And they can't see it. And these are longstanding problems with community benefit. Community benefit agreements have been done in real estate for a long time. Banks have Community Reinvestment Act programs.

But the key thing is how and where does the benefit to me and my community show up? And that's what's so powerful about utility bills. Utility bills show up every single month. And so if I'm seeing a discount or even no utility bill, especially for affordable housing, right where energy burden is a huge huge issue that's a real benefit if i'm seeing w-2 employment because now there's a real path to skilled trades and a good life for me and my family that's real community benefit and so the point is it's a community benefit that people can feel and they can see every single month talking about resilience in the built environment there's an aspect of what you're doing which is bringing that resilience to these communities Let me hear more about that.

Obviously, so a lot of the homes that we focus on, they're single family. So it's what's called naturally occurring affordable housing. So people generally focus when they talk about affordable housing, they tend to focus on the 20% that is subsidized for new build. But actually 80% of the affordable homes in this country are naturally occurring affordable housing.

So here's a stat that will make absolutely no sense in California. 25% of homes in this country cost under $200,000. dollars. That's 22 million homes.

So everybody is focused on the gap of 4 million houses that we need to build. That is correct. But there's 22 million homes that are just older single family homes that have deferred maintenance and need to be fixed up. So those buildings, what they need is they need everything that, you know, we could dream of from a climate perspective, they need better insulation, where it makes sense to need solar and battery.

And in some cases, they may need the heat pump, right? And so if we really want to think about how we can catalyze making these homes resilient to extreme heat and affordability, while also making the grid resilient, there's your platform. That's your opportunity. Can I just add on to that?

I think just to put things in perspective, when we have gone into these areas, it's like Southeast Michigan and Detroit area and Cleveland, other parts of Midwest, these kind of low-income homes, in many cases, the rent might be 900 bucks, 1,000 bucks, the utility costs are $800 a month. So when people talk about affordability, it is not just your rent and mortgage, but utility costs are becoming a huge part of it. And so when we talk about this and being able to eliminate in some cases or significantly reduce the utility costs, that becomes a big piece.

And then if you now have a 15, 20-year contract of actually reducing the energy bills, can you monetize that in some ways? Can you do the home repair that needs to be done. So it starts opening up a lot of different avenues for like the, the repair of these homes and kind of fixing up these houses and making them more affordable. That really hasn't been available for these areas for a long time.

And the repair of these communities. Yeah. I mean, hearing, you know, if I'm, I'm hearing you're going to make my housing more resilient and you're going to reduce my energy bill. Like what's the catch?

That's it. There is no cap. Well, let's talk about data centers. So, so on the other side of this, right, is data centers.

You know, you had some statistics around how much pushback they're getting. Maybe you can share more about sort of what the sentiment is and sort of the friction in that conversation. I mean, you know, there's not like one sentiment, right? Like communities are varied and they have different opinions and everything else.

Right. But let's just talk about the level of pushback. So, you know, Amit has sort of talked about the stats of like, you know, there's hundreds of billions of dollars of data centers that are stuck. But, you know, there was a councilman in Indianapolis that had 13 shots fired into his home and no data centers.

So it's really visceral. Like there, it is coming to a place of violence, right? You know, there are moratoriums that are being put in. Maine has obviously passed their ban.

You're looking at Ohio potentially passing a constitutional amendment that would put in a moratorium. The pushback is very, very real. And I think, you know, that's the thing is that the trust between obviously these data centers and these communities will not be built overnight. But, you know, these communities have dealt with durable challenges.

There are in the Detroit Home Repair Fund, there are 40,000 homes that need home repair. They're probably going to get to 1000. Look, I love Detroit. And part of the reason why I love Detroit is that it is the most innovative ecosystem in this country for urban renewal and for housing innovation and for equity and everything else.

But there's an opportunity there where, you know, when was the last time that Detroit or any of these markets had the opportunity to have bargaining power over the seven largest and most powerful companies in the world? And so if you can broker that deal and you can make it so that everybody wins here. Yeah. So, I mean, let's, let's talk about the math for a single home, right?

So what changes for the resident, the hyperscale on the grid and you you go in and put solar on the roof and yeah so the way we structure it is actually on the on the revenue side we want to strike into something where these hyperscalers have been doing and large scale solar and wind forever which is just in 20 year after agreement why can that construct be repeated at a distributed residential scale if you have 10 000 homes you have five kilowatts of dispatchable capacity per home, that's 50 megawatts of dispatch capacity that you can have dispatched every day at peak time.

Why can there be a 20-year off-take agreement against that? So that's what we are trying to get to, which is just have that certainty and that long-term agreement in place. So that's kind of where the revenue starts coming from. Where that then goes into is like it starts financing the solar and storage, which in itself kind of like takes off 50, 60, 70% of the utility bills, sometimes more.

And then you can actually subsidize the energy bills, especially for the low income housing. So this is where we are playing around with it which is for the lowest income housing we want the utility bills to be zero If you are more workforce housing maybe it is just what you getting from the solar and storage and that like 70 of it If it is higher income housing then you get 50 kind of off of your utility bills. Remember, they're not putting a dime, they're not signing a 20-year agreement with these kind of installers or anything like that.

This is just allow us to come and put this infrastructure on your home, and we give you these savings and utility bills, all funded by the hyperscalers who are seeking kind of the approval of these communities. So it's kind of a win-win situation. You're live right now in Southeast Michigan. So you're actually seeing this play out.

Maybe share a little bit more around what surprised you as you're deploying and what you didn't expect. I mean, I spend a lot of time in Southeast Michigan. I probably go there once a month. And I will tell you that, listen, obviously the Bay Area is one of the most innovative ecosystems across a whole range of areas.

But when it comes to housing and urban renewal, it's Detroit. Like, they are the most innovative ecosystem in this country. And look, obviously, like, I think people have started to hear about Detroit. They started to hear about what Dan Gilbert and the Illiches and some of these other families and the Community Foundation of Southeast Michigan and Kresge and Lisk and on and on and on have been doing.

But, like, the level to which they have wrestled with and wrestled that problem to the ground to figure out all the different tools that are available in terms of financing can't be beat, right? So I think that's the first thing. And I think the other thing that has been really surprising and wonderful is the degree to which there is a lot of the civic spirit that I think we would hope for in this country, where a lot of people will come together to like solve a problem across political lines and everything else.

And so that's why, you know, I think I'm so excited about Southeast Michigan as a place to prove this out is because they have the right culture, the right attitude, the right mindset, the right talents. One thing that I'll just tell you is a very specific thing. When we bought our anchor portfolio and we were walking those homes, on the thermostat, there was a sticker. And it was a sticker that showed when peak time was for energy.

And to me, that sticker is why we do this. Because these folks are having ration their energy and think about these things. And that's not a way for people to live. People should be able to heat and cool their homes and cook their meals and do all that sort of stuff without worrying about that.

And so we can solve that problem for people, right? There's the real impact. I want to go back to the trust thing. You're in the market, you're deploying, what is it taking to build that trust?

Because you are succeeding, right? Where others have failed. How How are you doing that? We are a tribal species.

We have communities. They exist and all that sort of stuff. Detroit is fine without us. Cleveland is fine without us.

They're doing their thing. They have networks. They all know each other. They've worked together for decades and everything else.

So I think the key thing is, look, you can't come in there and say, like, hey, I'm here and I'm going to solve your problems for you. You have to. It's really ecosystem mapping. And then you have to like consistently earn the trust of the key stakeholders.

And so you start to figure out who are the key stakeholders and the trusted people. And look, some of it is stuff that you wouldn't expect. Who in this room knows what a community foundation is? A few folks.

But I'll tell you that six months ago, I didn't know anything about community foundations. But these are really incredible orgs, right? They have a place-based responsibility to one community, whether that's a city or whether that's a region or anything like that. That is their mandate.

And they have been there for decades. And they often serve as sort of like a durable base of trust that transcends political administrations. Administrations come and go and everything else. The community foundation is always there.

And so those are the folks, those are a key ecosystem player that you want to win their trust and you want to work with them. And ultimately, look, your job is to help make the community more effective. If we do our job, when we come into a community, we are the invisible infrastructure layer that connects up what was already there. We're not doing anything new.

We're just making the community more effective and achieving the goals that they want to achieve. Just one piece to add, because we get this question all the time, which is like, why can't the hyperscaler, the data center company or someone go in and do this themselves? And I think this is where just as you think about it, if you're given what Hunter just said, if you are a massive company that's coming in and going, we are your friends, we want to help you, that just doesn't work the same way.

And so I think this takes really, really kind of getting into deep in the community, like Hunter is saying, and kind of creating those relationships and almost earning the right to say, let us help you. And I think that's what our view is that this doesn't need to be kind of peanut buttered across a thousand cities or counties across the country. If we do this really right, really deep in 10, 20 cities, we are by far incredibly successful. And then a lot of people can copy this model and do something similar.

But that's kind of the beauty of this, which is you can do this superficially. You have to really develop those deep roots into each and every community we go in. It seems from a gathering that you're why. What's your why?

It is to help these community members. And how is the data centers? I mean, it truly started that way, which is just like we kind of given our roots of like, where can we invest in real estate? And then we were going to put energy infrastructure on top of it.

And we flipped it. But the idea always was that data center becomes like it's this moment where you can actually get the most value for what you're creating. but what you're trying to do is actually help reduce the utility bills for these folks and all everything that we're doing now is ultimately going to set these communities up for success because specifically communities in the great lakes they are receiving communities right like people will migrate there for climate and if you've made sure that folks have affordable energy and if you've made sure that these homes are fixed up and that people have home ownership and that the folks who already live there have skilled trades, then they're in a position to win as people come in.

One of the folks that we work closely with in Southeast Michigan, her line is, a rising tide only raises all ships if you have a boat. And so first and foremost, we need to make sure that folks have a boat. That what NOAA and the skilled trades and all these other things can do I mean I joke that it NOAA arc right But like yeah we got to make sure that folks have a boat And the moment now is obviously the hyperscaler and the data centers but it's also setting them up to win over the long term.

With regards to climate migration, I'm going to just spend a second on that, because I know that's also kind of where you started. How does that factor into just resilience generally or your execution path? Yeah, so I mean, affordability is obviously issue number one, two, and three, right? And so that's showing up for people in housing a lot, showing up in insurance, it's showing up in utilities.

And so, you know, when we look at the rise of the Sunbelt, right, people often think, why do people move to the Sunbelt? It was for the weather. Well, I have some news for you. That's not what the research shows.

There's a classic paper by Ed Glazer and Christina Tobio out of the Kennedy School called Rise of the Sunbelt. And one of the overwhelming factors was housing affordability. People moved because houses were affordable. And then once people start moving, jobs start moving and everything else.

Well, just look at a map of this country. Where is housing affordable today? It is affordable in the Midwest. And then start to think, because this is a room of people and hopefully online who are comfortable having the climate conversation, what's going to happen with insurance?

Well, we're seeing insurance go up in places like Florida and California and everything else. And then you look at what's happened with energy burden. When LIHEAP was built, it was built for winter heating costs in the north. the dominant energy burden now is summer cooling costs in the south so you now have secular macro drivers that are pushing people to the midwest and the great lakes is the only region where every single state had positive population growth last year so that's happening it's going to continue to happen and that's why look obviously like the dominant focus is the energy piece but that's why we're also really excited about the real estate because this real estate is going to perform really, really well.

You retitled this event, Unlocking the Social License for AI. I found that curious because I didn't know how to interpret that. I'm curious to hear what you were thinking. Yeah, I think this is kind of what we started with, which is just everyone focuses on energy and behind the meter, in front of the meter, what kind of energy and path to power and how quickly you can get there.

But I think this whole social license issue has slowly crept up. and really accelerated in the past just a matter of months where data centers are getting basically blocked. Hunter mentioned that councilmen in different cities are getting kind of attacked. I read this one stat that apparently data centers and AI is ranked below unfavorability to ICE, which is tough to achieve.

But I think that's a, it's again, going back to what I said, which is just like we have companies pouring billions of dollars and kind of creating new energy infrastructure. The reason this backlash is there and the social license to operate is not there because all these communities are seeing all this world being created and they're being left behind. And it doesn't have to happen that way. If you look at the amount of money spent and you look at what our model is asking these companies to do and pay for energy, it's all fair market.

It's all kind of you're getting energy at cost that you would get from other sources. And so it's just thinking a little bit about how you can integrate these communities into the answer and the solution you're building for this new AI age, as opposed to just kind of going in and forcing it in and then thinking about this as afterthought, which is where the backlash is happening. So I think this is truly becoming like, I think this is a transformative moment that we are in that I think this is going to play out one way or the other and hopefully, you know, something good comes out of it.

So we've talked about sort of your why the company has started to, you know, take advantage of and then support people in this sort of climate migration. The how, like to close with how big can it really be that, right? So as you execute, when we talk about just energy generation, what are your thoughts as to how many homes we think you can help and families you can help and how much energy you all can power? Yeah, so for every city that we're looking at, if you kind of look at what's available in terms of portfolios of low-income housing, city land bank assets, institutional portfolios, just again, owned portfolios of homes and kind of small multifamily homes, you start getting to truly kind of tens of thousands of homes.

It's not absurd to think about that in any of the cities we have talked about, you can do this on 25, 30, 40,000 homes. Like I said, on average, you think about five kilowatts per home of dispatch capacity. At 10,000 homes, you're at 50 megawatts of capacity. You do this across five, six different cities, you truly are starting to look at a gigawatt of dispatchable capacity.

That is significant above and beyond anything that anyone has done for VPPs or anything like that. Because again, the fundamental problem that all of those folks face is just customer acquisition, which we are solving in a different way. And so we think this can truly be like the next first distributed utility. Once you achieve that gigawatt scale, that's a power plant.

anything like to add is it close yeah but also just say that's not all you're going to get because we have a shortage of 2.2 million people in the skilled trades right we're going off a cliff here we don't you know everybody in this room has tried to get an electrician or a plumber or anything like that it's hard and many of those folks are now in their 50s and they're going to retire so obviously a big part of the conversation around you know ai is sort of national security and how do we compete and everything else, there is another national security issue that is really like, you know, here, right?

Which is when you think about the jobs that are potentially going to get disrupted and the jobs that are potentially going to be durable, we need to build the skilled trades in a very big way to be ready for what's coming across a number of fronts. So I just wouldn't underestimate that opportunity as well, which is an outcome of what we're doing. Amazing. That's all for me.

Thank you both so much. I'm super excited to be on the cat table and support you in the months and years ahead. Thank you to everyone for listening to our conversation with Hunter Mattson and Amit Konkar, Resilience Investments. If you would like to learn more about resilience investments or get involved with the work Climate Capital is doing, you can learn more on our website, climatecapital.

co. Thanks again for listening.