The Nextspace™ Broadcast

[Rachana, Host] Today we have Daria Lipatova and Alex Lazareko from Offsetted.
Offsetted is a startup working in the sustainability space based in Hamburg, Germany, and they offer automated carbon accounting for organizations. And they also do ESG, which is Environmental Social and Governance monitoring and reporting for financial intermediaries and institutions. Daria is currently based in Singapore and she has a background in business and international relations while Alex is joining us from Silicon Valley all the way on the other side of the planet. And he has a background in software engineering. And welcome to the Nextspace™ Broadcast.

[Daria, Offsetted] Thank you Rachana for having us. It's really a pleasure to be here today.

[Rachana, Host] Thanks for taking the time and yeah, let's probably dive right into the conversation. You are developing and providing these carbon accounting products for your customers. Of course you are using satellite imagery is what I assume. So can you talk about how you guys use satellite imagery or any other satellite applications like GNSS
or Positioning Services, for instance, in your emission models or in any other customer product offerings?

[Alex, Offsetted] So we've been looking quite heavily in the space of how we could actually implement such kind of data in our platform. And we would rather understand that this is one of those strategic directions where we want to move forward. So since currently we have started to enter the market with a slightly lightweight solution for small and medium sized companies We can’t really apply this data in that segment, but we are currently working on the new version of the product, which is an orchestration software which allows you to manage the whole process from measurement to reporting side, where we connect to ecosystem of different partners and software, hardware that third party data providers and satellite imagery is definitely a thing which we want to integrate in the future, but we can see that currently demand is on the side of slightly larger companies who are having manufacturing facilities or who are in heavy industry, and especially relevant and interesting use cases. In this case: detection of leakage of methane or the huge leakage of CO2 emissions, which is quite relevant in that space.

[Rachana, Host] Have you tried already to access these satellite imagery or, let's say, applications? And have you encountered any barriers in accessing them?

[Alex, Offsetted] So... we have tried several solutions and spoke with some partners on our side. Both from research institutions and from startups like ourselves and we all came up with this solution that currently the main barrier is the price. Price tag of this data as well as their availability, because for the majority of us, the data resolution of free data sets is too low and to access high quality data in the majority of cases, when we are speaking about the implementation of platforms for large companies, it requires a lot of imagery, so it becomes quite pricey for a startup to implement such kind of data in the platform from scratch. If they don't have any commercial projects ongoing or dedicated budgets for this activity.

[Rachana, Host] So taking forward the pricing part: What part of the budget. Let's say for a typical project or customer solution that uses satellite imagery spent on acquiring the relevant satellite imagery.

[Alex, Offsetted] It's hard to say, to be honest in this case, because we haven't had any customers in the segment who would use this solution. But I think that it is not going to be extremely high in comparison with what exists in the market. But as I have already told you, for our partners, for whom I've tried to implement such solutions, it was quite pricey. Unfortunately, I can't tell anything besides that.

[Rachana, Host] Ok, the price for the kind of resolution, let's say spatial resolution you're looking for, seems to be prohibitively high from what you say. That's very interesting and a good data point to have. Aside from the price, is there enough satellite coverage? For example, have you ever encountered that, hey, for this geographical area, there is no satellite coverage, even if I'm willing to spend. Have you encountered any geographical areas where even though you're willing to pay that money, there's not enough satellite coverage in the bands that you want in the spatial resolution that you want or the spectral bands that you want.

[Alex, Offsetted] So since we are working with the customers well located in the major centers of the world, mostly the data is available. But I think that some other companies in the space who are working with customers with a more distributed geographic position, the problem might be, actually, a persistent one for them.

[Rachana, Host] Have you guys ever thought about owning your own satellite constellation or your customers for implementing what you are actively using or want to use satellite imagery for? Do you think they ever considered owning their own satellite? Because in the long run it could become more inexpensive, cheaper, rather than buying this imagery at a super crazy price?

[Alex, Offsetted] Yeah, this is definitely a very good question. So I think that some of the customers really might want to have their own satellite imagery. Especially if they're in some kind of business where they need to have this data updated very frequently, and that will be really dependent on the type of business of which we are speaking about. But I can see... what I can see from scientific research and from the market reaction. This is definitely an area where companies are very interested in because besides carbon emission monitoring or methane leakage you can find out a lot of different applications of those satellite imagery, specially in the agriculture sector or any other sector. For example, if you are monitoring the quality of trees or you’re monitoring the different quality of carbon offsets or basically there is value definitely in this data and you can get some extra value if you apply it for other use cases of the business. The add-on on that data might be beneficial for lots of companies when this will become more accessible on the market.

[Rachana, Host] So we just talked about the satellite imagery part of building your products,
but can you probably walk me through how you build your product or any other product offerings just to have an understanding of potentially other areas where satellite applications could be useful for you.

[Alex, Offsetted] For our case, the satellite imagery is going to be another data source for our platform, because typically we integrate with different software which is installed inside the company like CRM systems, CRP systems, energy tracking systems, logistics systems
and other types of software which checks for activities of the business. And basically we're aggregating this data and getting that carbon monitor carbon emission monitoring on top of the data which we get from those platforms. And definitely satellite imagery will be a data provider for ourselves. And as soon as we have, as soon as we acquire customers who are willing to take this approach, we're more than happy to integrate it into our platform because
It's just very exciting to use on our side because it allows us to generate interesting insights.
And that provides very nice and informative visuals on the platform itself. So I think that this data will be a good value add-on on our platform.

[Daria, Offsetted] Alex, maybe we could also populate a little bit more on the product itself.

[Alex, Offsetted] So the product itself is a platform which helps you to measure and monitor carbon emissions. So what we're currently building is a platform which connects to different data sources, segregates it. Then it provides you with measurement and monitoring of this data. And now we are moving forward towards designing carbon reduction plans, which would be there automatically. So to go into automated carbon reduction plans, we implement process mining technology. By using data from software systems, we can create some kind of digital winner for business processes which is then enriched with environmental data and when we have this model, it could be optimised by itself in order to be less emittive in terms of carbon reduction or it could be connected to ecosystem partners in software or hardware
to help to optimise certain aspects of the business in order to reduce carbon emissions. And for us to understand how to better assess them, we really need those data sources; And satellite imagery will help us to understand the carbon footprint better of larger customers with huge production lines for example.

[Rachana, Host] Daria, I wanted to ask you. Now that you're based in Singapore and trying to build, you know, your entire customer base or trying to expand into that market, are there any cultural differences or geographical differences in how customers come to you with the kind of products they want? How is it different from the U.S. or from Europe? How is it different in and around Singapore?

[Daria, Offsetted] That's a really great question. Because we're currently entering Singapore as a part of the German Accelerator Asian Market Access Program. And we are proud participants of this program here. But we started our journey towards Singapore about six months ago when we first learned about the great national initiative called Singapore Green Tech Plan 2030. And definitely you could read a little bit more on that on the Internet.
But the major goal of this green tech plan is to actually put Singapore on the, on the avant-garde of the development of clean tech in the world. And I see currently how quickly Singapore is moving towards implementing various types of clean technologies.
And currently we are preparing to launch our new product that is basically focused on working with our financial institutions as well as a Singapore exchange listed companies
that would allow them to better understand ESG related monitoring, benchmarking as well as provide them with easier reporting opportunities. And this is only possible because the local government and the monetary authority of Singapore in line with Singapore In Exchange are implementing global frameworks for ESG monitoring and reporting such as TCFD and we believe that next week we will hear a little bit more on this development here in the region.

So with our product Offsetted finance that we are launching at the Singapore FinTech Festival, we actually are dealing with the three scopes of emissions of all of our customers, according to the greenhouse gas protocol. And you might believe that the scope there is traditionally the hardest to define and calculate. And that's why we believe that through space imagery, we could get more precise data for our calculations for our customers coming from various sectors and also working with their petroleum. on a broader level.
On a broader level, preparing for our session today, I also read a couple of articles and researches and I also see that there is indeed a pressing need in such a technology.
And for example, there is a great initiative called Spatial Finance Initiative coming from the UK that brings together research capabilities and space data science and financial services.
And this initiative also focuses on integration of geospatial data, including the data that comes from NASA, remote sensing, payment systems and others with financial theories that allows to develop applications related to climate risk, transparency and verification. And we also are including these trends in our product roadmap and as we go, we see that we'll be using it more and more.

[Rachana, Host] That's so very interesting, like a culmination of different areas and different perspectives on solving the whole, I wouldn't say solving the climate change problem, that's too big of a problem to solve. But looking at it from the perspective of sustainability, that's very interesting. And you also mentioned that mostly it's your customers that use satellite imagery or the products that you provide. Do they also use or do you think they would also benefit from having satellite connectivity, let's say, real time broadband kind of speeds of satellite connectivity? Do you think having this in the product offering or the customer being able to implement these on top of the products that you offer? How do you think this would make a larger impact or do you think satellite positioning is not really necessary?

[Alex, Offsetted] So let me take this question. So I would say that for our space where we actually act this type of connectivity, maybe isn't really necessary. But there is another area where this connectivity is going to be necessary. And I'm speaking about climate risks. So I've just been to an event in the German Accelerator here in Silicon Valley where we had a panel and one gentleman was the representative for CVC of one of the largest German insurance companies. And he was speaking about the issue related to climate risks modelling. What is going to actually happen with some kind of manufacturing facility or any other things due to climate risks. So hurricanes or earthquakes or whatsoever. And in this climate risks model, building just a climate risk model is a very big challenge nowadays.
So because you have to take into account so many different data inputs as well as economical consequences of shutting down a particular manufacturing facility or any other thing. And here actually the speed of getting the data and the frequency of updates might be crucial for some components because as we all know, when we calculate risks either in cybersecurity or credit risks or any other area, sometimes real time data really matters.
And getting something in the minute before might take you an advantage, which could lead in an hour or 2 hours which you will have to react to a certain event. And this is definitely an interesting point. It is yet to be explored, but I'm quite sure that satellite imagery and different connectivity between it is going to allow us to build barrier risk scoring models and to make it quicker.

[Rachana, Host] Can we maybe talk about what kind of customers you usually have for your product, the ESG or the carbon accounting products perhaps?
[Alex, Offsetted] Daria, I guess that's probably your forte.

[Daira, Offsetted] And I just wanted to add to the previous question. That as we see that there are more and more solutions that are being introduced to the market almost every day
coming from various regions and tackling various industries. We see that the most competition comes from the speed and the quality of calculation as well as the customer service. So I believe that our approach towards working with technology providers, including satellite imagery, would allow us to win the race. in terms of the speed of our calculations as well as currently, most of them are performed in a retrospective manner and as soon as we have those integrations that Alex mentioned, we'll be able to speed up the process
as well as increase the efficiency and make our calculations more precise. And in terms of the customers, we're currently focusing on our two major products. The first one is of slatted carbon, which is your classical carbon accounting platform that performs calculations through the pre-scopes of emissions, according to the greenhouse gas protocol. And we have been piloting this platform this summer with various customers coming from, for example, information in international trade and manufacturing industries as well as currently performing it for a customer in agriculture. And with accepted finance, we have been already testing it with a venture capital firm that is Singapore based and has about 50 million USD under management and 35 portfolio companies across the globe, but majorly focused on Southeast Asia. And the first result shows that our approach towards automated carbon accounting really saves time and effort of the companies that want to have their calculations in place, as well as integration of a layer of ESG reporting allows them to further introduce our recommendations to actually enhance and improve this score.
And this not only allows them to respond to the pressure that comes from the regulations, but also create long term opportunities for business growth as well as increase the investment attractiveness of their companies.

[Rachana, Host] That makes for a very interesting demand for real time satellite imagery
and perhaps also satellite connectivity. Coming from a very satellite manufacturer perspective, I see a lot of demand, even though Alex said it's not really of paramount importance to have satellite connectivity. I kind of envisage that and I hope it would really help you make a bigger impact.

[Alex, Offsetted] While I was listening to Daria’s response to that question, one idea came to my mind. So here in the States, we are checking their Real Estate vertical and it's speaking about these residential complexes. Sometimes maybe it's going to be beneficial to have this data in real time. But when we're speaking about the real time collaboration between users and if we can find the application where you can get the instant feedback
that some change in behaviour, change actually a carbon footprint or any other thing which we're trying to optimise, this might be of interest to get those data in real time. So we really have to search for the applications where there is going to be a value to get this data instantly. And for this, we will definitely need to have connected satellites, which will be providing real time data.

[Rachana, Host] That’s good to know and it is good to know your perspective as well.
So let's say maybe we can think of a thought experiment. Let's say tomorrow, high resolution satellite imagery, real time satellite imagery is almost free or extremely affordable, and satellite connectivity also becomes very, very affordable. How would that change your idea of automated carbon accounting, this whole, you know, the platform or the generation engine or your other product offerings?

[Alex, Offsetted] So it's a good question. If we have this data almost free, we definitely going to integrate it and think about the applications of what we can do with this data
besides carbon accounting, the carbon footprint calculation, and these traditional applications which we already have on the market. So definitely try to find some new ways of how we can use this data to provide some additional areas of analytics based on that
and provide different insigts in real time. But I think from my perspective, what I will be looking for, I will be looking for ways of bringing additional value on top of our existing products based on the data which we receive from satellites.

[Rachana, Host] That sounds interesting. Could you perhaps think of any examples on what kind of additional value?

[Alex, Offsetted] For example, let's say if we're speaking about some platforms which provide the functionality of calculation of carbon footprint for individuals, there’s an idea which comes to my mind. So for example, if you have a house where you have a chimney
and if I want to know the carbon footprint of a chimney, you can measure that as a satellite if you have enough precision, of course, and if it's technically possible to detect it. But something like that.

[Rachana, Host] That would be fantastic. I would be happy to subscribe to something like that because just yesterday we were having a conversation around this in my office because some of us bike to work and some of us use a car. So we were gloating over the ones that use a car that our carbon footprint is low. This would give us some good statistics to kind of compare and compete, I guess.

[Alex, Offsetted] Yeah. In case if we have such high precision that they can detect it on a car level or on a chimney level, it's going to be extremely interesting to find the ways and brainstorm different ideas on how this can be brought to life.

[Daria, Offsetted] And from my side, I could add something that is connected with the reporting part of things that is currently coming from the regulator pressure. As we know, most of the companies are trying to be as transparent as possible with publishing their ESG reports. And it is also important because you want to by any means, avoid any type of greenwashing and of course, accessible and cheap and automated access to space imagery, in my opinion, would be would be leading to avoidance of any possibility of misusing, of misuse of information in terms of the company's sustainability approaches, and also empower them to become more transparent and also, we believe that we might see more beautiful photos that would be published in this reports. And then you could compare their beautiful goals that they so said based on science and scientific based goals, and compare the year to year performance of these companies on their way to actually achieving their made zero pledges.

[Rachana, Host] Absolutely, transparency is paramount. I absolutely agree. Daria, I have another question for you. So what kind of customers are most interested in your products?
Is it the industry or is it public institution ones or financial entities or which of these?

[Daria, Offsetted] Answering your question, we really need to segment the market. First of all, in terms of geography, for example, as we have started to narrow down our discussion towards industry cases, industry specific cases and geographically specific cases, I could say that here in Singapore, for example, the major demand comes from the companies that are first and foremost hit by the regulations. For example, if we are speaking about the listed companies here in Singapore listed on the Singaporean exchange starting the next financial year, the most emitting industries such as energy, food and agriculture as well as financial institutions will be obliged to monitor and report on their ESG performance and only starting the next year. Other industries will join these requirements. So we believe that still the regulations are one of the most pressing drivers for the companies to look deeper and look more precisely on their performance. While we also consider that working with financial institutions is very important for us as a company because we are also able to provide the transparency of their scope 3, where their emissions, finance emissions, as we call them, all their portfolio comes from. So in this in this terms of we are working with venture capital firms
and private equity firms that are willing to understand their finance emissions and understand how their portfolio performs in terms of carbon emissions as well as broader
speaking of ESG.

[Rachana, Host] That makes a great use case. Also for satellite applications to be targeted at these customers. I think I have a lot of information from the satellite perspective from you guys, but we haven't talked about green financing yet.

[Alex, Offsetted] So from a green finance perspective, I think that the most interesting application and the first customers who are going to use this and are already using satellite imagery are those companies who are in the carbon trading space. So I'm speaking about the validation of carbon offsets, straightening out progress of those projects. They typically use satellite data already, and since the market is growing quite rapidly in this space, more and more applications will be used for that. And if we are speaking about other companies
who could be green banks, for example, who finance different projects. And if they want to, and they do not if, but they really want to try the progress and they want to understand what is going on with emissions. And if those projects could be trackable by using their satellite imagery, they would be definitely interested in these applications because this is going to be quite a straightforward way for them to monitor the progress and to see if the projects they invested in are meeting the requirements which were set.

[Rachana, Host] That's a very useful insight. And yeah, I think we have a very good perspective now on how the whole carbon accounting kind of space uses satellite applications speed in the form of imagery or satellite connectivity. And that was a very insightful discussion. And you guys have given a lot of details and a lot to think about from the perspective of a satellite manufacturer, you know, someone on the other end of the value chain, how we can better architect our platform. So it would help the end user because ultimately the users of satellites are on the ground. And this is our effort to kind of understand what the end-use of the big giant, the fancy satellites, we're building is. Thank you for all these insights. And it was a very interesting, very fun discussion. As someone who's passionately, personally interested in sustainability, like all of us should, this was very great. And you guys are doing absolutely wonderful work. I hope to, we hope to engage much more with you guys in the future. And I also personally hope to be connected with you guys. And I'm going to follow offsetted Your journey looks very exciting and I wish you all the best for everything. And thank you for your time today.

[Alex, Daria, Offsetted] Thank you. It was a pleasure to participate. And we hope to really just stay in touch and to be working together more and more as we develop our platforms.