Climate Investing 2.0

According to this recent article, there is a surge in environmental, social, and corporate governance (ESG) investing, which is attracting record amounts of capital and bringing shareholder activism to the forefront. In contrast to the first wave of climate investing, this second wave will benefit from a more established ecosystem. In 2021, global venture capital funding for clean technology hit $43 billion, which was more than double the $20 billion invested in 2020. Experts believe that the trend is just getting started.

This aligns with the sentiment from a CEO roundtable I had the pleasure of moderating in the fall. The roundtable topic was the purpose-driven corporation. It was clear through the dialog that this phenomenon is not yesterday’s corporate social responsibility (CSR) window dressing. Sustainability at the broadest level is gaining considerable traction. Climate investing is driven by both a necessity to accelerate efforts to combat climate change and the investment opportunity it represents. Many stakeholders are now looking to capitalize on the energy transition.

Investors are looking for different things. From her standpoint of working at a major bank, she’s seen a lot of appetite among larger players — including institutional investors — for the relatively more mature sectors such as solar, wind, and electric vehicles.

Farnam Bidgoli, head of ESG Solutions at HSBC

Investing in climate technology requires us to connect several dots. As the article describes, climate investing goes beyond renewable energy, with applications across every part of the economy. They provide examples like software that makes buildings more efficient, or vertical farming that reduces emissions associated with food shipment. The building blocks that support the energy transition are accelerating and expanding. For example, this article describes how quantum technology could make charging electric cars as fast as pumping gas. The electric car market is one of the most rapidly growing sectors, and improvement in battery storage technology is a key driver. The challenge of slow battery charging speeds is an obstacle to large-scale adoption.

Currently, cars take about 10 hours to fully recharge at home. Even the fastest superchargers at the charging stations require up to 20 to 40 minutes to fully recharge the vehicles. This creates additional costs and inconvenience to the customers.

Institute for Basic Science

The article illustrates how quantum charging could address the charging speed problem. Per the article, a typical electric vehicle battery contains about 200 cells. Quantum charging would lead to a 200 times speedup over classical batteries, cutting home charging time from 10 hours to about 3 minutes. At high-speed charging stations, the charge time would be cut from 30 minutes to mere seconds. There are other issues beside charging to consider. One issue driving increased dialog is battery recycling. What do you do when the battery is dead? This article explores the need to safely manage an influx of batteries that reach end-of-life, as climate action and other market forces accelerate reliance on larger batteries that power everything from electric vehicles to power grids.

EV batteries have a 10–13 year lifespan, so while they may not be ready to be recycled in large volumes just yet, we know they’re on the way. Companies worldwide are already investing in recycling plants to meet this demand.

Michelle Lewis – Here’s what the future of battery recycling is going to look like for EV owners

Recycling allows us to reclaim valuable materials from batteries and put them back into the supply chain, reducing our dependence on virgin mining materials. Beyond these issues remains the question of cost as a barrier to wide scale electric vehicle adoption. This article looks at the cost to charge an EV vs. refueling a gas vehicle. Several charts in the article drive this conclusion: even with regional surges in the price of electricity — it’s still quite a bit more expensive to fill your gas tank than it is to charge your EV’s battery. Beyond these issues we must consider other challenges like employment.

The inevitability of the energy transition will undoubtably have an impact on employment. This article states that in total, the clean energy transition is expected to generate 10.3 million net new jobs around the world by 2030.

In order to properly utilize the new sources of energy, the largest expected job gains are in electrical efficiency, power generation, and the automotive sector. Combined with modernizing the grid, they make up 75% of the 13.3 million in new job gains expected.

Omri Wallach – The Clean Energy Employment Shift, by 2030

The energy transition is real, and it is likely to be a difficult transition. These articles identify just a few of the many challenges we have yet to face. But whether it is a group of CEO’s and investors in a roundtable discussion or a stream of articles describing these challenges, one thing is clear: Climate Investing 2.0 is upon us.

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