Capturiant isn’t Jim’s first rodeo. He’s built a series of great companies including investment bank Entoro.
Jim has over 30-years experience across deal structuring and capital raising. He is Chairman and Founder of Entoro Capital, Clear Rating, Producers Energy, and 1Trasnfer. Before that Jim spent time at the World Bank/IFC, and is one of the people at Enron who didn’t do anything to get his face on the cover of the Wall Street Journal. He holds FINRA 7,24,28,63, 79 and 99 licenses.
John Newtson: 0:05
All right, hey everyone, this is Capital Markets Tech, where I talk to the founders building the next generation of capital markets infrastructure, and today we’re talking carbon credit market tech. In 2022, the carbon credit markets trade value was worth $978 plus billion dollars and it’s projected to grow to, I think, 2.6 plus trillion by 2028. It’s one of the most exciting sectors out there, with an average annual growth rate of 48% from 2019 to 2021. But, like a lot of sectors, has had a bumpier ride than normal recently, and today I’m joined by Jim Row. He’s a serial capital markets entrepreneur and now founder and CEO of Capturiant, a global environmental asset validator, authenticator, registry and regulated exchange operating on a regulated private sector model, utilizing distributed ledger technology and insurance coverage. Thanks for being here, Jim. That was a lot of things that you guys are doing, yeah that was a mouthful, but thank you, john, appreciate it. Yeah. So for those of us who don’t know anything more about carbon than the fact that maybe we’re carbon people, carbon beings, what’s the thousand foot view on the carbon credit market and why is it growing so damn fast?
Jim Row: 1:16
Well, it’s growing really fast because you have countries like the United States getting back into game. After there was some sideways activity prior to the Trump administration, the Trump reversing course, etc. So a lot of activity. And then, obviously, during the Biden administration, you’ve had a hell of a lot of legislative passage for, like, the IRA, and that was just packed full of green efforts. So you’ve had a lot of.
John Newtson: 1:48
The IRA is the Inflation Reduction Act.
Jim Row: 1:49
Correct Sorry, I’m going to the acronym there, but yeah, so you’ve had a lot of activity there. And then the Europeans. They haven’t hit the brakes on any of their issues and in fact continue to just keep adding and adding and adding additional green hurdles to a lot of things that they do. So it’s not going away. That’s really for us. We approach it like risk management. We don’t set policy, but we’re there to try to help companies and corporations manage those new policies.
John Newtson: 2:24
Okay, so just give me then what’s the big idea on Capturiant and the product model that you have.
Jim Row: 2:30
It was very simple. So Capturiant was incubated by our financial services group in Toro, and in Toro we have investment banking, we have IRAs and insurance and we have valuation companies and everything. So it was really looked at me as another silo and another Alts product line. So I look at it as where is this? So it’s a very non-traditional space. So we started Capturiant, which really is capture giant, so it was really a playoff of capturing a lot of carbon is really where the name came from. So the business model is actually quite simple and that is to be a transparent, standardized DLT process and platform to work with corporations. Our target market is CFOs helping them manage their risk issues or offsets or buying and selling. So we look at it as much more an investment bank in the green sector. So if you really would kind of, if you had a buzzword or a phrase, that would be it. Now we’re doing things differently in the sense that from the very beginning, we’re on a DLT blockchain. We’re part of the Dera Hashcraft ecosystem, which is the lowest footprint of any protocol. So we’re part of that system. So when we issue tokens et cetera, they’re all on Dera and we actually have a weak custody and we do all the types of things, so we’re like a turnkey one-stop shop for all of the carbon credits. We differ in our business model than a lot of just pure carbon trading businesses in the sense that we’re regulated in the United States so we can actually undertake transactions in the asset side, the commodity side, and the security side. So, depending on what it ends up being, we have the capability of turning to the right methodology and making sure that a client’s covered Even things as remote as tax credits. Some of these are getting into the area. They could be securities and if we need to, we can. We can tact into that and do that. If it’s a commodity, we can get there because we’re looking at this as going to be fully regulated by the CFTC in a very short manner. The SCC and the CFTC have been kind of fighting to see who takes control here, but this is clearly a CFTC world, right, so it’s it’ll get into the SCC side when you actually have a security issue and there you. There’s some gray area on some of the tax issues and stuff like that, but I don’t want to dwell on that. But we really focus overall at the Capturiant level on working with the projects to get them, to get them validated and authenticate mint and then sell the credit. So that’s really the focus of the of Capturiant.
John Newtson: 5:34
Okay. So when I think about this right, your platform, your intermediary, essentially, between the people who have an asset that they are going to try and sell the credit for, and you have the buyers, and so could you give me a clearer picture of who the asset owners are and then who your buyers are?
Jim Row: 5:56
Good question. So the normally the it would be project developers. So if a project developer is creating a hydrogen project, a power plant, or doing sequestration in place or any of these other carbon activities, so that’s our primary developer or, you know, issuer. We don’t use the word issuing, we use the word, you know, minting, when we actually do it to separate the distinction, or they have the distinction between a security and an asset here. But so you would look at most of the green projects out there could be PV or, excuse me, ev companies. It could be there’s a list of 1000 long that would actually be our clients and we help them walk through the system of doing the evaluation and authentication to get it to the credits. Now the buyers will be funds, foundations, ESG plans, companies looking to offset their emissions, et cetera. It could be, you know, united Airlines needing to offset their emissions. It could be oil and gas company that needs to. You know they may be a producer of credits on one side and buyer on the other. So it’s really an entire exchange that depends on voluntary or compliance market. So one distinction I would make is that the US market for the most part, except for California and maybe Washington is effectively still a voluntary, whereas Europe and places in California could California effectively as a cap and trade system. So those are more compliance markets. You know the Europeans are massively compliance and the one thing that we differ kept hearing differs is that we are focused, we’re based in Houston, so we obviously have a natural migration to oil and gas power, petrochemicals, mining, you, you the kind of that was real hard kind of heavy emissions businesses. We do nature-based, like some of our competitors. We’re just not as strong in that areas, you know we’ll. We’ll focus more on where 75% of the actual emissions market grows. So, we specialize in the hydrocarbon space. So that’s another differentiator. But the barriers and sellers would be project developers on the production side and on the buyer side. You know Fortune 1000 companies and foundations, you name it. It’s whoever’s interested in the actual carbon credit market.
John Newtson: 8:23
Okay, and the way this market works, just because I’m not super familiar with it other than you know in broad terms, does the offset? Does a buyer have to buy from certain jurisdictions, or does it matter? Is it a global market?
Jim Row: 8:38
It’s a global market. You kind of opened up Pandora’s Box there. That’s not an easily answered question. There are certain places, for example in New York. In New York City in particular, they passed a law called Local Law 97 where they’re dictating that building owners reduce their carbon footprint. Well, there is a certain percentage that actually has to be produced in the state of New York, so I could give you that example.
So, there are places where you have to be localized in your credit acquisition, which obviously provides a lot of craziness in a particular market. There may not be the supply in the New York market to handle what the city of New York does. If you’re a building owner and you’re trying to do the right thing and abide by the rules, you may not be able to get it. It may not even be a price issue, maybe just an availability issue period. So, you do have these inconsistencies across markets and I would love to give you a broad brush statement on how it works, but it’s that horrible phrase. It depends.
John Newtson: 9:48
Right. So basically, because there is a political element to this and that there are government mandates, and so policy is your local.
Jim Row: 9:56
And there’s more than just a political aspect to this. I would say it’s 90% political, so it really gets down to. I mean, the Californians have different rules. Everybody’s got different set of rules. I mean, California’s been kind of its own animal for 25 years, right? I mean dictating different aspects. You’re going to start seeing a lot of states do it and at some point the feds will come in and level set some things. We’re not quite there yet. The system isn’t screwed up yet, as it will be right. It’ll take a little while. And then you’re going to see the CFTC coming and start to dictate some of the rules and that’ll trump a lot of other aspects from the local level.
John Newtson: 10:37
Okay, so I want to talk about a couple of different areas. One is just kind of the general market and then I want to get into the business itself and there was a report that the World Economic Forum, in collaboration with Bank Consulting, published this year and it was called the voluntary carbon market climate at an inflection point and in it they listed like three key challenges that they see the market as a whole is facing.
And I want to kind of get your take on how Capturiant fits in with this, because I thought that they actually kind of seem to track very well with what you do. And so, the first quality I’ll just list each of them and then you can kind of run through them. Challenge number one, they said, is basically there’s a project quality and credibility issue on the supply side. Challenge number two was about building the business case and getting more participation from the demand side and that there’s a lot some things holding basically companies back from scaling into their into the carbon markets and buying, and all of those seem to boil down to basically a lack of standards and guidelines to help companies distinguish between low quality and high-quality products.
So it kind of goes back to that first issue and then the third challenge, they said is that basically there needs to be some reform towards better transparency and building trust, because they said, basically there’s a real lack of standardization of terms, so basically one guy’s net zero doesn’t necessarily mean the same as the next guy’s net zero, and that tracking where the money goes isn’t always the best. And I guess that kind of leads us to let me get you to those, because there’s some other stuff that like the various scandal that we can get to.
Jim Row: 12:07
Yeah, I’ll talk to that as well, but let me go as a three, one, two. We’ll talk about the definition, et cetera, and we’ve actually tried improving that ourselves. We actually put out a glossary of 4,000 words that are used in the environmental world. You can go to our website, pick you know, pull it down, it’s free.
But even words as simple as what is the definition of validate can be different across jurisdictions, and I’ve had many discussions where you know you say that we’re validating somebody means a totally different thing. What do you mean when you’re? I mean there’s literally you think there would be a common language by now, but there is not so, or common vocabulary, so that there is some issue there. Now the transparency issue is, of course, has been a problem and the incumbents didn’t help themselves or help the process much. But you have to look at how this business grew. It was a cottage industry, right. It was grown out of, for the most part, non-financial people.
Now, that’s not a dig, that’s just the way it came. That’s just. It was kind of the UN types, the NGOs, the World Bank types. I’m an ex-World Bank guy myself, so I was there for four years, so I can talk on both sides of the equation there, but you had groups that were more driven by desire than it was financial. So, you didn’t see really financial discipline start to enter into the last couple real financial discipline in the last couple of years.
So, the transparency issue has been different. Where we differ ourselves is that we approach everything like it’s a securities issuance because of you know, we have a broker-dealer et cetera. So we try to elevate our capability. We use our capabilities to elevate the status of what, to try to get a greater sense of comfort. Your number one point there on kind of the quality issues, I think that was quality right? Number one was quality let me use the Vera Guardian controversy.
John Newtson: 14:10
Jim Row: 14:12
As a good example of what’s gone on. So Vera is a 501c3 in the United States. It is a validator and issuer of credits. It is not a verifier, it’s a validator. So, and they had obviously been in business for 15 years or so, they’ve, you know, had one of the better reputations of the market, along with the other companies for the most part of gold standard. A lot of, a lot more competent competitors now.
You had an article written by the Guardian newspaper out of London on January 18th, 17th, something like this that basically came out right wrong or indifferent, saying that 90% of all the credits that were issued were worthless. I can’t verify that myself, I don’t have an opinion on that, but what it did? It totally iced the market. In fact, prices have gone down 80, 90% and most of the voluntary carbon market. I would say it has 90% to do with that article, because it put a massive amount of doubt and most corporations around the world that were just doing voluntary basically hit the brakes. So it did a lot. It was a giant reset and I think it was an awakening to everybody in this business and around it. That basically said you need to clean up your house, because you also see groups like the CFTC starting to come and say we’re going to regulate it. You’re seeing the Europeans take an additional step when they said they’re going to regulate everybody that does valuations or does rankings or ratings for ESG products. So it kind of lifted up. You got to peer into the behind the scenes is what ended up happening, and you do have problems. Now Vera came back and they made an argument that no, that’s not in fact, true. And like anything in life, john, the truth is somewhere in between. I don’t know what’s perfect, but you know the truth is somewhere in between. Now, when it did expose is that there’s a real difference in when you have an evaluation of a carbon credit versus a security or commodities product. Right, it really exposed that aspect. So you’re going to see a lot more groups like myself or, excuse me, Capturiant and others that will be like us, that will focus much more on due diligence and transparency, basically the provenance of where all these credits actually originated from. So you’ll see a lot there.
Now there is also a huge difference between nature-based credits and other credits. For example, if you’re looking at an oil and gas sequestration project versus a nature-based, like a reforestation project. There’s a wide gap there in the comfort level of the monitoring and measurements and everything like this. Right you, on an oil and gas project, for example, you can actually you know there’s deeds and there’s minerals, I mean there’s all kinds of things and there’s licenses and approvals and permits and everything.
If you violate, I mean you can track it much easier. And in the hydrocarbon space you can actually monitor or measure a lot easier. So we believe ourselves that the quality of those projects are going to be higher because you can actually you have confidence that you can measure and monitor to them. Whereas if you have a forest project and you know Central America, Africa, whatever, you’ve got a whole variety of issues that can come into play. Right, you’ve got people that could, you know, cut down forest, you got, I mean, there’s all kinds of stuff and the monitoring and measuring is a real challenge for those people that buy those types of credits.
So, there’s a confidence level in a lot of the nature-based ones. That’s why one of the reasons for us to focus on the hydrocarbon side is that you can monitor, measured. We believe you can stand behind it. This is why we also have an insurance company coming on. That’s going to cover our, you know, cover the platform, cover the individuals, and cover any pools. It’s just risk management, right? You try to create a better product and then you try to have downside risks to those products.
John Newtson: 18:32
So, this is I mean. Obviously, this is an extraordinarily complicated market.
Jim Row: 18:38
You know, I’ve been in this. I’ve been licensed security since I don’t want to say, but let’s just say in the 80s. So you know, to me it’s a. There’s more moving parts than this one, than anything else. If it is a, it’s a very challenging business to try to get your arms around and there’s so many different rules and platforms and it’s a. It’s not easy to figure out. It’s taken us years to, and that we’re far from perfect either. Right, I mean there’s still. Every time you turn around you learn something new. And then every you know. Then you get legislative changes, particularly in the U S. You know even that the, the IRA, you know, invest worst title legislation ever inflation reduction act has stuff that still has not been clearly defined. I mean there’s some, you know they say, oh, we have all these tax credits between the 45 cues and the. You know there’s a whole list of them and there’s still some unknowns in there, right? So you’re still, we’re, we’re approaching what is seven months, eight months now, and there’s still some unknown. So, every time you turn around there it’s not terra firma on what you’re, what you’re actually seeing. So you’re, you’re constantly having to, I mean you’re constantly trying to update everything.
John Newtson: 19:51
Right, right and that so was the just as a as an entrepreneur then, and kind of was the complexity in? I would imagine that your background with securities is in building businesses in a space like that, complexity is obviously a barrier to entry for most people, so that’s part of the attractiveness for you guys to tackle this.
Jim Row: 20:15
Yeah, for us we’re a little bit different. So, the complexity issue was not it to your point. It is a barrier to entry and, at the end of the day, this market’s going to consolidate quite quickly, a lot faster. I mean, if you look at merchant energy, look at the ICO world, you look at Reg CF, you look at crypto, you know you have your normal hype curve and we’re right there along with it. You know everyone else. So you’re going to start to see. You know because we’ve? We’ve crashed and you’re coming back up. But that crash will create stronger products, stronger groups, but there’ll be much more consolidated. Now for us, as I mentioned, for the Entore/Capturiant world, it is. These are like alternatives. So they’re not just regular. You know public stocks and bonds, so it takes a little bit of different credit. Most financial shops won’t even, you know. They just don’t want to bother with it. It’s too many mental challenges to get around it. And this is why smaller groups will actually like most things. They’ll build up the business and that’s how it. You know that’s how it’ll work. So, it’ll follow that traditional trajectory.
John Newtson: 21:27
And so like the way I look at this, just like you’re basically building it’s a two-sided platform with Capturiant right, because you have both sides of the market and you kind of have, I think, the same issues that any two-sided network platform has. So like there’s a chicken and the egg problem. Generally speaking, you have a two-sided network right? So like you have the buyers and the sellers and you’re trying to reach this critical mass where you have enough of both for the thing to really take off. But in the very beginning, it’s like you know you have few buyers and that means you have few sellers, or if you have few sellers you know what I mean Like you need to get both. So how are you kind of managing that? I mean to get both sides of this network kind of built.
Jim Row: 22:12
Yeah, it’s the I’ve done it before. It’s hard, right, it’s just little pieces of incrementalism, right. And you’ve got to you combine not only the supply but the demand side. Then you have the tech side. You have all these moving pieces. But you know, for us we’ve been able to conquer that and been able to launch and everything in the last month and we are, you know, on the transaction side, you know, heavily ready to close stuff already. So, we feel pretty fortunate there. Now, one area that was and why we really focused on it. And fortunately, we’re also in Houston which, as I mentioned before, allowed us to have a critical, you know, focus on the hydrocarbon world and that, if we’re subject matter experts there, that has been a huge toehold for us to be impactful here. So, we have a backlog of projects already. That’s, you know, we have a very, very strong pipeline. I mean extremely strong. So, then it’s how do you match up buyers and as we prove out the economics of it and demonstrate why these are better? And we’ve done the trends, you know we’ve done other things. You go through the due diligence, everything’s on block. I mean, you go through all of those kinds of issues and then it’s just a buying and selling aspect and for us, we were able to leverage off of our existing infrastructure to get that done, whereas most people, if they were in a spot and they had the idea and they wanted to do it, they’d have to start at zero. We had infrastructure already that literally, we could leverage. We still had to do a lot, but we were able to leverage everything from payment systems to do. You know, there are things that we didn’t have to think about as a broker-dealer.
John Newtson: 24:04
Frankly, Right, right, and so you know I’m always fascinated by, like the growth, you know, choosing which sectors to go into and choosing the time in the business. And I don’t know if you know who Bill Gross of Idea Lab is. He basically innovated the whole venture builder model, right and like, I think, over 25 years. He said that they had, like their team had, like 5,000 business ideas. They’ve launched 150 companies, had like 50 successful IPOs and acquisitions and they did this big study of all the factors for the you know around, like the failure and success of the different companies that they mentioned and like all the things that everyone said, you know, or assumed was like oh well, it’s the founding team that matters the most, it’s how well the idea or business model is structured, is how much funding did it get?
And he’s like all those things are important, but our study showed like really the number one most important factor in the failure or success of an adventure was the timing of the business idea. And he has a whole bunch of examples of this right, like Uber couldn’t have happened without the iPhone, really other things couldn’t happen without broadband.
And so, I think about, like you know you did have this big kind of like icing in the market with the Vera story and, generally speaking, when we see, like you know, you talk about the hype cycle that kind of moment is almost like represents like a maturing of the market, like the initial maturing. It’s like reaching adolescence almost. And so how do you kind of see the timing of Capturiant and timing of the sector right now? I mean, there’s been a ton of growth. There’s a ton of growth projected. We’re having this moment where kind of almost feels like the bottom dropped out a little bit. How are you thinking about that? Like you know? Do you think it is it? And if the timing is good, is it luck or is it genius, is it?
Jim Row: 26:00
Uh, you know, what is luck? Right, being prepared to take advantage of something, right? So I think it’s. I think we’ve hit the trough of the hype cycle, right? So you have an initial up and then it crashes and we are in that uptick of the crash. The darkest time of the day is just before light, right? So we’re, you’re, kind of back in that space.
There’s a lot of hype with a lot of things that are going on, and there’s a lot of people that had good ideas and et cetera, but the crash happened of why we were building everything out. So the timing for us is actually quite good, right, so we’re coming in with, with products and ideas and services. That is what the market needed. You know, everything from transparency to the trust, to the standardization, to the, to the regulatory aspects, to the compliance mindset, and it’s easier for us to build it from, from leveraging existing infrastructure, than some of the incumbent groups that I’ve already discussed having to retrofit something, cause you have a culture issue as well.
Right, there’s just, and you have a different team that’s not used to doing certain compliance and regulatory aspects that’ll be very challenging, right, you can, you can, you can have them execute very well in one area. But going back to retrofitting is very difficult. For example, if you took a typical US finance group or whatever and you said, okay, now we’re going to all have to be compliant, you know, do as you seek regulatory. It’s a total, it’s a different game, it’s a totally different mindset to do that, and we’ve been fortunate enough to, as I mentioned, leverage off the existing infrastructure and move forward. So I think it’s actually the a good time for us. I think it’s going to be a good market for growth over the next few years, cause now it’s kind of like it’s more rational, right, like people are. People should be asking the questions.
They should have asked Vera, you know, a year and a half ago, let me look at Delta got egg on its face and they’re they’re one of 400 or probably, and you have it. So, you, they were just kind of blindly buying and didn’t really, you know, no one really checked on quality. No one did KYC or AML or all the kinds of normal regulatory. You know, financial activities that you do, those weren’t done, right, and a lot of credits for base are basically being hawked by guys selling it out of the back end of a station wagon right and what you’re going to see is you’re just going to see a maturing.
You’re going to see a more of a compliant, you know, regulated type of market happen. Whether or not it actually becomes purely regulated or not, the mindset will become clear. Think about it If you’re the CFO of a fortune 100 company in the United States, you’ll pause. You want to know who the people are that are selling. Where’s the due diligence? What’s the background? Before you may have been like, okay, I’ll, you know, I’ll flip 10 million bucks to get, you know, the some irate share shareholder off my back. Now they’ll be like, no, we’re going to take a look at this and see who it is. They’re going to want to know. They want to be able to buy from known exchanges or people that have a compliance background regulated. I think you’re just going to see it go to. You’re going to go. It’s going to go to a Wall Street model. That’s what I’m getting. It’s going to go full on. That train’s left the station and you know, if you’re not on it, you’re in tough shape.
John Newtson: 29:36
Yeah, I mean, I think that’s, that’s almost like a foreground conclusion in terms of the trajectory, just because, like you said, like you have a public company, they’re making financial decisions, they’re making commitments to their investors and they need, they need to trust one, not be, you know, accused of all kinds of things that can go wrong, if it’s from something as light as being the skews of greenwashing to outright fraud based on Well.
Jim Row: 30:02
I always say the following what are most people’s jobs in life? Most people’s jobs in life is to keep their job. Okay. Now, if you are a corporate officer or whatever, you want to keep your job. Well, the best way to keep your job is to do better due diligence and make sure that what you’re buying is, in fact, true. Okay, you don’t want to have.
That’s why we believe in what we’re doing and through the whole process, and then do things you know, like insurance wraps and this type of thing. So give them the comfort that they’re not buying. You know just some you know garbage that can’t be verified, as I mentioned. You know some guy selling you know widgets out of the back end of a station wagon. It’s a little different than somebody that’s actually compliant, been regulated, and that’s our thesis. Right is to leverage off that experience and track record Right.
John Newtson: 30:56
Right, and so I would imagine that it’s that kind of approach of taking the security approach to these things, even when they’re not securities. That is part of the value proposition that you have to everybody.
Jim Row: 31:08
That is exactly the value proposition. Not only that, but you know, because we’re I mean, we have over 50 people that are licensed on our team right, we’re actually held to those levels, no matter what we do. Okay which people don’t quite understand as I if you’re a you know, fin or SEC licensed person, you’re actually held to very high standard, right, whether or not it’s actually doing you know, you’re held to a different level. It’s like a CPA or anybody else. You’re held to a higher level. So you know we want to do things right, we want to make sure the market is transparent, we want to make sure that you know you have good buying and selling capabilities and you have good execution.
John Newtson: 31:47
Right, how do you see the competitive landscape for you guys right now?
Jim Row: 31:51
Um, I will make a prediction I think the few people that are in some of the validation side, they actually go away. Really, I think somebody, I think some of the incumbents actually go away. Why do you think so? And people are like, oh, that’s a pretty crazy statement, but you’re talking about some serious, you know, pr damage, et cetera and other things that could end up being, you know, a real challenge. You’re also going to see new products being created that I think are going to be very different in the future and if you’re not bringing them all together, I think you’re missing it.
I think, kind of just the one you know having one little niche in the business isn’t going to, isn’t going to make it. It’s going to. This is going to be a consolidation. If you look at groups like you know, crypto, okay, I know, for example, we started our own crypto exchange and sold it Right. We sold it, yeah, did well, but it was, it was, it was time to go right, and I think you need to know when you’re it’s time to consolidate and it’s when to stand alone. I believe you, what you’ll get is five to eight major exchanges would have you in the world and you, because there’s just, there’s just a lot of it, depending on who you believe.
There’s just such a huge market. You know it ranges from one billion to, you know, $10 trillion market. It’s, whatever you believe, all we know it’s going to be impactful. But I think the competitive landscape consolidates. But I think you also have to be, you have to differentiate yourself as well. So that’s why we picked certain niches. I believe you’re also going to see things like certifications beef up. We’re working on, you know, bad aspect as well. So, you know, because a lot of companies are going to go, how do you, how do you prove that you’ve been, you’re, you know, being compliant with a lot of these activities?
My expectations many of the accounting firms don’t want to take that liability and risk. Right, they’re going to be like you know, they’re paranoid enough of having to do other things to. You know why do you have the separation between the audit and, and you know, corporate. But I, I think you’re going to see it. Look, it’s going to get standardized and regulated, it’s all. It’s going to be kind of a boring business in three years. Right, it’s just going to be a check. But you know, if you look at and I’ll use the extreme if you look at a black rock, they won’t touch your project unless it meets certain criteria. Now I think there’s going to be some backlash on the George Soros aspects of it, where they do these ratings and everything. I think that’s going to people are going to want, they’re going to live
You know, look under the hood on that now, and I think that’s run its course as well. I think you’re you’re going to start to find that there’s going to be regulated entities that actually do the assessment versus these unknown groups out there that just come up with their own. You know, they come up with some mysterious rating that all these corporations fall into place over. I think that goes away too, because I think the market’s matured enough to now that these fund managers, everything like that, just because you know, I just I see that changing.
John Newtson: 35:11
So you’ve got like the Wild West period is basically over in terms of like, what’s an actual, like real asset versus what is kind of you know, I’m going to just trust you. He tells me that this is what it is and I’m just going to trust it and that’s it, and that’s gone.
Jim Row: 35:26
Yeah, totally agree with that. I just would caution you using the word real asset, because that actually has a defined meaning to it.
John Newtson: 35:36
Well, yeah, this is what you have, what it has been represented to be, this credit is Correct.
Jim Row: 35:41
The sloppiness is now over and you’re going to see if. Back to my point if you have mandates or voluntary, it doesn’t really matter. You know if you have a compliance mark, and you have people that need to depend on these. You know reviews and ratings and certifications and validations and authentications and all the stuff we’re talking about. They’re going to want to have proof. Right now, it’s the trust me factor. Trust me is gone and right or wrong that you know that Guardian article was. You know the thing that. Basically, you know it destroyed a lot of value, but it was. It was. It was probably needed because the market was too frothy, and people were literally selling garbage and didn’t really do its intended purposes too right. And the answer, a lot of the answers to that question are no.
John Newtson: 36:41
Yeah, and it definitely. I mean I know that, like Verra has like they’re disputing the underlying like kind of veracity of the analysis that that was used for that. But like what, two months after that article came out, David Antonioli he was a CEO for 15 years and he had to step down, or he stepped down, so like it’s had a big, big impact on them and then the market as a whole, because they were the number one, weren’t they the largest?
Jim Row: 37:10
Yeah, I mean it really. They were their US base where he had gold standards, which is Geneva base, but so they were the two there and you know they were suffering from a lot of success too, right, and their backlog is huge, right there. You know, I don’t know this to be factual, but this is kind of you know, noise in the market that you know they’ve got a backlog and doing some of their reviews of 18 to 24 months, right. So, where we are a private sector and we actually guarantee 30 days, so you know you have, you have, you have different models that will actually end up being much more competitive. They look like any group that’s started, I think, actually there becomes net or a Netscape.
John Newtson: 37:56
Interesting Really, so you think that’s just the way it goes yeah, you’re successful and whatever.
Jim Row: 38:03
Then you had a Netscape’s issue is, you know you were slapped for being successful and, you know, had to change their business, you know. Then they just, you know other competitors came in and it just changed, right, I think you’re going to see that.
John Newtson: 38:18
Yeah, I mean that makes sense and I think so. So, thinking about, like the you know kind of capturing as a business, are you guys self-funded entirely? Are you raising capital? Are you planning to raise?
Jim Row: 38:27
We are self-funded. Today we are in the process of doing some cap raises.
John Newtson: 38:30
Yes, oh really, do you mind sharing, like what your plans are for that?
Jim Row: 38:36
We are. We have, depending on the cap raise for us. We are doing one at the cap turn at level and then we have one at the entoro level as well. Now, we do that because we have a Chinese wall between the two groups, because we have, you know, an exchange and everything. So anything we do like on a prop basis or anything else like that, we have to have on the other side. So we have to. We’re running it just like you would in an investment bank, right? You have to have separations of certain functions. So we have to do that, and that’s why that was one of the reasons for having the different branding as well, right? So we didn’t want to have it all under one issue, because, I’ll cut to the chase, there’s conflicts of interest there, without question. So you need to be very clear, clear in what you’re doing, and you have to have the committees and the processes to separate that function, and we’ve done that. So we, we actually do that internally, we, we, even though we’re not regulated in certain jurisdictions, we act like we’re, you know, we, we operate like we’re CFTC, sec. That’s how we, we approach things, just because it’s a hell of a lot easier. You know, once you’re down a process like that, it makes it a lot easier, right? You don’t have to. You just do certain things to. I mean, we do a full. Like I said, we look at it like a security transaction. When you’re looking at a car, of a credit, and I think I think the people that work with us will find comfort in that, they will. That to me is high due diligence. Is there right, and we’ll. We’ll let the buyers determine. You know what they feel about it.
John Newtson: 40:11
Yeah, no, I can see that and I definitely don’t see the, the CFO market as a super risk tolerant market and so the airing on the side of caution is kind of part of part of the the character for somebody.
Jim Row: 40:30
Yeah, look at the end of the day you’re. You’re trying to check the boxes for the CFOs, the GC, and to make sure you’re doing good corporate governance right. I mean, it’s just the right answer.
John Newtson: 40:45
Yeah, yeah, that makes sense. So, I guess then, just to kind of close this out, then you know you’re building this business as a separate entity and you’re building it, you’re going to be raising capital. Timing is you know one thing, but what the hell do you know about building a business, Jim? You’ve asked me a couple of them.
Jim Row: 41:10
So, hey, you know what you get failures along the way too right? So, you can’t, you know, you can’t just expect everything to be perfect. So, there’s still seven days a week and long, long days. So, you, you don’t give up until you’re far into the. You know the W category.
John Newtson: 41:29
Yeah, but yeah, I think it’s cool though because, like you have built quite a few businesses. You’re, you know you’re within the world of entrepreneurs I think of, like the capital markets, entrepreneurs are a very rarefied space in the sense that the complexity capital markets right, it’s just the regulatory complexity, the nature of markets, the. It’s a very interesting space and you’ve built a lot of different things over the years, like what keeps you in this market other than the money, I guess.
Jim Row: 41:59
Well, actually, you know, a little bit of a workaholic. So you, you know I’m, my golf game is horrible, so that’s not going to be an option. So you know, don’t burn, don’t waste a good walk there. So you know, just get out there and keep swinging. So, you know, for me it’s just a good opportunity and keep going. I personally like to work, so work is actually enjoyable to me. Where a lot of people find it horrible, I actually find it enjoyable. So just, you know different, you know different type.
John Newtson: 42:35
Fair enough, that’s what. That’s what I feel, like most founders that I, that I know, and it’s it is. It’s like they want to get together and talk about the business. That’s their hobby, it’s their passion, Like it’s the thing that gets to my side. It’s like when you hear, like I watch shows, like where comedians are talking about the craft of what they do and like telling their war stories, and it’s the same thing Like people just like building businesses, they like being in certain sectors and like the there’s a history of. Like you get together with other folks who are doing stuff in that space and like those are your people, those are people you can talk to you because you share that passion.
Jim Row: 43:11
That’s, that’s, that’s the energy you know feed off of that and at the end of the day, being an entrepreneur, you know it’s a horrible job description actually, because it’s, it’s tough. You, you know, you’ve done it yourself it’s, it’s not easy.
John Newtson: 43:26
Yeah, usually, usually you start. You start because you. My view is well, why did you? Why did you just start a business is because I couldn’t keep a job, and then you find that you love it.
Jim Row: 43:37
Without doubt, right. I mean, you know most entrepreneurs are not employable, right, you, once you’ve done it, you, because you get, you have a sense of mental freedom and the the other thing is that you know most corporations and and you know functions are, you know, very, very confining and they don’t, you know they don’t work well for the 1% of the, the population. That’s entrepreneurial, truly entrepreneurial, right, like really, truly. So it’s a, it’s a mental freedom aspect and it’s you, you know people are just wired differently, that are, that are entrepreneurs. They want to, they want to build something you want to achieve. They want to. They want to, you know, they want to improve and I like being around people who want to improve.
John Newtson: 44:21
Yeah, yeah, absolutely Well, I appreciate you coming on here, Jim, and talking about them, everything you do in their Capturiant and kind of. It’s really exciting to kind of watch the market develop and to see what you’re doing there and hopefully you’ll come back as this, this evolves and keep us up to date on what’s happening. Be happy to Awesome.
Jim Row: 44:42
Thank you, sir.
John Newtson: 44:43
Capturiant is the world’s first regulated carbon credits exchange.
It’s actually a “one stop shop” for the buying and selling carbon credits as it’s a global environmental asset validator, authenticator, registry, and regulated exchange operating on a regulated private sector model utilizing distributed ledger technology (DLT) and insurance coverage.
Jim Row, founder & CEO, joins me on Capital Markets Tech today to share where he sees the Carbon Credit, market going. Some projections estimate it will hit $2.6+ trillion by 2028 but there is a lot that has to happen to reach that market size. In 2022 the trade value of the market was $978 billion.