The $200 Billion Market Most Investors Have Never Heard Of

One is the voluntary market and one is a compliance market. But where does it all begin? It all begins with the carbon footprint or the carbon emissions that are happening in the world.

And how are those mitigated? What can be done to mitigate those? Now, there are several ways to do that simplistically, right? Either you can avoid emissions.

Instead of everybody driving cars, they start taking public transportation. The emissions go down, the greenhouse gases go down. That's one way that you're avoiding. The other way is actually capturing it from the air.

And there are other, various other technologies that are being used and developed to actually capture the carbon dioxide directly or the greenhouse gases directly from the environment and then remove them so that the greenhouse gases decrease and helps decrease the global warming. That's, in a nutshell, what we're trying to achieve in the carbon markets. Right.

Foreign.

Welcome to Truly Passive Income. I'm Neil Henderson.

And I'm Clint Harris. And Today's guest is Dr. Avishkar Sabarwal.

He's the founder and CEO of Satya Carbon where he is working to bring more transparency and financial structure to the carbon credit market.

What makes his path unusual is that he brings together medicine, real estate, capital raising and climate finance to help turn a fragmented market into, into something institutions can better understand and trust. So this is something we have not talked about today. We've been talking before we started hitting record here and we're both excited to dig into this.

So thank you for making time for us today. How are you, sir?

Thank you so much for having me. Really excited to be here. I'm phenomenal. I'm actually traveling right now. I'm here for a conference.

So that's why, you see, I'm in a hotel room, but really excited to be here and going to talk more about my company and talk about carbon markets in general and what we're trying to build over here.

Well, thank you. Especially with the opportunity to talk to so many people at a conference. Thank you for taking some time to talk to us. So we appreciate that.

All right. Carbon credits. So my wife is a full time real estate broker. We have a real estate team and Neil and I work in commercial real estate.

I hear about this left and right. You hear the names, you'll hear the buzzwords. People are trading credits. I have mitigated a few wetlands properties.

And so that conversation comes up in very minor forms. But basically what I know is that this is, this is a veteran move area. This is one of those things where you either do it or you don't do it.

You don't really dabble unless you're just fixing one or two lots that you're trying to build a house on, which is what I've done in the past. So for those of us who don't know almost anything about this, please explain to us what the carbon credit market is and how it functions.

So, yeah, so I'll just give a brief overview of what this market actually is. Right. So. So in a nutshell, what. So there are. There are two different sort of sections in the market.

One is the voluntary market and one is a compliance market. But where does it all begin? It all begins with the carbon footprint or the carbon emissions that are happening in the world.

And how are those mitigated? What are, what can be done to mitigate those? Now, there are several ways to do that simplistically, right? Either you can avoid emissions, right?

Instead of everybody. I'm just giving a very simplistic analogy over here. Instead of everybody driving cars, they start taking public transportation.

So the emissions go down, the greenhouse gases go down. That's one way that you're avoiding. The other way is actually capturing it from the air.

So you're planting more trees, you're doing afforestation, stuff like that.

And there are various other technologies that are being used and developed to actually capture the carbon dioxide directly or the greenhouse gases directly from the environment and then remove them so that the greenhouse gases decrease and helps decrease the global warming. That's, in a nutshell, what we're trying to achieve in the carbon markets. Right?

So carbon credits are basically sort of a measure of how much of that CO2 is being mitigated, either by avoidance or by removal. Right? And that's a way of measuring, because those are the number of units.

Because every, you know, for example, you have the metric system or you have the other system you're doing. And you're saying, okay, how many kilograms is this person? Or what is the BMI of this person? Right.

That becomes a universal metric for everybody to understand what they're talking about. Right. I can say, well, you know, I am more carbon efficient than, or my car is more carbon efficient than your car. But what does that mean?

How do you measure that? And so to measure that is the unit of either carbon credit.

And again, there are some nuances there in the terminology itself which we'll not dive into, because the nuances are whether you're in the offset market, I mean, in the compliance market, or the voluntary market will not go there. We'll just keep it very simple, very straightforward.

So it becomes a unit of kind of measuring something that everybody in that space can understand, right? So what happens is the companies that are producing emissions, they have a way of calculating how much they're producing.

Right now, they may have their own internal ESG mandate, which is what we're kind of focusing on right now is the voluntary market, which is they voluntary, want to be, say, net zero, or they want to decrease their carbon footprint. And that's their internal mandate. They have said, look, we want to be more green, we want to do this.

We are aligned with this mission, and these are the steps that we're going to take so those become voluntary sort of carbon offsets. But even in that, there are steps and layers into which they have to kind of go through before they start buying carbon credits.

The last strategy, sort of it is that where they absolutely cannot mitigate their emissions, some emissions are always gonna happen. That's where they can buy these credits to offset those emissions. And how does that work?

Like, while they're still emitting, what does that even mean that they're offsetting? So the way it works is that there are projects that are set up, right, that are actually reducing the emissions or either by avoidance or by removal.

And so what they're trying to do is essentially when they're buying these credits, they're financing those projects.

So overall, it's still helping because they're still kind of going net zero, but it's an indirect way of doing it because there are certain emissions that they just cannot, you know, mitigate. And so that, in a nutshell, is what the carbon market is very simplistically.

Got it a lot to unpack there. So essentially what. What the market is, there's been a market that's created to trade these carbon credits for money.

Essentially, that's what it was basically offset. They can basically offset company can offset its carbon emissions by buying credits from someone else or selling their credits.

I guess it'd be buying. They'd be buying credits.

Yes, they buy, buying. But again, there are a lot of.

A lot of things, a lot of nuances in that, in the sense that, you know, a lot of the first question is going to be, well, if they can just buy these credits, then what's the point of even managing their emissions? And that's where we come into something called greenwashing, and that what that means is where they're just buying credits.

And as we dive deeper, we'll kind of go into the nuances of how the credits are and what the Credits are and where we bring in value. So they can just buy credits and they can say, well, we're net zero.

But a lot of it also depends on what their internal mandate was, what they're trying to achieve. Is it just to have a tag saying that they're net zero or are they actually committed to that thing? Right.

And so that becomes more of a reputational thing for the companies that are buying them. Right, right. For example, some of the bigger companies, large companies, they are very, very particular about what they want to buy.

They are very focused on really high integrity credits and they will not touch anything. That is where they have even an eye, without doubt. Right.

And that's where differences come in with respect to the quality of the credits that are being sold on the market. And also what the buyers are looking for and say, for example, it's a new company, smaller company that's looking to buy these credits.

They are, you know, they may not know exactly what the landscape looks like. There might just be a new entrant into this ESG space and be like, we don't know what to buy. We can, you know, this is our, this is our quota.

This is the amount of money that we can spend on these credits. Why don't we just buy cheaper credits and, you know, have more of them?

The problem is you can buy the cheaper credits, but then that also will reflect the quality of the product that they're buying. Right. And so that's kind of the. What we also help with, with respect to analyzing that stuff.

Okay, I want to make some oversimplifications here, and please correct me if I'm wrong. And there's a few things. I look at this and to me, honestly, it feels like a tax. It feels like a money grab.

And the reality is with every company, their carbon footprint is either getting bigger, getting smaller, or staying the same. But we've got a lot of industry if across the board.

And I don't, political affiliation aside, I don't know anybody that doesn't want the best thing for our planet and taking care of, of where we live. This, this small rock in space called home for all of us. Right. It's the only one we got. We want to take care of that.

The way that we're going about that. There's obviously differences of opinion there.

When you look at this, to me, it feels like, or I think the perception could certainly be that it's a money grab.

And across the landscape, the industrial landscape or whatever, you know, industry you want to look at, we have companies that are never going to have a zero footprint or negative. And then you have the idea is, how do we offset that across the board? How do we bring everything back to as close to net zero as we can?

And you've got some companies that. That's just never going to be the case. May.

And I'm making up a number, they may, you know, have a footprint of 20 units like these credits are establishing a level playing field where there's continuity and there's measurable units that we can use to put a value on this. And it creates a marketplace. And these people that are creating all this carbon are offsetting that by purchasing the credits from other places.

But you're bringing up a very interesting point, is that this still feels very much like an emerging market and it's a little fragmented.

And the quality of what you're getting with those carbon credits, yes, maybe you're checking the box on the paper, but the reality is, if you really care about your integrity as a company and you care about your reputation as a company, some of those could be called into question at some point. So you want to make sure that you're getting what you pay for.

Sometimes it may be worth it to spend a little bit more because the last thing you want is to put what you're trying to do as a company at risk by not having the proper carbon credits in place. Is that fair to say?

Yeah, I think that's a fair, fair argument and a fair question question. Because a lot of people do feel like it might be a money grab. So that's where the whole concept of voluntary market comes in. Right.

A lot of that's what we're focusing on right now. We will be moving into compliance markets eventually.

Those are the cap and trade programs that are there either in California, there's a big program in eu, there's a program in uk. I think Japan's setting one as well. India is looking in the direction as well.

So those are more of the sort of the regulated or the compliance programs where the companies have to meet those compliance requirements. But what we're kind of starting with is the voluntary market, wherein it is not mandated. You do not have to do that.

But these companies felt that they wanted to do that because they felt and they're aligned with that vision. So it's completely voluntary. They can choose not to buy. They can choose to buy, but they want to buy because they. They're aligned with that mission.

And so they're coming and they're buying these credits. Like you were mentioning the Credits have different qualities, right?

And there are companies that will buy really bad credits and they have gone into disrepute because sometimes there's like negative media about the credits that came out, or it was a fraudulent product or a fraudulent project that was set up somewhere and it was not real. So they had to use, you know, remove all of those credits from the registries.

Because there are a lot of other, you know, players in this space wherein you have to register the product on the credits on a registry. There's some body that's doing a verification on them. So there are like other players that kind of are involved in this.

But of course there's, there's fraud in this industry as well. And that's a big, big challenge over here. How do you make sure that the pro.

The credits that are being delivered are actually real and viable credits? And that's what our mission was. Because there were two things happening here. It's a fragmented market, very opaque market at this point. Right.

It's not as liquid as you would have the, your regular stock market where everything's up and things change every few seconds. It acts more like a commodities market and it's still slightly slower moving.

But just because of the nature of the market, just because of the demand, where we're in and where we are overall in the, in this carbon space, right? So that's where we come in. That's where our opportunity is.

And also our, you know, the way we're kind of looking at this is helping do that, the heavy lifting of the due diligence on the projects, understanding what are the risks, doing our internal, you know, internal scoring. Now, we're not trying to replace any of the rating agencies that already exist. But not every developer will go to a rating agency.

And we can go a little bit into that. Like what are rating agencies and what they do and what they don't do. But we're not trying to replace them.

We're doing our own internal due diligence, trying to make everything evidence based.

Because I'm a physician and I want everything to be a rock solid based in evidence and then present it to the buyer so that they have confidence in buying that. Not only that, we're adding another insurance layer on that and we're in negotiations with that with insurance companies as well.

To see that gives the buyers that comfort and that confidence that, look, if this product is already insured, it is going to not affect our reputation.

Like, even if they say the credits get invalidated, the insurance will cover either the cost with Replacement of these or will, you know, cover the money that we've kind of spent on it so that their reputation is kind of safeguarded over there.

Wow. Okay, this is very interesting.

So I understand the side of things of like taking the carbon that you're producing and quantifying that into something that is, is measurable that you need to replace. And that's how that we're working towards net zero, the actual carbon credits themselves.

It created this loophole where all of a sudden hemp became a booming crop again. And they're using the stalks as of the plant as fiber.

They're using the flower of the plant for CBD and hemp derived thc, which, there's a big kerfuffle about that right now.

But one of the things that I caught that was very interesting, the reason that hemp came back and became highly pro profitable again was number one, because of the flower, but number two, because they could sell the root mass as carbon credits.

So they're harvesting the plant, they cut it down, they sell the stalk for fiber, they sell the, the flower for CBD and hemp derived thc, and they're selling the root biomass as carbon credits.

So what exactly I thought carbon credits were like if you have a wetland and you promise that you're not going to tear it down for 100 years and you're going to let the plants keep growing, that they're going to give you credit for so much per acre, but there's so much more nuance than that. So what exactly are the things that are turning into carbon credits?

So there are, there are a lot of different ways that people are doing, you know, carbon credit, producing carbon credits. Right. So like I said, there are two different categories, avoidance and removal.

So the avoidance credits are wherever you're avoiding emission in any shape or form. Right. Or you're reducing the emissions.

Some of the examples I'll give you, and it may not make sense initially, but when I explain it to you, it will, is, for example, say there's methane being produced, say even in landfills. Right.

You can now direct that methane via, you know, pipes, and I'm keeping it very simple either towards energy companies for them to use or gas companies for them to use, or you can actually flare the methane. Right. What is flaring, you just burn it. What it does is methane is heavier and a worse greenhouse than the carbon dioxide that's produced.

So even though you're burning the methane, its greenhouse sort of the footprint is lower than that of carbon dioxide. That's, that's a way of avoiding, you know, extra carbon going into the atmosphere. So, so that's, that's one way of doing it.

And there are a ton of other ways that you do it.

There are like ocean projects, there are technologies that have come about where they're actually, you know, putting in equipment to directly capture carbon dioxide.

And then there's like the whole biomass thing that they can use the biomass converted into biochar and then store it in the, under the ground or under the earth's surface so that it's not in the environment. So there are a lot of different ways in which carbon credits are produced. Not everything is the same. Not everything is going to be the same quality.

You can buy land and, you know, plant a thousand trees or whatever. And then, you know, they're going to capture, over time, they're going to capture carbon dioxide from the environment.

That's another way of producing. Again, this is very simplistic. There are more nuances.

You know, they have to have a whole methodology, a whole project, and it goes through a very rigorous process of, you know, analysis.

And even the registries that they're onboarded on have their own, you know, metrics and criteria of what they're going to approve and not approve to be, you know, be on their registries. And so also it takes time. It's not just as simple as ideating something and, you know, kind of bringing it to the market.

So it's a full fledged, you know, if you're, if you're setting up a project, you're going to be dedicated to it.

I'm still sitting here trying to wrap my brain around it.

And the analogy that's come into my dumb brain is that it's almost like if you think a carbon emitter like a cigar bar, and they've got the option to either they can buy a sign that declares them non smoking, which would be fake, or they can literally buy some sort of filter that reduces, makes them, you know, non smoking, or they can pay, you know, something that's going to basically, you know, offset the amount of cigar smoke that's going out there.

Yeah, let's go with that analogy. Let me explain it to you with that analogy because I think it's. Explain to me like I'm five correct I think, I think that's.

That's a great analogy and let me explain it to you. So, for example, say you go to a cigar bar, right? Now, they have. They are, for example, using.

And I'm just going to throw it out there because I don't know cigar space and I don't know how much they MIT and whatever, right? So I'm just going to throw this out and say, hypothetically, say, vaping produces less carbon emissions than a regular cigar.

I'm just being very hypothetical over here, right? So they start saying, well, what we're going to do is we're going to allow you to, you know, to smoke, but you're going to start using.

You can only vape in this environment. Now what it's doing is it's still emitting, but it's avoiding the extra emissions that are coming in, right? And so again, it's very simplistic.

That's the way you're avoiding direct capture would be, say, the cigar place is. This thing is, you know, we need to capture directly from there. They install filters outside their space and around wherever.

And then they're like, okay, we're going to directly capture this from the air. That's actually direct capture.

Direct air capture, where they're capturing it from the environment, not necessarily inside, because again, if they're putting a filter inside their environment, they're reducing the emissions from going out because it's. They're still producing it, but then it's an avoidance of that emission happening. So it's not direct air capture.

The direct air capture is the additional that's already present out in the environment and then capturing it and bringing it in. So simplistically, that's how I would explain it.

I just wanted to get that. We've spent like the first however many minutes we've, like, this has taken a lot of education.

I want to make sure before we dig in that people have a pretty good understanding of what it is that we're talking about before we dig in. That's why I wanted to get in.

I'll second that.

I know we're burning up a lot of time here understanding this, but I think before we can understand the marketplace and how it works, there's some fundamentals there that. And this is the first time in 155, 160 episodes that we've ever talked about this. So thank you for humoring us on that.

Couple questions that I have here.

One of the things that you mentioned earlier is that there's no mandate on this and Also, I know that the political landscape has is changed on this as well. I know there's been a lot.

The Green New Deal was probably pushing something in this direction and there's been this big ebb and flow of the way people have felt about this recently. It seems very herky jerky with this administration and the way they pulled back the Paris Accords.

I'm interested to know if that changed things in this landscape. But I think basically just without mandate, how secure is the marketplace and is the political landscape affecting things?

And it certainly seems like America's leading the charge on this with not a ton of input from other countries that I think we would like to see take this more seriously. So what does the future of this space look like from that side of things?

And then we will transition into talking about Satya Carbon and what problem that is solving. But let's get clear on that first.

Yeah, yeah.

So I think from a market perspective, and you know, just the fact that you mentioned that 155 episodes and nobody's talked about it, I think, you know, talks to you, speaks about how early we are, even though it's been around for almost a decade, probably more this market. But we're still in early days with respect to the carbon markets. Right.

So with respect to the political landscape, I think as far as the, you know, as far as the mandates go, there are already compliance programs that are existing. So California has a cap and trade program, I think, I believe New York has one as well.

EU has a big exchange, you know, that's trading and actually, believe it or not, the compliance trading is dominant, is the dominating sort of the market, voluntary market, where we are entering right now is a small portion of the market, of the big market. Right. And then there are other companies that are joining the bandwagon. I mean, Japan's setting up their trading program for compliance credits.

India is moving in that direction. So you have a lot of countries moving in that direction.

So as far as the political landscape goes, unlike real estate, which is sort of local, it depends on your local, say municipality or your local state, state laws and stuff like this. This is more of a global business. This is more of a B2B business.

And so the political landscape does impact things and you know, where things are heading and which direction does impact stuff.

But again, it's more so with respect to where we're entering, at least with the voluntary markets, more so what the companies want, and I think that is independent of what policies are saying or not saying because this is their belief system and they want to do what they want to do.

So we're kind of, I don't want to say we're kind of secure that way with respect to this, but, but you know, with this being a voluntary market, that kind of helps us have a safety blanket at least where we're entering now.

And in my opinion that was like almost the peak, if not the peak of the market. Right. Right now what's happening in the carbon markets is we are almost at like the bottom, if not already there. And it's going through a shift.

The market itself is going through a fundamental shift. There were a lot of bad credits that came out in the past. They got a lot of distribute.

And that's where the challenge was because the buyers did not know there was a lot of, you know, it was on shaky ground.

And so that's where we find the opportunity of, okay, let's, how do we standardize this, institutionalize this thing and bring it up to speed where we're transparent, they understand, the buyers understand what they're buying. There's none of this greenwashing happening.

There's none of this fraudulent carbon credits that are coming into play and we're really able to sell high quality, high integrity credits.

So I'm starting to see the value of where you guys come into place. This is a fragmented, very rapidly emerging market.

And I didn't realize that there was so much disparity between the quality of product that you're potentially getting. One is maybe just to check a box and one is actually doing its intended purpose. And it sounds like all of that's on a scale.

And to me it sounds like Satya Carbon.

The problem that you're solving is that you're stepping into this space between the project developers and the institutional buyers as almost checks and balances and making sure that they just so they have access to the information.

You're almost like underwriting or vetting the quality of the product, coming to market and help identify the right product for the specific use case of that institutional buyer or the developer. Is that right?

Correct. Correct. So that's where we come in. So we are, so we function twofold. One is directly talking to the developers, right.

And those are the developers of these projects that are going to be producing government credits, understanding their product. It goes through our system of due diligence. We see if this is going to meet the metrics for even onboarding them onto our platform or not.

We're setting up a carbon advisory division as well, where if it doesn't meet a criteria, we kind of recommend that, okay, these are the changes that you need to make or this is what you can do to kind of improve the project. Because we're not going to onboard anything that doesn't meet our internal metrics and because that becomes a reputational risk for us. Right.

And so then on the other side, we have the buyers.

We are creating a way for them to understand their portfolio, what their portfolio needs, and then curating, helping them curate the portfolio that they need, or if they already have their preferences set, in which, you know, a lot of the bigger companies will, because they're already actively buying.

And so to help them kind of understand that if there's a new entrant, we help them, you know, facilitate that and then they can buy credits from our, you know, from our. Essentially, it's like a closed marketplace where they buy it from us.

Are you building a marketplace or is this an established market that's already there?

No, no, it's an established market.

Overall, what we're building is our own closed sort of a marketplace platform where we are going to be only putting in the projects that meet our internal standards, minimum standards, or we are helping the advisory division will help bring those projects up to our standards with the guidance from us. So that's what we're building internally.

And then this gives the buyers a confidence, okay, they've gone through this, they've done all of this, it's vetted and they can get into buying it confidently. And then on top of that, we have the insurance wrap that we're doing on our platform.

That is, we envision having platform level insurance, so every credit that goes out is going to be insured from our platform.

And that adds even more confidence to the buyers that, look, this is really good quality because it's not only been underwritten by Satya Carbon, it's actually been underwritten by the insurance companies. They understand the product as well. And, and, you know, it's, it's a good quality.

In, in researching you, I was amazed at the breadth of your background. It spans medicine, obesity research, real estate investing, and now climate finance.

How has your training as a physician shaped the way you evaluate risk and diagnose problems and build the systems in a market like carbon?

Yeah, I think one of the things that you learn as A physician as you're growing up is understanding and identifying patterns. And then of course, you need the hard work and the grit that comes with practicing medicine and learning medicine, going to medical school.

So I think I am blessed to have those skills and kind of bring them to this market to understand where the gaps are in the market, what we need to build. You know, by no means are we first movers in this market.

I will not pretend to be a first mover in the carbon markets, but it was about identifying in the macroeconomic environment where would we stand and what would be a good viable product for us to bring to the market. And then of course, going into the weeds of it, understanding. And you know, with medicine, like I said, I like everything to be evidence based.

Everything needs to be, you know, of top quality. And so then going into the details of that, into the weeds of it.

I mean, being a physician, I had to learn everything about carbon markets, like, who the hell am I talking about? Carbon markets? So I had to learn everything about it as much as I could.

And then obviously relying on experts that are already, you know, playing in that field and it becomes more of a who, not kind of how situation at that point.

Can you give us an example of the, you mentioned high quality credits and then ones that are highly questionable. Without throwing any names out there, can you give us some examples of what you're talking about?

Yeah, absolutely. So, for example, you know, some of the lower quality credits might be.

And again, this is very, very broad because even within those categories are going to be nuances. Right. There might be some afforestation credits that are coming, say from Brazil or from any other country, say Africa or wherever, have you. Right.

They might have an older methodology. They might have a way that they're looking at the credits or they're generating credits. It's not having that much of an impact on the environment.

At the end of the day. The way they are, you know, way the credits are analyzed are based on a few metrics, few criteria.

That's additionality, permanence and stuff like that. So, you know, for example, somebody's planting. Somebody's planting a huge forest in a place which is very, very prone to fire. Forest fires. Right.

What is the risk of that whole forest catching fire? It's going to be very high if they're very, very prone to that forest fire. Right.

So what that does is even though you planted the trees, you try to offset those credits. But because it's such a high risk of fire, what if it catches fire? Now? All of those credits are gone. Right? It got reversed.

So, so that doesn't necessarily become a very high integrity credit versus, say, for example, you have these biochar products.

And again, there also, there are variations within the biochar projects themselves where they're using biomass to basically do pyrolysis in a low oxygen environment. And that captures the carbon dioxide from the environment. This creates a stable product that's put into the ground.

And now that is kind of packed and stored in the ground. You've literally, you know, taken carbon dioxide from the environment and put it into the ground. There's, there's no doubt about it.

There's no chance of reversal on that because it's already in a solid form that's sitting there similar to what you said about the root system, because it's already captured that, it's already sitting in the roots. It's not going to escape back into the environment. And so that would become a more, a better quality carbon credit.

Some people are using technologies, actually devising machines.

And so just to give you an idea of the breadth in terms of dollar value so that it gives a better understanding of how the variation is really bad quality credit can go for $3, $4 a credit. A really, really good quality credit can go for $500 a credit, up to $1,000 of credit. So it's like a huge, huge variation.

Obviously, the ones that are, you know, $500, $400 or a thousand dollars or whatever, those projects are far and few. The ones that are three, four dollars are plenty.

But, you know, you gotta find the right ones that are gonna be the right mix for the right, right company that's buying them.

So you guys are not in the business of identifying or create. Like you're not in the business of creating credits.

You're not going out to farmers with big swaths of land or people in eastern North Carolina that have thousands of acres of hunting clubs and getting that, you know, turning that into a credit. You're finding existing credits that are out there.

You're vetting them, probably bundling up into different sizes depending on the needs of your, of your clients. And you're, there's no problem for you finding carbon credits out there. It's about finding the right ones.

Is that your, what you're telling us about where the marketplace is now?

Yes. It's not. There's, there's a lot. There's no dearth of carbon credits that are available in the market.

But, you know, the buyers are very picky with respect to what they're you know, what they're buying and what they're looking for. And so our job is to make sure that we are. We are also picky about which projects we are aligning with.

And it's not necessarily just about the existing credits. That is where we are starting. But eventually we are already in discussions with some of the energy companies and stuff like that.

Where we're going to help them, that's where the carbon advisory comes in, is help them create their product in a way that's going to be, you know, high integrity, high quality product so that they're not going back and reinventing the wheel. They're starting with the right, with the right frame and then deploying, you know, creating the right credits.

All right, I want to start trying to bring this home. A lot of our audience understands underwriting real estate also a background that you share.

Where do you see the closest parallels between underwriting a real estate deal and underwriting a carbon project? And where does the analogy break down?

I think these are two completely different spaces. The reason why I say that is a lot of it is dictated by, as far as the underwriting goes with respect to the quality of the project.

It's primarily done by analysts who've worked in the trenches, who've been on the ground, and those are the people that we are partnering with who are gonna look at the projects that be on board. We go through our criteria, which is also part AI and part human. And the reason being that not everything can be done by AI in the carbon markets.

And that's not the, you know, that's not what the buyers are wanting at this point anyway. So it's part AI, part human. So a lot of the work is offloaded to AI.

But then there has to be certain amount of analysis that needs to be done by individuals, by a carbon analyst that we're onboarding.

And that's where our software or our platform comes in is like combining both of these, creating a comprehensive report, presenting them to the buyers. So that's sort of the analysis. So I think it's very hard to find parallels with respect to that.

But what I would say is that when it's kind of like somebody looking for, say they're buying a single family home or they're buying a property rental property, it's kind of like, okay, what does the neighborhood look like? What is the crime rate over there? What are the comps in that market?

That's where the comps would come in is with, what are these credits trading at in the market? And then what does the neighborhood look like? What is the quality of the vintage of the property? What does the inspection show?

That's where we do our due diligence. And that kind of is. If I can draw an analogy, that would be the analogy over there.

Okay, so how, where's, how are you making money? And if this is a product that's being offered to passive investors, it's obviously, it's very active for you.

But if it's offered to pass investors, how do I invest in it and how am I making money?

Right, so that's a great question.

So right now what we are doing is right now, since we're really early days, so right now it's fully active and we are not taking on any passive investors. So there are two ways to do this. One is invest in our platform that we're building and become an early investor. Because everything costs money.

We're spending money on building this out and stuff like that. That's number one. So you get an equity position in our cap stack. The other way is that once we are up and running, we will be launching our own.

At least that's the vision that we have, is going to be launching our own internal fund. And so that fund is going to be.

Right now what we're doing is essentially providing the advisory services, providing the due diligence and stuff like that. But once we have a few of these done, that's when we launch the fund.

That's when we will take principal position within the carbon markets, buying the quality credits early on. That's where the investors will come in and can deploy capital passively with us. So there are two ways of doing it. One is early stage.

One is once we have the fund ready, obviously with the early stage you get, you know, an equity position in the company. With the later stage, you're going to be a part of the fund.

Got it.

So you guys are actually, besides just advisory services, you're actually packaging up, vetting, you're buying the credits, vetting them, basically giving them an accredited status or however you're doing it. And then that's what you're selling. And so you're, there's a markup on that. You're marking that up and you're packaging it.

Correct. So the advisory services and the brokering services are what we are focusing on right now.

Once we have a few of these done already and we've ironed out the kinks, then we'll be setting up our own fund. That's when we will, Right now we're not holding any inventory of the credits. Once we have that done, we will be setting up a fund.

That fund will deploy to strategically hold the inventory of the credits, which believe it or not, we're not again first movers in that there are a lot of larger institutions that are already doing that. You may think that it's a business where the off takers or the end corporations are buying them.

Actually there are a lot of financial institutions also buying high integrity credits to hold onto them so that they can opportunistically sell them at a later date. So that becomes our next sort of the step up is when we start doing our own principal trading.

Well, hold on now.

If you're talking about the idea of carbon credit banking, essentially they're buying credits, high quality credits that they're going to hold on to a later date. So this changes my perspective of the supply and demand in this market.

That's implying that there's not just a continuous dearth of these really high quality credits. And at some point the supply for those high quality credits is going to be lower than the demand which is going to incur a premium on those.

So is this a fairly level playing field? Like the demand is going to be there, these credits are.

Are you expecting them to become harder to find over time and that they're going to tend to go up in value or is that an oversimplific?

I think it's an oversimplification only because the market is changing and the players are changing and the players are expanding. Right. So it's not just the demand, the demand's going to go up, but also the quality of the credits is going to go up over time.

Like I said, there's a bifurcation that's already happened in the market. People are kind of avoiding the low quality credits. Now the focus is really on the high integrity credits. Right.

And so over time that's going to change, that's going to evolve while the demand also goes up. And we are anticipating the demand to go up. All indications are that it is going to go up.

And as it grows, the demand for the high integrity credits is also going to grow because people are getting more educated about it.

And, you know, players like me, you know, our company are coming into this space to make sure that there is that transparency and there is a way for us to, you know, make sure that the validity of the credits is there. Got it.

All right, last question for me. We've already gone long, but I knew we would because we're super curious about this topic, so. And then I'll let Neil wrap it up.

I'm sure he's got another question as well, but. So I see the opportunity of what you're doing with Satya Carbon makes total sense to me. It feels like you are an early adapter.

I'm sure to you it feels like other people are there first, but you're doing it before it's mainstream. That's for sure, in my opinion. But I see the opportunity for you guys.

I see the opportunity for any LP who is investing with you, either an equity position or in a future fund coming down the pipeline.

But for those of us not playing in that space, but maybe especially like where we live, people with access to farmland or hunting or whatever, things like that, where's the opportunity for the average person or the average real estate investor or the average landowner that they may not be thinking about, is there opportunity for that person to take advantage of the carbon credits that they have, or is it a very, very niche product and only the people that are doing that full time should focus on it.

Is sort of a niche product.

But I think there is some opportunity, especially when people have farmland and, you know, because there are certain ways that farming can be done, there are certain farming practices that they can use. I think the first step would be for them to kind of explore this market and understand if they want to kind of dive into this market.

Where they would come in is as the developers of the projects, not necessarily as the off takers or the buyers of these projects. But the first step would be to kind of look at what the market looks like.

There are some name registries, big registries that are fairly famous that they can go to understand, go through their methodology processes, look at the way they want the projects to be set up.

They're very strict guidelines on how they want everything to be set up, understand how that can apply to their particular market, especially with farmland and stuff like that, and see if that's something that they want to do. Right. If they can incorporate those techniques into that, then they go down that route.

That's where they can kind of talk to us, we kind of discuss with them. And that's where our Carbon advisory, part of it comes into play, helps them set that up again, we're not the only ones that are other bigger ones.

They're bigger name companies that have been there for a long time. We're sort of new entrants into the market. But the way we're looking at the market is slightly different from how they've looked at it.

They have some challenges with their legacy credits that they've had in the past.

Again, nothing against them, but I think the way we're looking at it is more from an outsider point of view, because I'm an outsider into this industry, so I think we have a different perspective into things.

Vishkar, this has been absolutely fascinating.

I think it's safe to say we just barely scratched the surface, but it's been really educational and in interest of your time, our time and audience's time, let's start wrapping it up.

And this is the final question we ask every guest, which is, is there a book or resource that you find yourself recommending to your friends and colleagues more than others?

Is this particularly to the common buckets or any book of resources?

Whatever you want.

Yeah, whatever. It's up to you. So I know you're doing things with AI as well.

It could be about carbon credits, whatever is, you're in a very niche, interesting world here.

And if people, I would say, I would say it this way, if we or other people want to educate ourselves on more about this marketplace so it can better help us understand the position of Satya Carbon and what you're getting into. Is there one way if somebody comes to you and you have just a few minutes to tell them, hey, I would start here. What's the best resource?

It could be a newsletter, a book, a podcast, anything like that. But instead of just asking you, hey, what's your favorite business book?

What's a resource that our listeners can get access to that you find yourself recommending more than others or just a solid first place to start if we want to be pursuing knowledge about this subject.

Excellent. Yeah, excellent. So I think this is something that I recommend to everybody that's looking into Kavanaugh. So I'll give you two things, right?

One is sort of a mindset thing that really helped me in my life, in my business. And this is overall. And this will help any, anybody, no matter what niche they're in. It's a book called 10x is easier than 2x. Right. It's.

It's a phenomenal book. Changes the way you think about business, changes the way you want to do business.

So I would recommend, highly, highly recommend that book to anybody. If you're looking specifically for the carbon markets.

The place where I started, the place where I recommend everybody should start, Nasdaq actually has a free course on carbon markets. So you can just Google Nasdaq carbon credits course. They have I think five, it's a five part course. Go through it.

Pretty comprehensive, gives you a very fair idea of who the players are, what the carbon markets look like and kind of gives you a starting point and then it gets your juices flowing.

Then you kind of go through some other stuff, looking at the registries, looking at what documentation they have and then you can go down the rabbit hole if you want.

That's amazing. Great. Well, thank you so much. Listen, Dr. Avishkar Sabarwal, thank you so much for your time, for your education.

Thank you.

If any of our listeners want to hear more about what you guys are up to at Satya Carbon, want to connect on what opportunities you have coming down the pipeline or have interest in connecting with you for the purposes of looking at things either from the buyer or seller side of things as well. What is the best way for them to do that?

They can either go to our website and we have a Contact Us space. They can go there or they can email me.

My email is avishkar, my first nametyacarbon.com happy to kind of talk to them and see how they would like to get involved with us and we can go from there.

That's beautiful. Thank you. Satya Carbon is S A T Y A and we'll make sure we add that in the show notes as well. Thank you so much for your time.

We greatly appreciate it. Look forward to watching your continued success.

Thank you so much guys for having me.

Thank you so much for listening and watching the Truly Passive Income podcast.

If you liked the show, if you think it would be useful for someone else, the greatest compliment that you could give us would be to share the episode. Leave a comment down below or leave us an honest review. If you have any questions, don't hesitate to let us know down below.

And remember, with Truly Passive Income comes freedom of time, place and the freedom to pursue your higher purpose.