Enduring Planet’s loans help climate startups overcome the chicken-or-egg dilemma

David.

I'm David bank and from Impact Alpha. This is an agents of Impact podcast.

0:01

We've created a structure that we think, especially given our performance, provides Impact investors a very attractive, arguably risk adjusted return while being able to have this diversified exposure to the climate ecosystem.

0:06

That's Dmitri Gershenson of Enduring Planet. He and co founder Aaron Davis join me to discuss how their working capital loans help early, early stage climate startups meet the milestones needed to unlock other financing and pay them back. We discuss the current state of climate tech, technology enabled lending, catalytic guarantees, and even corporate beekeeping. Let's jump right into our conversation. Aaron Davis and Dmitri Gershenson, welcome to the podcast.

0:23

Thanks for having us.

0:53

Thanks for having us.

0:54

Been looking forward to this conversation. Been watching Enduring Planet for a while here at Impact Alpha and I thought you'd be both good kind of references on just what is the state of the sort of climate entrepreneurship, climate startup ecosystem, you know, it's been to say the least, sort of a volatile period. So maybe just started what you're seeing among, you know, your, the network and your, and your clients and your customers,

0:55

it's definitely a funky time out there. I think between the federal posture on the ecosystem, the downstream effects on capital markets, the overall challenges we're seeing in the economy, it's, it's, it's not an easy time to be building in climate. Whether you're a venture backed startup or just a, you know, like an H Vac contractor, there's a lot going on.

1:21

Are folks running out of money? Is there a sort of clean tech wipeout afoot here?

1:50

I think folks are always running out of money. That's like the nature of building companies. Obviously I do think there's an uptick of that, but that's it really just, it's very segment specific. In our experience, climate entrepreneurs are more resilient than the average entrepreneur to shocks and people are so committed to the mission that they find creative and innovative ways to survive despite market challenges. I don't think we're seeing a dramatic collapse in the ecosystem and one of

1:55

the creative ways they find is I think they find their way to you. And tell us a little bit about what Enduring Planet does and how maybe Aaron, how do you bridge folks through rocky periods or sometimes just, you know, I don't know, bureaucratic delays of waiting for payment, that sort of thing as I understand it. Right.

2:32

Yeah. So we provide short term lending to these entrepreneurs that have contracted receivables. So we're looking for either government contracts or commercial Contracts that we can lend against that have a high likelihood of payment. They just have this sort of chicken or egg feature where they're, you know, need to accomplish a milestone or purchase lots of solar panels and they need the capital to do that before they can unlock it.

2:48

So your loan is secured by, at the other end by, by some kind of contract and receivable that presumably will help you get paid off. So that seems fairly straightforward. Why is, what's the gap that you're filling? Why wasn't, you know, why weren't other lenders, you know, taking advantage of that opportunity?

3:21

I mean, I think traditional lenders are looking for a long, you know, know, track record and history and a big bank balance and lots of assets to secure against. And so a lot of these companies are relatively new in the last, you know, five years. They're relatively asset light or they can be depending on, you know, if they're not a hard tech company. So they're just, they don't have the typical product profile.

3:36

Yeah, they're also, you know, historically most of these folks weren't profitable, so big banks won't touch them because of kind of banking credit requirements. And then in terms of the actual ecosystem for capital in the market, there's a pretty big gap for folks who do smaller tickets and go early in general. Right. So there are lots of lenders in climate and most of the institutional ones won't look at deals sub 10 or $20 million. And so that means that everybody who's kind of ramping to that point, they're out of luck.

4:08

Well, just give us a flavor of the kinds of folks that you're lending to and what kinds of products and services they're bringing to market and how that capital kind of kept them on track.

4:46

Yeah, I mean, it's a very wide array of companies. So we work broadly across climate abatement, removal, adaptation, resilience. It's all in scope for us. We recently completed a transaction with a company that is providing electric vehicles to the city of Riverside. And they have a big contract that procures those vehicles and we're supporting their working capital needs to deliver those. Right. We've done deals with companies that handle recycling and waste management to bring waste out of the typical waste stream, reduce waste going to landfills. They have grants from the state of California from CalRecycle to build recycling facilities. And so we finance those. Aaron, what are some fun examples from recent deal flow that you want to share?

4:54

Well, you know, my answer is always the bees. We've done corporate Beekeeping, a few loans to those types of companies. We've done a lot of clean transportation especially.

5:52

Tell us more, tell us more about the bees. They have to buy new bees because the old ones are dying off.

6:07

No. So they, they essentially are doing corporate beekeeping. So they're putting like beekeeper beehives on the rooftops of New York City. JP Morgan and you know, they're, they're soups and nuts providing that beekeeping service. And then you know, JP Morgan can give like little honey gifts to their customers or whatever it is.

6:13

So it's local Manhattan. Local Manhattan.

6:37

And it's, you know, has a material benefit to the adaptation, resilience of communities because there's, you know, significant impacts from climate on both bee populations and the health of like plants that get pollinated. And so there's all these downstream effects from this, from this work.

6:41

Indeed. And so, and so I get that, I get the picture, but I'm still not understanding, you know, sort of how there's always an unfilled niche. You're in what I think people would think of as the private credit market or non bank financing institution. And you know, people are always looking for, you know, especially in recent years, been looking for those kinds of opportunities. How did you find one that that wasn't filled? Maybe, maybe what? How did you come to the work?

7:01

Oh man. I mean Aaron and I have been in this space for a very long time. I, prior to starting Enduring Planet, I did a lot of work in the catalytic capital space supporting financial intermediaries, lending and climate, mostly in emerging markets. Aaron was running a debt fund providing working capital to climate entrepreneurs in Sub Saharan Africa, South Asia. And we came together because for us there was this kind of realization that the private credit or working capital ecosystem for climate in the US was basically non existent, especially for earlier stage companies. And this happened back in 2021. At the same time there was all of this innovation in the technology that can support faster, better, more equitable deployment of capital. And so that's part of the reason why we formed Enduring Planet, not as just a fund, but as a technology company. And so we actually take a lot of pride in how quickly we underwrite. We can usually get to a term sheet within a week, how quickly we fund, which is typically within a month of signing that term sheet.

7:25

I'm not as familiar with being a borrower in that market, but I imagine that must be something like record time.

8:41

It's pretty fast if you compare to say the work that I was previously doing or like a Development finance institution or a bank. Those can take upward like upwards of a year to get funded. Like going through all the diligence, you know, like selling your first child and then, and then maybe survived that year.

8:47

You wouldn't have needed the funding in the first place.

9:09

Exactly.

9:11

So get the money out quickly, get it out with reasonable assurance of repayment. How do you guys get funded yourself in finance? You mentioned catalytic capital. I know you've been, you know, experts in that yourself. How do you structure your own funds?

9:14

Yeah, so right now we've structured them as sort of SPVs that live under enduring planet. And investors buy notes via note purchase agreement. So we're raising from impact investors like family offices, foundations, donor advised funds and high net worth individuals and hope to target higher dollar impact investors more instit institutionals and corporates. A unique feature of our fund is that we also have a guarantee from cigp. And we wanted to get this guarantee because of the impacts of the current administration and kind of helping investors to get more comfortable investing into climate when there's been a lot of uncertainty created.

9:29

Well, let's just dig into that. CIGP of course is the community investment guarantee pool and it's kind of a facility that helps backstop managers like yourself. But how does that guarantee actually work? Like what's being guaranteed?

10:28

So the investor note capital is being guaranteed. So at the end of the life of the fund, when we go to repay our investors, if there's any shortfall in their principal capital that will bolster their repayment up to 10%.

10:40

Are you finding that that kind of credit enhancement actually makes a difference for some folks?

11:03

Absolutely. It's helped us attract funding and it's helped us get investors back to the table. You know, at the start of 2025, we had several investors who we thought were a great fit for the fund drop out because they had this uncertainty. And we now I think probably have double the amount of people in our data room looking considering this investment.

11:07

Yeah, I think maybe one thing that I would add is that we've constructed the fund in such a way as to appeal to the broadest base of impact investors. Based on the conversations with them following our first fund, then what people had asked for was liquidity. And so we have this structure of notes that have multiple maturity periods that people can choose to have liquidity when they want. The notes pay interest in real time. So it's not like an LP position that's illiquid for 10, 15 years. There's capital coming back to the DAAF or the foundation or the family office in real time, there's a first loss position from us, so there's actually a layer of first loss in the fund and then there's this guarantee on top. And so we've created a structure that we think, especially given our performance, provides impact investors a very attractive, arguably risk adjusted return while being able to have this diversified exposure to the climate ecosystem.

11:33

Are folks starting to see this as you've proven out your own sort of repayment track record and whatnot, Are they starting to see this as investable category for private debt?

12:37

Yeah, I think we're still, we're still early and we're still small. One of the choices that we made very intentionally was to not go from our, you know, our pilot fund was 5 million. Our second fund as a target of 20 institutional investors won't look at opportunities unless they're, you know, 100 million-plus. And in some ways our choice to go small and conservative so that we could scale our lending without eroding credit quality has meant that we have to continue to raise from sort of individuals and family offices and DAs and foundations for now. But I think our track record is pretty impeccable.

12:48

There's kind of a small is beautiful kind of theme emerging that we've been hearing from fund managers, which is that when you get the, the fund sizes that are bigger than your check sizes are bigger, you actually get away from some of the need and the kind of borrowers that you had initially intended to serve and that maybe, you know, a bunch of small funds might actually, you know, maybe with some, some cost savings on the back end in some ways. But it might be a way to, to get money out in these, in these smaller checks, which has always been a hurdle or an obstacle.

13:33

Yeah, I mean, this is part of the reason why we've invested so much in the technology we've built so that we, to serve all of the smaller customers even as we grow. So even when we're managing a billion dollar pool of capital, we'll still make 100k loans. That's never going to change. And we actually see that as a significant advantage to our business because oftentimes the folks who do borrow 10 or 20 or 30 million dollars tomorrow are the folks who need 100 grand today. And so if we can form a relationship with them now, we can then scale and grow with them over time. And we've done that now with a dozen borrowers who have come to us for their second, third or fourth loan

14:06

and just to bring it back around to Scaled growth. I think folks are still waiting for at least the downturn in carbon emissions and the true impact of all this clean tech that's been funded. When do we start seeing this market tip so that, you know, we actually get the climate impact that we're, that we're, that we're.

14:47

That we're looking for? I'm going to take a, maybe a slightly spicy posture here. We're already seeing the impact. Right? Like, climate work is happening every day. The trajectory that we would have been on had this work not happened would be infinitely worse than where we are now. Right. I don't think that we should ignore the pullback and I don't think that we shouldn't complain or yell about it. But I do think it's important to recognize, like, that the work that is happening now matters. And we have, you know, most of our clients are putting steel in the ground now. They're deploying electric vehicle chargers now. They're reducing emissions from waste now. They're putting innovative materials into supply chains now. And that work is having an impact today. And the best that we can do is the most with what we have. Right. And like to keep trying to grow and to keep trying to finance these solutions. I don't know, I feel like framing it as, like, when are we going to see it? Well, it's like we're seeing it. It's happening today, it's happening right now.

15:11

I love that you two and I love that you're helping keep that work going, even through the rough patches. So thank Aaron and Dimitri and we hope we'll have you back on the podcast to see how it's going in a little bit.

16:25

Thank you.

16:38

That's going to do it for this Agents of Impact podcast. Big thanks to Dimitri, Aaron, to our producer, Isaac Silk, to the whole team at Impact Alpha, and to all of you agents of Impact, with gratitude for all that you do

16:41

sa.

16:58