Investing in community – an interview with Franz Hochstrasser

“Every community in the US has a few leaders that want to tackle climate change in an equitable way, we are hoping they will use our tools to become an Originator, and get started,” says Franz Hochstrasser.

Franz Hochstrasser is the CEO and Co-Founder of Raise Green, and New Haven Community Solar. Before getting his Masters at Yale University with a focus on sustainable finance and climate change, he served in the Obama Administration for all 8 years, most recently as a Senior Advisor in the Office of the Special Envoy for Climate Change which helped negotiate the Paris Agreement, the White House Council on Environmental Quality, and the US Department of Agriculture.

We speak about Raise Green and their connections with the Open Climate Collabathon, a new form of event based on a principle of radical collaboration and crowd-development, that calls on everyone to contribute in the development of an open source and collectively owned global climate accounting system, platform and portal.


Sebastian Klemm: How do our children survive the 21st century?

Franz Hochstrasser: From climate fires, to ominous orange skies, to increasingly frequent and more intense hurricanes, droughts and floods, our children will inherit a rapidly warming world, that’s already baking from greenhouse gas emissions over the last century. But while we are the first generation to see the impacts of climate change, we are the last to be able to take meaningful mitigation action, and if we are successful we will begin to see a slowing warming trend and a reversal begin towards the end of our lifetimes.

More of our children will survive in the future if we take bold steps now to cut carbon pollution and prepare for the climate impacts that are already hitting society, and hitting the poorest and most vulnerable first and worst. We want all children to live in societies whose infrastructure was built by concerted and forward-thinking members of our generation so they will have a greater likelihood of survival. Nobody wants to be viewed as a parent that failed to take their children’s future into account.

We all have a role to play in building out community scale resiliency and greenhouse gas mitigation efforts, the question is will we take responsibility for that role?

Sebastian Klemm: Why do you support the Open Climate Collabathon?

Franz Hochstrasser: We are all in this together. Whether its our pipeline of 60+ climate entrepreneurs creating projects across the U.S., our hundreds of investors or thousands of subscribers, Raise Green supports the Open Climate Collaboration because we don’t have time to waste.

Participation in the Collabathon furthers the belief that by collaborating and contributing to build solutions that are of mutual benefit, we can build a more inclusive and responsive society together. And we MUST!

Sebastian Klemm: How have you supported the Collabathon so far? In which of the prompts have you been involved and what have you been co-developing?

Franz Hochstrasser: Matt Moroney and I actually were there with Dr. Martin Wainstein since the inception of the Open Climate Collabathon, and we have been happy to be involved in many different ways since the early stages.

Specifically, we have contributed to Open Solar as founding members of that team. We have also contributed work on accounting frameworks for climate assets with a focus on deploying inclusive finance models for clean energy and climate solutions. We are delighted to remain involved and supportive of Martin as he launches the Open Earth Foundation!


Sebastian Klemm: The Collabathon drives the Open Climate project which aims for a crowd-development that leverages blockchain and other emerging technologies, such as IoT (Internet of Things), big data and machine learning, to the challenge of helping the world keep a transparent accounting system as we strive to achieve the climate targets set in the 2015 Paris Agreement – i.e. maintaining anthropogenic warming below 1.5°C.

Could you explain from your perspective why this project is worth supporting and why sponsorship is important to keep this development movement alive?

Franz Hochstrasser: As part of the U.S. team under the Obama Administration that wrote the President’s Climate Action Plan and negotiated the Paris Agreement, I have deep personal and professional motivations for supporting its successful implementation.

At Raise Green we are focused on empowering communities, especially underserved communities, to create and own the climate solutions that they want and need. We are breaking down barriers to local involvement in the development and ownership of clean energy assets and democratizing investment into climate finance for everyone, and this approach is consistent with the bottom up framework of action codified in the Paris Agreement.

In the Agreement, ultimately it is up to each country to set a climate target (or Nationally Determined Contribution as they are called), and up to each subnational or non-state actor (businesses, schools, non-profits, faith-based organizations, etc.) to implement against those targets by transitioning to lower emissions technologies and practices. So building out a transparent accounting system that documents the reduced carbon pollution from actions taken by local leaders and community members – like Raise Green project Originators – and allows those metrics to be rolled up and reflected at the national and international level is a great way to be clear about how every action counts, and how collectively we can accomplish the goals of the Paris Agreement.

Sebastian Klemm: The Collabathon Wiki describes et.al. “Blockchain applications in the climate space should not try to replace existing climate accounting frameworks but rather build on top of them to drive higher levels of efficiency. Furthermore, the distributed ledger technology space is characterized by a high levels of entrepreneurial spirit and initiatives. If these are to directly compete against each other with a zero-sum mindset, then the capacity for having a unified climate accounting system is reduced. In other words, the world would not benefit from multiple carbon ledger systems that cannot interoperate with one another. The planet’s atmosphere is still a single limited space where all free greenhouse gases reside. Therefore, an open climate system needs the capacity to involve both existing legacy climate registries, platforms and databases, with blockchain based environments that subsequently should interoperate and reconcile records between each other. This is what underpins that effort on how to design and develop the Open Climate platform should focus on the concept of a a platform of platforms (or PoP).”

What possibilities can you envision to maintain this platform of platforms crowd-development by patterns of commoning and crowd-financing at some point, indeed?

Franz Hochstrasser: The Yale openlab, along with a large group of experienced partners, has been running a series of Open Climate Collabathons to build out the platform of platforms in an open source collaborative way.

Once the platform is built out, the maintenance could be managed through a digital autonomous organization, and I know that the Yale Open Labs team is thinking about this exact challenge, since we are too!

Sebastian Klemm: In our interview Dr. Martin Wainstein, founder and lead researcher at the Yale University’s openlab, says: “Currently, intellectual and financial capital is still the primary means for corporate valuation,but more and more we will start realizing this falls short since new companies will showcase value growth and impact through collaboration, open source and a growing network effect from shared purpose.The challenge is to capture this and find creative ways to translate this into financial capital, albeit a more enlightned version of financial capital.”

How does Raise Green showcase value growth and impact through collaboration?

Franz Hochstrasser: The climate crisis is a collective action problem, and the transition towards clean energy will require widespread collaboration and action. Currently we are behind the necessary investment needed to limit global warming to (2 degrees C).

Raise Green provides a method that addresses this issue on both fronts, allowing people from all over to collaborate in starting clean energy projects by using the Originator Engine our beta Software-as-a-Service, while simultaneously increasing the accessibility of project funding and project investing for those who want to join the fight against climate change on our marketplace.

At the end of the day, collaboration is the means from which Raise Green derives value, as projects are only able to take place as long as people want to create and fund projects within their communities.


Sebastian Klemm: Together with your partners at Raise Green you won the Aetna Foundation Prize in 2018 for your plan to aggregate small investmentsto provide equity for finance companies, providing investors a market rate of return while financing projects that provide social andenvironmental benefits.

Why did you found Raise Green? Could you walk us through the value proposition elements at Raise Green?

Franz Hochstrasser: Matt Moroney and I always wanted to create something that addressed the climate crisis, although it took a little while before we arrived and proceeded with the idea of Raise Green. Our first business was focused on using mobile sensors on bikes to deliver air pollution data to better serve communities. We did some thinking and eventually realized, like many others, that we wanted to have a direct way to address climate change.

We believe that the existing mechanisms for individuals to take action on climate change were limited. While bigger companies and nonprofits were and are making strides towards implementing climate solutions, there are a lack of necessary tools for individuals to implement impactful solutions in their communities.

With the Jobs Act and implementation of crowdfunding in 2016, we wanted to create a platform that gave individuals the tools to do just that, create impactful solutions and the community scale.

Our value proposition hinges on two main points. We provide project creators with the tools to create community-scale solar projects through our Originator Program, thereby making an otherwise complicated process as easy as possible.

Then, we list these projects on our crowdfunding portal, ideally funding the projects while ensuring that the profits from the projects are directed to everyday investors like you and me, rather than the traditional capital institutions that might not have funded such community-scale projects.

Sebastian Klemm: Comprised of i.a. the Yale openlab and its Open Solar project, Greentown Labs, the New Haven Community Solar as well as the MIT Digital Currency Initiative: What are the timebased interrelationships in this ecosystem that have helped to establish Raise Green?

Franz Hochstrasser: Raise Green is the byproduct of a missing link in the suite of climate solutions. If I asked you what you could do today about climate change, you might say that you can drive less, bike more, eat less meat, or recycle, and of course you would be right, those things do help. But they fall far short of the level of proportional response that we need to take as humanity if we are going to get anywhere near having the solutions to climate change scale as rapidly as the pace of the problem, so they would fail to meet the need.

After leaving the Obama Administration and finishing the push to get the Paris Agreement entered into force in Fall 2016, I was struck by the need for rapid implementation, and the relative inability for individuals to meaningfully act to those ends.

When I arrived at Yale I met Matt Moroney, who would eventually become my cofounder. We have fostered the idea and built a FINRA and SEC licensed financial firm from scratch, and added amazing financial veterans Megan Schleck, and Jackie Logan as well as a growing team of contractors, collaborators and advisors.

We are powered by people, so relationships are everything.

image © raisegreen.com

Sebastian Klemm: Climate action is more than demanding action from others, it also means taking action ourselves.

How does Raise Green help people to create their own green job? If not only to bring people and projects to your marketplace: How does your Originator Programme revise the paradigm of maximized self-interest and evolve an enlightened global self-interest ushered through Radical Collaboration?

Franz Hochstrasser: I mentioned that we provide the tools for people to start climate solution projects. The official software solution that we offer to do this is our ‘Originator Engine’ use the Beta here, which we co-developed with IBM.

We like to call it the “Turbo-Tax” of climate solution projects, as our idealized end goal is for it to be easier for individuals to start a community solar project than franchise a fast-food joint in their neighborhood. These people are referred to as our ‘Originators’, and originators will receive the profits from their project (akin to a Green Job) over an extended period of time as long as their project is successful.

Originators have the opportunity to become local leaders in their communities, and have the opportunity to rejoice from essentially bettering their community by ushering in clean energy. Not everyone ends up working in the clean energy or climate industry, and not everyone has the opportunity to put solar panels on their roof, but we believe that we incite community collaboration through enabling investment and profits at the community scale.

Sebastian Klemm: Amidst these challenging times and in anticipation of impending recessions in response to the COVID-19 lockdowns:

What opportunities do you see for people to engage in co-creative crowd-developments like the Open Climate Collabathon with regards to the work of the future & the future of work?

Franz Hochstrasser: COVID causing a significant economic reordering as it affects everyone’s lives across the world. In the US this pandemic is already a terrible tragedy, killing more than 200,000 people, and it could have been mostly avoided if Donald Trump had not downplayed the pandemic and put lives at risk by denying science. The lockdown and economic recession has left millions of Americans stuck at home and jobless.

Raise Green gives people the opportunity to become a climate entrepreneur, and be the change that they want to see in the world by creating their own green job and starting a solar project for their community.

Every community in the US has a few leaders that want to tackle climate change in an equitable way, we are hoping they will use our tools to become an Originator, and get started!


Sebastian Klemm: In our interview, Dr. Jemma Green, the CEO of Power Ledger, states: “We are conscious that developing countries are likely to repeat the mistakes of the developed world when it comes to energy, resulting in electricity that is unaffordable for those who are most vulnerable. I am determined to help facilitate renewable energy projects and technology to connect and empower communities. (…) We are creating an energy marketplace where prosumers – those that consume and produce their own energy – receive a better price for their excess energy, and customers without renewables are able to purchase that energy at a better price. This is why we call it the democratization of power. The team and I share a belief that empowering individuals and communities to control the way in which they buy and sell their electricity will help create a power system that is resilient, affordable and clean.”

In which ways does Raise Green democratize energy?

Franz Hochstrasser: Energy and the electricity market have historically been limited to big local institutions in the space. Obviously, most of these institutions operate on a for-profit motive rather than having the switch to clean energy at the forefront of their institutional goals. For many, energy and electricity are only an afterthought that surfaces when they pay their monthly electric bills.

Unfortunately, this type of thinking has only increased the dire nature of the climate crisis, and steps towards a global climate solution will require massive shifts in thinking. For many of those who might feel hopeless in the fight against climate change, Raise Green provides a mechanism to create and invest in climate projects.

While community projects might not always have an observable impact on your electric bill, (especially if you are investing in projects in another state!), these projects are necessary and impactful steps that help bring us towards a climate solution.

In short, Raise Green democratizes energy by opening the investment, profits, and even pitfalls of the energy industry to the general public, enabling the population to take the steps towards a solution when energy institutions fall short.

My Co-Founder Matt Moroney talks about this in a Clean Technica podcast released just recently:


Sebastian Klemm: In his essay “Buddhist economics” the economic thinker, statistician and economist Ernst Friedrich Schumacher argues: “(…) production from local resources for local needs is the most rational way of economic life, while dependence on imports from afarand the consequent need to produce for export to unknown and distant peoples is highly uneconomic and justifiable only in exceptional cases and on a small scale.”

Since Raise Green promotes investment in local resilience: How do you impact local economic development? In which ways does Raise Green foster a circular lifestyle paradigm and local poverty alleviation?

Franz Hochstrasser: I think that our understanding of the local impact of climate change warrants a reflection into the process of the globalization and industrialization of consumer production. Energy, like many other means of production, has become an afterthought throughout time as people have grown accustomed to the on-demand nature of electricity without thinking of the local consequences.

For many people, particularly communities in poverty, local air pollution presents a serious issue to human health. Increasing environmental effects from climate change will affect communities in poverty most, we have seen that very acutely with the climate fires raging in the western United States.

In response, Raise Green seeks to start projects in communities that have the most to benefit from clean energy projects, with benefits taking place in the form of pollution reduction, community-directed economic profits, etc. A shift to clean energy on the local scale requires people to think about energy consumption a bit more, thus fostering a circular lifestyle economy more so than the negative environmental consequences that come with the globalized fossil fuel industry.

Sebastian Klemm: How do you measure and verify strengthened resilience in a community due to a project?

Franz Hochstrasser: Community-scale energy projects are just that, driven by community. As a result, communities and localities in which clean energy projects are implemented will have the most to benefit in the face of continued climate change. As we have seen recently in the face of the pandemic and throughout history, fossil fuel institutions are unstable and have a diminishing role in the sustainable future.

Community-scale solar projects not only democratize energy and reduce environmental effects like pollution, but also provide resilience in the case of extreme weather and climate events.

We now have two fully funded and oversubscribed offerings completed on the Raise Green investor marketplace, and before that we proved that it’s not only possible to use inclusive finance to build resilient local projects that benefit everyone, but that it could be replicated.

We financed 2 solar projects that sell discounted electricity to a housing and homeless services non-profit and are co-owned by 126 investors.

New Haven Community Solar has demonstrated evidence of strengthened community resilience in the form of decreased costs for the non-profit, so they can in turn house more vulnerable and at-risk individuals, and reduced carbon pollution.

We track carbon reductions by the MWh of clean energy generated, and sell those renewable energy credits to the utility company so they can work toward complying with the state mandated clean energy targets. See our ‘Project Spotlight’ here

Sebastian Klemm: The RAISE Model in your due diligence process stands for: “Revenue. Ambition. Impact. Social. Environmental.” How do you define & design both revenue and growth on your company level?

Franz Hochstrasser: We often say that we are not strictly for-profit or non-profit, but that we are ‘profit-for-all’, and so we want to make sure that extends to protections for our crowdinvestors, and our issuers alike. We only want to work with Originators that can demonstrate that they can actually make a real difference in their community and reduce dangerous carbon pollution, but also make money for their investors. You can read more about the RAISE Model here: https://www.raisegreen.com/how-investing-works

Sebastian Klemm: We need to design sustainable technologies also sustainably in themselves: What follows after 20 years contractually agreed cash flow of a community solar plant,which also equals the average livespan of solar arrays? Are there take back-systems in place to recover the solar arrays’ components and materials for remanufacture?Is it possible at all to recover and remanufacture inherent materials of solar arrays?

Franz Hochstrasser: We are systems thinkers at Raise Green, and that is baked into our ethos and approach. The end of a solar project’s useful life can be up to 30 or even 40 years, and decommissioning systems is something that every project developer will need to consider. More on how to start thinking through this here, but this is a challenge that the whole solar industry is working to solve now and there are some promising approaches out there. We speak more about this on our podcast which just launched last week where we interview one of the leading circular economy thinkers Eva Gladek, check it out on spotify here:


Sebastian Klemm: Is the collaborative capital of a company now of equal importance to its intellectual and financial capital? In how far has the ability of being able to add value by collaborating effectively with others become a new business imperative?

Franz Hochstrasser: Further collaboration and co-opetition between businesses, public and non-profit units must happen if we are going to tackle serious societal issues like climate change, racial justice, and wealth and income inequality. Raise Green is built on the fundamental belief that we all have a role to play in tackling problems that impact everyone, and that communities closest to the problems are best suited to solve them.

The age of greedy and purely profit driven finance, private equity and venture capital that extracts value from communities and concentrates it in the hands of the rich and powerful incumbents is outmoded. That type of small-thinking is increasingly unacceptable.

We need inclusive capitalism, and investors that are patient for return but impatient to make a positive difference, and we need companies and collaborators that empower communities and individuals to literally take their power back and create and own the solutions that they want to see in the world.

image © raisegreen.com

www.raisegreen.com

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