Climate, AI and Other Key Themes for 2H

Eric, perhaps two questions for you.

So you recently co-authored the Water Risk Outlook and also a recent report on the Colorado River.

What are you looking out for in the water space in the second half of this year?

Thanks, Shaheen.

Water continues to be a huge focus, and there's a lot to look out for in the second half.

I think as we chat, the U.S.'s two largest reservoirs, Lake Mead and Lake Powell, both on the Colorado River, are at their lowest levels on record.

At the same time, the seven states that use water from the Colorado River have essentially failed to reach an agreement over future allocations, and the federal government is expected to intervene with a plan in the coming days.

So it'll be interesting to see what that plan looks like and how various industries from tech to agriculture could ultimately be impacted.

We're also, of course, continuing to watch what's happening in Corpus Christi, where the water emergency appears to be delayed until 2028, given recent storms.

And we'll be keeping an eye on this year's El Nino and the associated hydrological impacts in different regions.

I'm also focusing, of course, on the opportunity side, which includes everything from AI-powered leak detection to infrastructure repair.

And of course, we're looking out for developments around data center water usage from a risk policy and community standpoint, as well as any innovation in the space.

So generally speaking, I think water is a massive theme with so many risks and opportunities for investors, and we'll certainly do our best to stay on top of it.

Very interesting.

Eric, another theme you focused on recently is carbon removal.

Where are we in this market and what's your outlook?

Yeah, the carbon removal market is super interesting in my opinion, and I think there's still a lot of uncertainty in the space around kind of cost and scale.

But the reality is removals need to play a role if we're actually going to address climate change.

And I would say the importance of carbon removals is only growing with each passing year of increasing CO2 emissions.

So with that said, for the second half of the year, I think there are some key components to look out for.

First, we're seeing an increase in emissions from hyperscalers as a result of AI data centers.

So it'll be interesting to see if these companies, many of whom have really strong climate ambitions, continue to drive the carbon removal markets, especially against the backdrop of Microsoft saying they would pause purchases.

Second, we're seeing capital constraints for carbon dioxide removal companies with investments in pure play carbon removal companies declining from about 572 million in 2024 to 442 million in 2025. and only $67 million year-to-date based on publicly disclosed equity rounds.

So we expect this trend to continue, which of course presents challenges and could lead to consolidation.

And then I third, for many of us, you know, we thought 2026 was really going to be a year where we started to shift from, you carbon removals to actual deliveries from novel technologies like direct air capture.