Building Digital Infrastructure for Climate Action with Allen Fan

Speaker A: And um, I don't think anyone really started in the carbon industry. I was pretty burnt out at my last job as well. My first couple of jobs was at big four, initially audit at EY and then consulting at PwC. Yeah, the big one is obviously DMRV, basically digitizing the entire monitoring, reporting, verification purpose process and hopefully streamlining what used to be a 6 to 36 month process down to hopefully a matter of weeks.

Speaker B: Today on Survey and Beyond, we are joined by Alan Fan, co founder of Carbon hq. With a background in auditing, consulting, venture capital and carbon project finance, Alan is here to show us how better data systems can improve transparency, strengthen trust in carbon markets and help scale climate action globally. Welcome Allan, to the Survey and Beyond podcast.

Speaker A: Thank you Baro, for having me.

Speaker B: So we are going to dive into the carbon development space today. But before that, before explaining what that is and providing our listeners to some context, I would love to know a uh, bit more about your career journey because I know you didn't start originally in this industry. So just let us know, how did you end up here?

Speaker A: Yeah, absolutely. And um, I don't think anyone really started in the car industry. That's one of the things I love about this industry is people really start into it from all walks of life. So for me, I'm originally from China. I moved to New Zealand with my parents when I was a teenager and typical Asian, like family household dynamic, I had a very limited choice in terms of career options. So both of my parents were accountants and it was basically decided from a very early young age that I was going to take over the family trade and become an accountant. So that's what I end up studying at university and what I ended up doing after leaving. So my first couple of jobs was at big four, initially audit at EY and then consulting at PwC. And then it was really in my spare time that I got really interested in the entrepreneurial scene and eventually found myself working at a venture capital fund in New Zealand. And it was there that I always wanted to kind of build a company for my own. I was working with a lot of aspirational founders, but I didn't find a problem that I was really passionate about solving myself. And eventually I moved from New Zealand to Australia back in 2020 or 2021 and I needed a new job. So basically I came across this job ad on LinkedIn. It was for, uh, project finance role at a carbon project developer for a clean cooking carbon project developer. And at that time I really didn't know anything about Clean cooking about carbon industry. And quite frankly the company looked a bit odd because only had one person in Australia I thought might have been a scam or something and all of the team were based in Africa, based in India and the us so very typical kind of project developer setup that I know now. But at the time it was really, really strange. But I interviewed and got to know more about the carbon industry and became very interested in this space and that's how I got into this industry.

Speaker B: Yeah, what a nice surprise. Thankfully you are a risk taker and you went ahead with that job opportunity. That's awesome. And now you walked us through your journey and so we can start talking about the carbon development space for our listeners. For people around the world that never heard about the industry or I have heard about the industry but doesn't really know what it is. Could you briefly explain what are we talking about? So what are you trying to accomplish in this space? What is it?

Speaker A: Yeah, so I guess at a broad level the carbon industry involves using market mechanisms to fund these very impactful climate protecting projects across the world. So typical examples that you see are tree planting, protection of forests and carbon HQ works a lot with cookstove project developers, safe water project developers, et cetera. So the idea is fairly simple. It's that if we as a species for the last couple of hundred years haven't really been taking this external cost of environment and carbon into account into our economic activities, can we actually invent a market mechanism whereby we incentivize the restoring of planet? So that's really the very basic way of it, so that people can get rewarded and get paid for benefiting or protecting or improving them as opposed to destroying them.

Speaker B: And it's a space that it's growing. And in that first company you worked for, from what I know, it started scaling, you were doing a great job, you were finding your passion and it started scaling. But unfortunately I feel like the mechanisms that you had, especially how you managed information, it was not proportionally scaling or it was not at a foundational level that would allow you to scale in an efficient way. Is that true?

Speaker A: That's right. I mean this was back in the very exciting times of the carbon industry, 2020, 2021, fueled by a zero interest rate era when sustainability, climate protection, very sexy. It was very, very popular across investors. So it was a really easy job for us because a lot of investors were very interested. And very quickly our project portfolio grew for the organization that I was working for at the time being Sequest Capital and very quickly we started to face the challenges of growth, of scaling as well, because as part of an investment team, only had I needed to actually walk the investors through the process of getting their money in. But we also had to keep them informed about how the projects are going after that investment is up and running. And that often is the difficult part. So for a carbon project, it's very common where you've got the project activities on the ground, you've got the technical people doing the issuances, sitting in a different part of the world, and also the head office being in an entirely different country. So for me at the time, I had to work very closely with my colleagues in Africa, with my colleagues in India to try to figure out what was going on. And at the same time, all of that data was collected and being managed in Excel as well. So it was really, really painful just to get a holistic understanding of how we're performing on the carbon project. I remember the operations team on the ground would have this one Excel spreadsheet and then the technical team would have a different Excel spreadsheet and the sales team would have a different Excel spreadsheet. And it was my job at the end of the month to tie all of these things together to figure out what is actually happening. So it was at that point when the market was still really, really, I guess, at a very good place, at a very exciting place, when I thought to myself, hey, this industry is truly going to scale and reach the climate impact that it's aiming for. Then carbon project developers also need to scale, and the way that they're working also needs to scale and be more professional as well. So that's when I really thought to myself about, okay, is there a space to create a solution here that helps carbon project developers run their processes more professionally and also, at the end of the day, help drive efficiency and project integrity throughout the entire industry.

Speaker B: So that's when you made the decision to found Carbon hq.

Speaker A: That's right. I mean, I was pretty burnt out at my last job as well, so I was looking for an escape. But basically combined with my previous passion of being an entrepreneur, I had finally felt that, okay, I found my calling, I found my purpose. This is what I was kind of destined to do. I was being put through the experiences of working within a carbon project developer so I can actually work on this problem as a founder, as an entrepreneur. And I felt that is going to give me enough, let's say, like, resilience and commitment to, like, actually stand behind a company.

Speaker B: Yeah, that makes a lot of sense. And at Carbon HQ you mentioned that you are lifting carbon projects out of offline documents. So I think this might relate to what you were mentioning. You had a lot of different spreadsheets, a lot of different PDFs, so how are you changing that now? How are you making the process more efficient for everyone?

Speaker A: So I guess before covering how we're doing things, let's talk about how project developers are currently doing things or how they were doing things without Carbon hq. So in the old world, data about carbon projects would be collected using a data collection tool like Survey CTO or Kobo Toolbox, and then it would basically go into Excel after that, and people would manually clean it up or like identify errors and make changes to the data offline. And then basically a whole bunch of numbers and calculations would be performed on the data that is collected to actually derive the technical parameters and, and the numbers for their carbon credit verification purposes. And kind of these numbers would be then turned into Excel workbooks, PDF reports, monitoring reports, and then sent to, uh, vvbs and sent to standard bodies. So by the time that standard bodies receive the information, it's all in offline, like kind of unstructured Data. They're receiving PDFs and they have to then manually go through that data to perform their verification workflow. Which means it takes a super long time to actually issue the credits. I think during the height of the industry cycle was taking the standard bodies anywhere between six to almost 36 months to issue credits. And again, that's also due to a lot of the problems that the project developers have in their data. But imagine if you were running a business and you had to wait three years to actually receive the product that you want to sell. Obviously that's a huge burden on your cash flow, that's a huge burden on your working capital. And at the end of the day, that's going to require you to rely more on outside investment to keep the project up running. And what does that do? That just means you need to issue more credits to pay back the investors. What does that do? That just means all of a sudden project developers are pressured to issue as many credits as they possibly can. And that is really, I think, the core driver of some of these scandals that we've seen in the market over last few years. So how are we doing things? Uh, basically we see the path forward for this industry being automated, being digital, being really, really efficient. But then we also realize for that to happen, that whole digitization effort needs to start with carbon project developers, where the data is collected, not when it gets to standard bodies. So we took a really good look at how project developers were working at the time and we decided that we're going to give project developers a very native digital tool that is built for how they work so they can bring through their data collection software integrated with Karma hq and we automatically structure that data across different sources across different forms. So they, as opposed to working with half a dozen of different data structures with different names now they're only working with one consistent data structure from the get go. Sounds simple, but it's actually something that a lot of project developers are struggling with. And then from there we look at, okay, what does project developers need to do next? It's actually checking the data at a scalable level, automating that and identifying any issues with their data before it uh, gets to dvbs, before it gets to standard boxes so that there are no issues and there's no back and forth when it gets to those organizations. So our product has a whole bunch of validation features that helps project developers to identify these things. And right now what we're building is actually the DMRV part, the credit calculation engine, so that project developers can actually plug the data that they've collected into a methodology aligned calculation engine to actually produce these outputs for verification purposes. And that's hopefully going to be shared directly with the standard bodies like Gold Standard and vera through APIs. So hopefully they can then run automated processes on their end and uh, really, really cut down how long it takes to issue credits and hopefully once credits are issued now it's tied directly to the data that's underlying that's supporting that claim of a carbon credit reduction or removal and really increasing the transparency and the quality of carbon credits asset class.

Speaker B: Absolutely. And I think a lot of people might not be aware of how data heavy these projects just mentioned. So many different data processes, different people involved, uh, different stages. And I think this is important for this discussion where we are talking both about data collection. But I also want to talk with you about the data quality portion. You already were mentioning about the verification rules that you are applying. So in practice my understanding is that you need a data collection process, one for the DMRV that you mentioned, which is the digital measurement, reporting and verification process to calculate the credits. But you also need to have in a way a CRM M because you are selling products to people. So you have these two distinct data, um, processes. Is my understanding correct? In a way, yeah.

Speaker A: I mean in a way it is correct, but at the End of the day, it's the same dataset for project developers. I mean, they might be collecting data, uh, different ways. Initially, it might be, okay, they're saying that they're selling a stove. So, okay, I'm, um, recording information about the cell. But what a lot of project developers do not realize is that their product is actually the carbon credit. It's not the stove that they're selling because that's not where they're driving most of the economic value. So to your point, there is now a lot of different data being collected for a carbon project, if you break it down. So there might be this kind of cells like CRN type of information that is being collected when the distribution is made. But now, increasingly these days, there's also incorporation of sensor data of how these stoves or, uh, how the carbon project is actually performing in real time. And then subsequently you also have these monitoring surveys as well, whether it's for SDGs or whether it's for just ongoing measurement of the carbon project's effectiveness. So it can very easily expand in a way where for a single carbon project, you've got three or four different data sources, and that is before you even consider the different partners you may have running a carbon project. So carbon, uh, project developer may have two or three or even half a dozen of partners that they work with who individually bring their own data systems to the mix. And that just expands the complexity dramatically. So one of the things that Karna HQ has really done this year is building a super flexible data ingestion engine so that it plugs into a lot of these APIs of the popular data, uh, collection tools. It plugs into PayGo software like Rupiah, for example. And now people can actually bring their sensor data onto Kappa HQ as well, and from there basically glue all of these different records together into a single report to create a holistic view of their carbon project.

Speaker B: And I wanted to ask you a few questions about data quality, because I feel like in this space, carbon credits, they need to be credible. You need to have a very thorough process to generate these carbon credits. So data quality is extremely important. And I imagine, at least my assumption is just by building that digital infrastructure, you are already minimizing a lot of potential errors. You are already making a huge effort in terms of data quality. But what are other data quality risks that you see in the space and how are you managing those?

Speaker A: So data quality, uh, is honestly the most important thing when it comes to carbon projects, because at the end of the day, carbon is just data. So I think there has been a great article written about the type of growth for carbon credits is not something that you can touch, it's not something that you can experience, it's something that you have to prove to all of this data that you are collecting. So data quality is the carbon credit quality. There's no other way to put it. So what we're seeing is a lot of project developers in recent years are starting to realize this as well. There hasn't really been kind of a common understanding in the past, but because of where the market is going, because of what buyers are demanding, because of all of the unfortunately like scandals that happened in the market over the last couple of years, project developers are really, really starting to realize this, which is fantastic. So what are some of the common challenges that we see with data quality? A lot of the times they're like just super basic things, like having consistent names for the data that you're collecting, right? Don't call it like serial number in one form, a serial number ID and the other form, and then have like a common unique identifier across all of your forms, just like super basic things. And if you're going to use a data collection software, try to pick a really good one and try to leverage all of the capabilities that it's offering. So Survey CTO is a very popular one across a lot of our professional project developers. And it's also like a really good sign where they're using Survey CTL because we know that they're treating data collection very, very seriously because of how capable and expandable the product is. But what a lot of people don't realize is that a lot of these data collection tools have very capable features that might be difficult to implement, but once you implement them, it's going to prevent poor data from entering the system from the get go, which is much easier compared to having bad data entering and try to do something about it afterwards. So my advice on that is just to actually sort out the basics.

Speaker B: That's a really great advice. And just the unique identifier is such a, uh, good advice for any industry, any data collection process. So I really love that. Now looking back from when you began working in this space and where you are right now, how you are handling and managing projects, what has been most surprising to you? Because I imagine that you are seeing such a change in how you are managing and collecting the data. So do you have any examples or stories or anything that was really surprising to you?

Speaker A: I think what has been really surprising one specifically about the data is the number of different data sources, ah, project developers need to work with. There's so many and I mentioned when they work with a lot of different partners, that just kind of compounds things even further. Two, how manual it is. The processes are just like super manual, but a lot of the times people are too busy to seek for help as well because they're drowning in the um, manual process. That is the problem that should be solved and itself. I guess more generally I've just been impressed or surprised by how resilient people are in this sector, not just in the carbon space, but in the more broader, uh, development space as well. Things haven't been easy in the last two to three years, but I see a lot of people pushing through because they really believe in the work that they're doing. And that just gives me a lot of inspiration to uh, push through with the work that I'm doing as well.

Speaker B: Looking at how carbon project developers are using Carbon HQ and how they are automating things, what's something you can share that can inspire others that are still in manual processes to shift? I don't know if you have any practical examples or things that you have seen changing the work lives of people.

Speaker A: Absolutely. I mean there's been so many and it's not a magical process, it is a software that people need to learn how to use and implement as well. So there is a bit of work involved. But for the people that have really put in the work to embrace it, it's really changed how they approach data or uh, like how they operate on data for their carbon projects. So for one of our organizations where we've replaced their salesforce with Carbon hq, they've been able to basically completely automate their data checking processes, which used to be all manual. And they operate with like millions of cookstoves across different countries and Africa as well. So I can't even imagine what that manual process looked like. And then since then this kind of stays with me and our team as well. Was just like a comment from one of their product managers when they said kyber HQ is kind of now like the heart of their operations. And that's just given us so much encouragement about the work that we're doing because we're seeing how the work that we're doing is helping people with their work, which is creating really, really meaningful impact on the ground, whether it's climate or whether it's people's livelihoods. And another example, less related to data, but more related to the carbon credit side is people have been using Carbon HQ to, uh, kind of forecast and manage their carbon credit sales operation as well. It's not our bread and butter, but it's something that we do as well. Because at the end of the day, you need to turn data into carbon credits and then sell the carbon credits. So for that, again, the organization has fully embraced carbon based Q. So a lot of the times when our product is not working, we get these very panicked, angry messages about what is happening. Why is this not working? And the other angle is that they're fully relying on our product for something that is very important to them. So we don't take that responsibility lightly as well. And it's been great to see how our software is able to help them with streamlining carbon credit sales as well.

Speaker B: That's quite rewarding. I can relate to that. I see that you're also a member of the Climate Action Data Trust. Can you just briefly mention what this is?

Speaker A: Yeah, so I'm also a member of a couple of these industry organizations that focus on, I guess, aligning of data structures or practices in the carbon industry. So another one that I'm part of is the Carbon Data Open Protocol, which is an initiative by the guys at Silvera and rmi. Unfortunately, I'm not nearly as involved as I should be with these initiatives, but I think they're incredibly valuable initiatives that eventually is going to benefit people like Karna HQ significantly. Because right now we're super busy and got our hands tied with cleaning up the mess within the project developer at an internal level. And then once eventually that work is hopefully done, one day we're going to figure out, okay, how do we actually make this interoperable and allow it to connect to different organizations, allow it to connect to the APIs of ratings agencies of, uh, standard bodies of buyers and investors, and truly that's going to drive the digital infrastructure of this entire industry. So hopefully their work is going to enable that for us down the track. But right now we're consumed with sorting out the mess internally.

Speaker B: Yeah, of course, baby steps.

Speaker A: That's right, baby steps. And it's been four years as well. I mean, before this, I've never stayed at a job for longer than two years or like a year and a half. But for this it just feels like it's four years in and it's just baby steps as you're talking about.

Speaker B: I feel you. So some closing questions for you, Alan. What are you more excited about in this space for the future? Are there any digital trends or anything that you are particularly excited?

Speaker A: Yeah, the big one is obviously DMRV basically digitizing the entire uh, monitoring, reporting, verification, purpose process and hopefully streamlining what used to be uh, a six to 36 month process down to hopefully a matter of weeks. And I believe that's going to fundamentally change the project economics of how these Kadan projects work. We've heard about the mrv, we've talked about the MRV for a very long time, but I think we're still yet to uh, actually get it done. So I'm very excited about actually making this happen.

Speaker B: And the other question is you are not just another person working in the industry, you are a founder of a company that's a very specific and exciting role. Do you have any advice for other people that are already founders or people that want to found a new company? Any inspirational advice?

Speaker A: Just that it's super hard. So if you're thinking that it's going to be easy, probably think twice. It is really, really hard. But it's also super, super rewarding. I think this person that I admire a lot, his name is Naval Ravikant or something, he's uh, a VC investor out of the US I think he says something about once you taste the freedom, it makes a person unemployable and it truly is. So like once you start something, once you get behind it and once you see your product out there and people are using it, it really is like having a baby out there in the world. So it is super rewarding. I think more people should do it because of how easy it is these days with AI. But don't underestimate how much work it is.

Speaker B: And finally, for people interested in this theme in the climate space in digital DMRVs, do you have any resources that you want to share? Any book or an article or anything at all?

Speaker A: So when it comes to dmrv, some of the stuff that I found really interesting one is a report by the guys, the um, modern cooking facility or something me C S. So that one, they basically do an industry report on DMRV and I'll look at how DMRV is kind of defined differently by different people and what are the existing solutions out there. And then I guess if you're interested in kind of this part of digital or carbon credits, always feel free to reach out to me. I'm more than happy to have a conversation as well. I think we'll be starting to post some articles on our website about the work that we're doing about the state of the mrv. Again if you're interested keep, uh, an eye out on those. So comeahq Earth.

Speaker B: Perfect. Thank you so much for all your insights, Alan. It was a pleasure having you in this podcast.

Speaker A: Awesome. Thank you so much, Madhav, for having me. I've, uh, really enjoyed this conversation that

Speaker B: wraps up today's episode with Alan, co founder of CarbonHQ. Today, Alan and I discussed how moving carbon projects away from messy offline spreadsheets protects project cash flows, why data quality is carbon credit quality, and how robust data collection tools stop errors at the frontline, and the exciting future of DMRV to speed up credit insurance timelines from years down to weeks. You can find relevant links in our notes and don't forget to subscribe. Thanks for listening to Survey and Beyond, the Data Collection podcast by Survey CTO. If you want to learn more about how SurveyCTO helps organizations collect reliable, secure and scalable data anywhere in the world, visit www.surveycto.com. and if you are a fan of Survey and Beyond, consider leaving us a rating or review on your favorite podcast app. Your feedback helps more listeners discover these conversations and stay connected to the list. Latest Thinking in Data Collection don't forget to follow us on Apple Podcasts, Spotify, or wherever you get your podcasts so you never miss an episode. On behalf of the entire Survey CTO team, thanks again for joining us and we will see you next time.