Investing in a more inclusive tomorrow . . .
The revolution in green-tech offers incredible potential for long-term sustainability – and prosperity.
Combatting climate change is so more than a moral – and existential – imperative; it’s a commercial opportunity on a scale to rival even the industrial or internet revolutions. Everyone – absolutely everyone – has a stake in the future. And emerging economies and bold but patient investors could potentially be the biggest winners of all.
It’s difficult to read an article about climate change without being bombarded by a barrage of shocking statistics. But that is not what this article is about. No eye-watering predictions or gloomy graphs. If you don’t believe the scientific case for climate change by now, you never will.
Global warming is real. Anthropogenic climate change is not some fringe theory. It’s not a passing phase to be forgotten when the next headline-grabbing crisis comes along. It is our future, like it or not. We could emit more CO2 arguing the finer details. After all, no one knows exactly how it will play out. Ultimately, it doesn’t matter. We’ve all got front row seats and the titles are already rolling.
But I don’t want to stoke panic. I want to talk about opportunity. Why? Because every challenge – even the greatest challenge our human society has ever faced – brings with it opportunity. The opportunity to contribute to resolving a problem; the opportunity to drive the development and commercialization of burgeoning technologies that could, quite literally, save our planet; and, in doing so, the opportunity to earn huge returns.
In this respect, the climate challenge is no different. There are already billions of dollars flowing every year into new opportunities to help us manage climate change – so-called ‘green tech’ innovations. As a recent green tech report analysis from global consultants McKinsey & Co., states:
“The need for climate technology is vast—which creates large potential markets and investment opportunities. Our estimates suggest that next-generation technologies could attract US$ 1.5 trillion to US $2 trillion of capital investment per year by 2025. ”
With sufficient funding and support, green tech has the potential to transform our way of life, abolish harmful emissions – and deliver substantial rewards for those with the foresight and commitment to invest in the future. That phrase ‘sufficient funding and support’ is crucial, though. Many of these technologies have enormous potential, but at the current rate of progress, it would take years, even decades, for that potential to be fully realized. And time is one thing we do not have.
Unleashing the potential of green tech
If we want to be part of the solution, we have to start now and we have to think big. And by ‘we’, I’m not just talking about us as individual investors. We need more investment on a global scale. Private capital, institutional funds and state investment working together to meaningfully and rapidly accelerate green tech innovations that can transform our future.
Innovations like ‘green steel’ – steel produced via a process powered by hydrogen rather than coal. Steel production using coal accounts for around 8% of global greenhouse gas emissions, but there are a number of promising alternatives at various stage of development. One of the most advanced is the HYBRIT project in Sweden, which has developed a hydrogen-based steel production process. A pilot line began operations in summer 2020, and a trial delivery of the first fossil fuel-free steel took place in August 2021, with automotive giant Volvo Cars using it in the production of prototype vehicles and components. It is hoped the technology will be ready for industrial-scale production as early as 2026. Other steel companies are also advancing towards hydrogen-based steel production, including a demonstration plant being designed in Germany.
Green or recycled concrete is another green tech with huge promise. Concrete is responsible for about 7% of global CO2 emissions. Most of these come from burning limestone to produce clinker, a binding agent that is essential to producing concrete and which makes up as much as 70% of the final product. There are a number of advanced technologies being developed around the world, however, which could drastically cut emissions from concrete production.
In 2021, the Bill Gates-led investment fund Breakthrough Energy Ventures (BEV) invested US$ 27 million in Ecocem, an Irish company that has developed an ‘eco-friendly’ formulation for low-carbon cement that uses slag ( a byproduct of steel production) and other materials to replace much of the clinker required to make concrete.
The investment will enable Ecocem to seek approval from EU regulators to roll out its new formulation, as well as establishing new plants outside the region to demonstrate the viability of its lower-carbon formulation at a global scale. Other investors in BEV include Amazon’s Jeff Bezos and Michael Bloomberg, founder of the eponymous media group.
Meanwhile, researchers at the University of Tokyo have developed a process that uses recycled construction waste and industrial exhaust gases to produce a new form of lower-carbon concrete, called calcium carbonate concrete. The process uses calcium from discarded concrete. This is combined with carbon dioxide from industrial exhaust or even from the air, at much lower temperatures than the regular concrete production process. While the new concrete is not as strong as regular concrete, the research team believes it is already suitable for use on small projects, like houses.
“We hope that in the coming decades, carbon-neutral calcium carbonate concrete will become the mainstream type of concrete and will be one of the solutions to climate change,” said Takafumi Noguchi, a lead researcher on the project.
Seeing the bigger picture
Most green tech ventures aren’t going to be overnight successes—even if they ensure we will have a world to wake up to. No matter, how promising the venture or noble your motivations, backing green tech can be a difficult sell when you’re under pressure to hit regular profit targets. Try persuading shareholders or eager investors expecting quick returns to go all-in for the long game. Not an easy task.
This is one advantage that private investors have over public corporations and the City or Wall Street. Private equity, particularly private family equity, is ‘patient’ equity. If you are investing your own funds, you can set your own objectives – and that can include taking a longer-term view of promising green tech innovations, confident in the knowledge that when one or more comes to fruition, the returns will more than justify the wait.
Electric vehicles are a great example of the power of private capital. Tesla, , Polestar, Lucid, NIO. Virtually all of the biggest disruptors that pioneered the electric vehicle market are start-ups with significant private capital backing. And it was private capital that reaped the rewards as these innovators went on to establish themselves on the global stage.
It’s not only about investing in current opportunities, but also supporting the R&D that can drive forward innovation in these areas. As McKinsey estimates, mature climate technologies could go 60% of the way to abating emissions and stabilizing the climate by 2050. The other 40% must come from tech that is still being developed and refined.
One of the ways investors can back the solutions of tomorrow is by partnering with leading research centers at universities such as MIT, Imperial College London, Cambridge, Oxford, CalTech, Stanford, Princeton, EPFL, Tokyo, and many more, to help fund the research and innovations from breakthrough thinking at its most embryonic stage, that could go on to secure a more sustainable future for our planet.
The Jameel Family is a huge proponent of this approach for private family philanthropy. It already supports multiple joint research centers at both MIT (J-WAFS, J-PAL, J-WEL and the Jameel Clinic) and Imperial College London (Jameel Institute), and has links to Cambridge University in the UK and the University of Tokyo. With such relationships it is a committed investment partner in a number of exciting technologies with their roots in both these, and other, centers of excellence across the globe.
Victims… or visionaries?
Of course, governments can play the longest game of all. Green tech could enable emerging economies to sidestep the transformation challenges of carbon-based nations—closing the gap or even leapfrogging them.
Emerging economies have had the raw end of the deal. The first nations to reap the benefits of industrialization did so without heed for the consequences. Now emerging economies are chastised for catching up to the carbon-based successes of the developed world.
But rather than being seen as ‘climate change victims’, there is potentially a truly spectacular opportunity for emerging economies to leap over the West’s coal and oil-based legacy industries by throwing their weight – and their investments – into green tech.
At the moment, they’re lagging behind. According to the IEA, government spending on sustainable energy in emerging and developing economies remains only around one-tenth of the level seen in advanced economies. Being late to the game has its advantages, though. Less red tape, less infrastructure, fewer vested interests. In other words, there is an incredible opportunity for visionary leaders, inventors, and most importantly investors (including private equity and government) to change the very course of history.
Emerging economies can be far more ambitious in their investment strategies and regulatory frameworks. Rather than investing in legacy, carbon-based technologies like oil or gas fields, for example, they could invest in new sustainable technologies like green hydrogen.
Take a look at Namibia. Ambitious plans for a green hydrogen project near the town of Lüderitz in the south of the country are the first steps in an ambitious government strategy to transform the country into an African green hydrogen hub.
Production at the plant could start in 2026, providing around 300,000 tons of green hydrogen per year.
It will create 15,000 direct jobs during the four years of construction, and 3,000 more during full operations – 90% of which will be filled by locals.
“The idea is to turn Namibia into not just a green hydrogen hub, but into a synthetic fuels industry powerhouse,” says James Mnyupe, the government’s presidential economic advisor and hydrogen commissioner.
The impact is set to be international, with agreements already signed with Germany, Belgium and Rotterdam in the Netherlands. This comes with some funding agreements, but Namibia is looking at more options, such as green or sustainable bonds, towards the roughly US$ 9.4 billion needed for the initial project.
New tech for new energy
The need to switch our energy mix towards power sources that are truly clean is one of the biggest pinch-points of our aspirations for a more sustainable future. Renewable energy is the obvious choice: solar, wind, and hydroelectric are the big ones. Wind power has increased 75-fold over the past two decades and, as explored in this Abdul Latif Jameel Perspectives article, its growth shows no sign of stopping. Solar power has shown similar levels of exponential growth. I’m immensely proud that Abdul Latif Jameel, through our flagship renewables business Fotowatio Renewable Ventures (FRV), is one of the pioneering companies pushing forwards global progress in renewable energy.
It is unlikely, however, that current renewable energy sources alone will ever be enough to meet total global energy demand. New sources of power are needed to fill the gap. Hydrogen, as outlined above, is one possibility. Fusion energy is another.
Fusion is the opposite process of nuclear fission (or what we know as nuclear power). While nuclear fission splits the atom, fusion takes the lightest atoms (for example, hydrogen) and combines them – or fuses them – together. This process releases enormous amounts of energy – around 200 million times more energy per reaction than burning fossil fuels.
Fusion is the fundamental reaction of the universe. It’s how all stars – like our Sun – work. It’s the reaction that built up all the atoms inside us. And the beautiful thing is, it is limitless. A single glass of water can produce one person’s energy needs for an entire year. It doesn’t produce highly dangerous by-products that need to be disposed of. It’s a much cleaner, simpler, natural process.
It’s also incredibly complex and requires enormous sums of investment to get it out of the lab and into the power grid. But momentum is growing. There are at least 35 fusion energy companies around the world, 18 of which have received a combined US$1.8 billion in private funding as at October 2021.
The Jameel Family, through their dedicated investment arm the Abdul Latif Jameel Investment Management Company, or JIMCO, is one of the private investors backing this game-changing technology. In December 2021, the JIMCO Technology Fund participated in Commonwealth Fusion Systems (CFS) US$ 1.8 billion Series B funding round. Since being founded in 2018 as a spinout from the MIT Plasma Science and Fusion Center, CFS has been developing High-Temperature Superconducting (HTS) magnets and is building the world’s first net-energy-gain fusion system.
That same month, the JIMCO Technology Fund also participated in the US$ 130 million Series E funding round for General Fusion, which is developing a commercially viable demonstration fusion energy plant based on Magnetized Target Fusion.
If and when fusion energy is proven to be a viable energy source, the implications are literally world-changing. It would create an endless supply of clean, sustainable energy to supply our society’s growing energy needs, without destroying our environment, our way of life, our planet, in the process.
Time to buy into tomorrow
It’s easy to see why every living being on the planet is invested in the success of green tech. At the moment, though, too many businesses, investors and governments are box-ticking. They are hemmed in by traditional, carbon-centric ways of thinking and doing, unable or unwilling to fully engage with the enormity of our predicament or the change in mindset required to find long-term, holistic solutions.
If we can break out of this limited perspective, the benefits for all of us are so enormous as to be almost unquantifiable.
And that includes the financial benefits. The biggest wins will be earned by those investors, entrepreneurs, and especially emerging economies, that are visionary enough to see the bigger picture – and brave enough to invest in what they see. I hope more private family, private equity and government investments will join with us in investing in a more beautiful tomorrow.
 World Steel Association, 2019.