Can forests be banks? A new venture capital group is buying forests and wetlands. But they’re not cutting down the trees or starting farms … they’re monetizing nature by selling carbon offsets, and looking to see increased value in the underlying assets.
The goal for land owners? The ability to do nothing while making money. In other words, NOT cutting down the trees, NOT putting in a mine, NOT draining the wetlands. The goal for businesses and people? The ability to buy carbon offsets … and invest in the bank of nature.
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(This transcript has been edited for length and clarity.)
John Koetsier: Can forests be banks? Welcome to TechFirst with John Koetsier.
A new venture capital group is buying forests and wetlands, but they’re not cutting down the trees; they’re not starting farms. In fact, they’re monetizing nature by selling carbon offsets. They’re tokenizing biodiversity in a blockchain-based natural capital marketplace, and letting people vote on which lands are the most important to save.
To get more details, we’re chatting with Merit Valdsalu, CEO, and Andrus Aaslaid, CTO of Single Earth — and I hope I didn’t butcher your names, guys. Welcome!
Merit Valdsalu: Thank you.
Andrus Aaslaid: Hello.
Merit Valdsalu: It’s very nice to be here.
John Koetsier: Excellent. Super happy to have you. And you didn’t say that I butchered your names, but you didn’t say that I didn’t either, so I’m going to accept it as a win and move on.
Merit Valdsalu: Yes.
John Koetsier: Let’s start right at the very beginning. What is Single Earth? What are you doing?
Merit Valdsalu: So, Single Earth is an online platform that enables forests, wetlands, and other natural resources to generate profit without being sold as raw materials … but instead as carbon offset and biodiversity offset.
Because right now, the only way for a landowner to earn money from the forest or other lands is through intensive land use, like, you’re cutting a forest or digging up a wetland for peat extraction. But that completely destroys the natural ecosystem in these areas. So, we at Single Earth are actually doing the exact opposite. We reward landowners for not clearcutting their forests and not digging up their wetlands … but instead, for preserving the ecosystems that actually keep all of us alive. So—
John Koetsier: Very, very interesting. So it’s carbon offsets and there’s more to it, of course. You’re putting it on the blockchain. You’re doing a few things with it that are pretty cool. How does that all work?
Andrus Aaslaid: Well, when we separate it from the cryptocurrency, how it was used, then blockchain is a pretty neat thing. The problem is that we turned it against itself by doing speculative instruments, and when — for years, I’ve been saying that there are two things I probably will not touch as a developer: one would be green tech, and one would be blockchain.
And when we met with Merit, then I all of a sudden realized that blockchain is one of the very few things which literally suit for saving the nature very well, because it’s very good at keeping models and very good at making things transparent.
So we are kind of creating something which hasn’t existed before … and that would be that we are tokenizing nature and the value of the nature into the blockchain. And one big thing that Merit also mentioned, was that if we can somehow give value to the nature which is tradable. Because at the moment, why gold is so good, because it’s liquid; we can always have gold and sell it and everybody wants to buy it, so there’s no problem of us having too much gold.
With nature, especially the one which is scarce and has a good habitat for species, for that kind of nature nobody wants to buy it because if there is a precious animal living in it, it’s worthless. I can’t cut it down. I can’t dig it up. I can’t do anything with that. So why the value? And this is exactly what blockchain gives us. It gives us a digital twin kind of representation of those values and we can trade them. So if you—
John Koetsier: I don’t know if I should say that it’s sad that we can’t value nature unless we can extract things from it, or say that it’s wonderful that you can value nature in a capitalistic system by assigning value to it.
Merit Valdsalu: Yeah, well, that’s the thing that actually we realized quite soon. When we started with the company, we were actually looking for a solution on how to preserve forests, how to prevent forests from being clearcut, from being cut down. And then we quite soon realized that the only way to actually make a difference is to pay … to pay the forest owner for keeping the forest growing.
So we had to figure out business models that would actually help us do that. And carbon offset actually works perfectly for that, because forests as they grow, they remove CO2 from the atmosphere. They also have a lot of biodiversity that we need to protect. But this information is not available for everybody.
So as a forest owner, you will know how much timber there is in a forest, but you wouldn’t know how much carbon is sequestered. You don’t know the exact biodiversity value that it has. So that’s essentially what we do. So we first calculate the ecological value of a forest, and then we tokenize this value. And basically what we can do with that is we can emit a new token for every CO2 ton sequestered in a specific forest. And that’s how technology helps us to bring this ecological value to the world, to make it tradable.
John Koetsier: Wow. So you go to a forest and you assess its value — I assume you have a biologist helping with that, or a team of biologists helping with that — and a particular tree, perhaps a giant tree, maybe a giant Sequoia in California or something like that, that might be worth X number of tons of carbon offsets and be on the blockchain forever afterwards?
Merit Valdsalu: Correct. Yes.
Andrus Aaslaid: There is this thing though that we have to also keep in mind, that if we measure everything in carbon, then I’m always saying that you always get what you measure. So if you measure carbon tons, the carbon tons are what you get. And people are getting very creative in how to use all of those government [subsidies] for having more carbon tons. And meanwhile, we are going south with everything else [for the] sake of the carbon.
So carbon has been a very good equivalent, so far, for calculating nature, but I think we’re now also moving to the new paradigm where we start talking about biodiversity and measuring other things besides carbon. Because yes, carbon saves us and the greenhouse gas measurements methods save us from overheating, but we don’t want to be on this cool planet ourselves without having any other species around us.
John Koetsier: Absolutely. Absolutely. I love it. Merit, I want to ask you this one, because obviously you’re doing carbon offsets and there’s been some controversy over carbon offsets, right? Do they really reduce the amount of carbon in the atmosphere? Or are they just a way to greenwash other things that you’re doing? Do you have an opinion on that? Do you have some insight on that?
Merit Valdsalu: I do have an opinion on that, and I am also worried about a lot of carbon offset projects that actually don’t do good for the nature. For example, like this tree planting in places that clearcut for us and then plant new trees, they don’t actually do good for the nature. That’s not good. Like, what would be good is preserving the healthy ecosystems that we already have here.
But that’s not a thing that’s so easily monetizable, like, how would you put a price on something that you just want to keep as it is? You don’t want to do anything there and you want this to have a monetary value. So that’s been the challenge for us in how to monetize doing nothing … but it actually provides us with the ecosystem around us.
John Koetsier: This is the challenge for billions of people on the planet: how to monetize while doing nothing. And apparently you’ve solved it, but only for trees. So [laughing] that’s a great thing … but, excellent. Talk about your first fund. How much have you raised? Are you still raising? What are you looking to take it to eventually?
Merit Valdsalu: So right now, we have the first fund of $3.9 million which is made by the founders of Pipedrive. Pipedrive is the latest European unicorn, and the founders they made an exit from the company, but instead of putting the money that they earned from this deal in like traditional banks, they decided to use this money to buy forests and wetlands and other natural resources.
Now why they do that is because they already know that the value of nature is going to increase over time. Because as we move towards climate change and biodiversity loss, then what’s the one resource that is going to become the most valuable thing on the planet? Well, it’s the nature, it’s the healthy ecosystems that actually keep us alive, and we’re going to learn more about that in the coming decades. So, but as an investor, you are looking for things that are going to increase their value. So nature is one of those assets. So the value of forests as an asset will grow over time.
John Koetsier: Wow.
Merit Valdsalu: But in addition to that, it also enables them to generate profits through carbon offset and also biodiversity offset, like the emerging markets that are going to expand in the coming decades. So it has, actually has like these two ways of making sense financially. So it generates profits through offset, but it also grows in value over time. So I think it’s like the perfect solution.
John Koetsier: Wow. Will it grow faster than bitcoin?
Merit Valdsalu: I hope it will, because nature is the one that’s going to keep us alive and save us.
John Koetsier: Andrus, I’ll turn to you. How will the marketplace work? We talked a little bit about how people will make money on it. Talk a little bit more about how the marketplace works and why it’s important that it’s on the blockchain.
Andrus Aaslaid: Well, if we look at — take gold, at the moment, which is a universal kind of representation of a value. Then we have it as an equivalent, it’s tradable, and it’s a good thing to use as a measurement because it’s difficult to forge. So, you can’t fake gold, you either have it or not. But they have been doing it for centuries, trying to create false gold and still haven’t succeeded.
Now, nature, if we look at the general sense of it, nature is also very difficult to falsify. I mean, you can’t create more trees out of nothing, you have to grow them. So in a sense, nature shares the same idea as gold. We have a limited amount of it, but we haven’t been able to value that because it’s not tradable easily.
And that’s where the blockchain enters into place, because if we’re able to, like I said, represent the value of that particular piece of nature in the blockchain, we can tokenize it. And tokenization means that we can make it tradable in smaller pieces than a hundred hectares or a thousand acres or whatever.
And when we monitor it, on the other hand — so with a blockchain, what we have stored in there are actually the environmental data about the particular piece of land, the satellite monitoring of the forest, the environmental data of the air quality, the carbon sequestration numbers. So we have this model of essential capabilities of this piece of land, which counts as us for the whole planet that we need this to be there. We need this forest to work as it does, and if we put that in a blockchain we’ll [be] able to issue that value and this value becomes a tradable asset, which means that we can trade with something we need.
John Koetsier: You know what I love about that … bitcoin has value because of scarcity, but no other reason. I mean, if we all decided tomorrow that bitcoin isn’t worth anything and nobody would ever buy it, its value would drop to zero. It doesn’t matter how scarce it is, you could take half of it out of circulation, there’s zero value.
Here, you’re talking about something that has limitations on how much there is. There’s just natural limitations to how much there is on the planet and how much there is in your particular fund, but there is also in addition to that scarcity, there’s also a real asset backed there. There’s a real asset there.
Now, what does it mean? Let’s say that I think this is absolutely amazing and I want to buy some of your tokens. Do I own a fractional share of a forest in Europe, or a wetland in Brazil, or what’s that mean for me? And what’s that mean for somebody who might own the property right now?
Andrus Aaslaid: You can do that two ways, basically. One is that you already have this piece of land that you want to be not cutting down for timber or not dig up for natural resource, but you want to kind of keep it as it is and get paid for doing nothing.
Which means that you enter to our marketplace. We measure, we tokenize, and all of a sudden you find yourself a new kind of asset which makes your money, because somebody else needs to neutralize their activities somewhere — of maybe destroying something, but maybe just out of the goodwill to show their customers that this is what we do. So this is the one way that you’re already an existing landowner. The other way is that you want to create either the fund yourself, or you want to contribute a smaller amount of money to the fund or to one of the funds we are working with. And then you will become an owner of those tokens [which] are somewhere at this fund, owned by the — well, the property still needs to be registered somewhere, which means that somebody has to own the land officially as well.
But you will be an owner of part of that landmass somewhere, which is owned by that fund. So it’s two different methods, depends on what amounts you want to invest.
John Koetsier: Interesting. So I do own some percentage of that land there if I own those tokens, and that’s a legal actual fact?
Andrus Aaslaid: Yes.
John Koetsier: Wow, very cool.
Andrus Aaslaid: You are owning a piece of the fund as your own it in any other place.
John Koetsier: Okay.
Andrus Aaslaid: And the IT system behind it which trades with those tokens is basically an [indistinct] vehicle of creating this return of investment, because we see the new generation of the consumers appearing who are born after 2000, and they are very conscious about that they are inheriting the planet which is kind of screwed up. So they are the ones who will probably start demanding more and more that whoever tries to destroy it, pays at least some contribution back to someplace else that this is — or as close to home, preferably, as possible.
Which is actually another very important aspect about it, because so far most of the offsetting business has been happening quite anonymously. You will be buying your carbon offset most likely at the other end of the world. And it’s still the same planet, so you can say, well, it doesn’t matter where do we contribute. But it is still lacking this notion that I am working here, I should contribute to the people whose environment I’ve been digging up somehow. So it democratizes it by bringing it closer to home for people.
John Koetsier: Excellent. So Merit, I asked you earlier and you talked about your current fund. How big are you looking to get? Are you looking to raise again in the future? You know, what size are you aiming for?
Merit Valdsalu: So the next milestone for us will be to raise a $10 million fund and also explore like different natural resources. Because right now we are quite good at tokenizing and calculating the ecological value of forests, but we also want to look at wetlands … but also like agricultural crop lands and different land types. So this is like the next milestone, and after that, probably the next funds will be more than a hundred million dollars.
John Koetsier: Okay. And Merit, where are you buying lands right now to add to the fund?
Merit Valdsalu: So right now it’s mostly Europe, Northern Europe, so … close to home. But as we have this global map of natural resources already live and we invite people to vote there which lands to save, then this will be our, like the place where we look for the next markets to expand to.
So basically what we asked the global community to do is to tell us, so what’s the next country that we need to focus on? Where are the biggest challenges that we need to tackle next? So if you, for example, see a lot of votes being given to, let’s say, a rainforest in Brazil, then this is then our next target. We will know where to expand next. So that’s why we want to bring this global community in and then we, basically, what we want to do is crowdsource the problems to solve.
Because the local people are actually those who know best what’s happening in their local areas, and they know which areas are actually in urgent need of protection. So we want to also crowdsource these problems.
John Koetsier: So let’s assume that somebody thinks this is amazing and wants to buy into the fund. Where do they do that? How do they do that?
Merit Valdsalu: They would have to contact us and then we will set it up. So this first fund for us is like the way how we test different business models. We learn a lot. We are still developing a lot of these ecological models. So a lot of this is going to be like an ongoing process. Like the research is currently being done in the universities about the ecological side of what we do about the carbon, the biodiversity and everything. So it’s going to be like a never-ending story to get the entire planet tokenized and uncovered.
John Koetsier: So I can’t buy your token today. When will I be able to?
Andrus Aaslaid: Well, today is something where you sign up and when tokens are traded it’s going to be — if everything goes well, then within the next two months.
John Koetsier: Okay.
Andrus Aaslaid: Then you will be able to buy it as a company for neutralizing your carbon offset. So we’re tokenizing now, but the marketplace is opening only in two months, because we are quite a small team and can’t do everything [at] once. The important thing to distinguish though, is that we’re talking here a lot about creating the fund for buying up nature.
Single Earth is not a fund itself. Single Earth is an enabling, or enabler for having those funds to exist. So, for example, our first partnering fund — we are working together at the moment — is put together by guys who did just exit from the Pipedrive, the latest unicorn in [the] European Union.
And so while we have also the portfolio of our own, then we are not trying to become like the largest landowner in the world. We are trying to provide the technology that people who own the land would be able to create profit out of it without having to sell it as raw material.
John Koetsier: I see.
Andrus Aaslaid: So we are basically, we are not minting gold. We are the bank who trades, or kind of a stock exchange who trades with those assets.
John Koetsier: Okay, okay.
Andrus Aaslaid: So we bring together the landowners and the companies who want to contribute to those lands.
John Koetsier: Just companies? Or can individuals as well?
Merit Valdsalu: Well, we have been mostly talking about companies, but there’s a lot of — like the market has been indicated that there’s actually a lot of individuals who would like to contribute as well.
John Koetsier: Yes.
Merit Valdsalu: So, we’re probably opening up for them as well.
John Koetsier: I can totally see how individuals would want to put $100, $500, a couple thousand dollars or something like that into this … partly as an investment, partly as out of a sense of social responsibility or something like that. So once it is tokenized and up and running, and the exchange is running, that would be very interesting to see.
Well, this has been super interesting. As you know, TechFirst is about tech that’s changing the world, innovators who are shaping the future. Merit, I’ll ask you first. Why are you doing this? Why did you pick this particular thing to do with your life right now?
Merit Valdsalu: Well, quite frankly, because the natural world around us it’s dying, so we need to do something. We still have some nature that we are able to protect, that we are able to save, so we just needed to find a way how to do that. And it turns out, like the only way we can do that is like integrating nature preservation into the existing economy. And if that’s what it takes, then this is what we just have to do. A
nd starting with these nature-backed financial investments is actually a very sensible way to do that. It actually makes a lot of sense if you look at how the value of nature is going to increase over time. So, from my perspective, I think just finding ways on how to actually make a difference, how to actually save the nature around us is what drives me. Yeah.
John Koetsier: Excellent. And so, look into a crystal ball for us, maybe 10 years out or something like that as you continue down this path. What do you see as your end goal?
Merit Valdsalu: Our end goal is to pave the way to nature-backed banking, because that’s the way how we can integrate nature preservation into our everyday life so that the economy would support the preservation of nature. And that’s the only way that it can actually work.
John Koetsier: Tokenize the whole planet?
Merit Valdsalu: Yes.
John Koetsier: Tokenize the whole planet — that is a big job! Excellent. Well, thank you so much for joining us on TechFirst. I really do appreciate it.
Merit Valdsalu: Thanks for having us.
John Koetsier: It’s been a real pleasure. For everybody else, thank you for joining us as well. My name is John Koetsier. I appreciate you being along for the show. You’ll be able to get a full transcript of this podcast in about a week at JohnKoetsier.com. Story at Forbes will come out shortly after that, and always the full video is available on my YouTube channel. Thank you for joining. Until next time … this is John Koetsier with Tech First.
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