{"id":95645,"date":"2022-02-03T07:09:01","date_gmt":"2022-02-03T07:09:01","guid":{"rendered":"https:\/\/alj.com\/?post_type=spotlight-fadyjameel&p=95645"},"modified":"2022-04-21T05:49:41","modified_gmt":"2022-04-21T05:49:41","slug":"investing-in-a-more-inclusive-tomorrow","status":"publish","type":"spotlight-fadyjameel","link":"https:\/\/alj.com\/en\/spotlight-by-fady-jameel\/investing-in-a-more-inclusive-tomorrow\/","title":{"rendered":"Investing in a more inclusive tomorrow . . ."},"content":{"rendered":"

The revolution in green-tech offers incredible potential for long-term sustainability \u2013 and prosperity.<\/h4>\n

Combatting climate change is so more than a moral \u2013 and existential \u2013 imperative; it\u2019s a commercial opportunity on a scale to rival even the industrial or internet revolutions. \u00a0Everyone \u2013 absolutely everyone – has a stake in the future.\u00a0 And emerging economies and bold but patient investors could potentially be the biggest winners of all.<\/p>\n

It\u2019s difficult to read an article about climate change without being bombarded by a barrage of shocking statistics.\u00a0 But that is not what this article is about.\u00a0 No eye-watering predictions or gloomy graphs.\u00a0 If you don’t believe the scientific case for climate change by now, you never will.<\/p>\n

Global warming is real. \u00a0Anthropogenic climate change is not some fringe theory. \u00a0It\u2019s not a passing phase to be forgotten when the next headline-grabbing crisis comes along. \u00a0It is our future, like it or not. \u00a0We could emit more CO2<\/sub> arguing the finer details. \u00a0After all, no one knows exactly<\/em> how it will play out. \u00a0Ultimately, it doesn\u2019t matter.\u00a0 We\u2019ve all got front row seats and the titles are already rolling.<\/p>\n

But I don\u2019t want to stoke panic. \u00a0I want to talk about opportunity. \u00a0Why?\u00a0 Because every challenge \u2013 even the greatest challenge our human society has ever faced \u2013 brings with it opportunity.\u00a0 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.\u00a0 \u00a0\u00a0<\/p>\n

In this respect, the climate challenge is no different.\u00a0 There are already billions of dollars flowing every year into new opportunities to help us manage climate change – so-called \u2018green tech\u2019 innovations.\u00a0 As a recent green tech report analysis from global consultants McKinsey & Co., states:<\/p>\n

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\u201cThe need for climate technology is vast\u2014which creates large potential markets and investment opportunities. <\/em>\u00a0Our estimates suggest that next-generation technologies could attract US$ 1.<\/em>5 trillion to US $2 trillion of capital investment per year by 2025.[1]<\/strong><\/a><\/em> \u201d<\/p>\n<\/blockquote>\n

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With sufficient funding and support, green tech has the potential to transform our way of life, abolish harmful emissions \u2013 and deliver substantial rewards for those with the foresight and commitment to invest in the future. \u00a0That phrase \u2018sufficient funding and support\u2019 is crucial, though.\u00a0 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.\u00a0 And time is one thing we do not have.<\/p>\n

Unleashing the potential of green tech<\/h2>\n

If we want to be part of the solution, we have to start now and we have to think big.\u00a0 And by \u2018we\u2019, I\u2019m not just talking about us as individual investors.\u00a0 We need more investment on a global scale.\u00a0 Private capital, institutional funds and state investment working together to meaningfully and rapidly accelerate green tech innovations that can transform our future.\u00a0<\/p>\n

Innovations like \u2018green steel\u2019 \u2013 steel produced via a process powered by hydrogen rather than coal. \u00a0Steel production using coal accounts for around 8% of global greenhouse gas emissions[2]<\/a>, but there are a number of promising alternatives at various stage of development. \u00a0One of the most advanced is the HYBRIT project in Sweden, which has developed a hydrogen-based steel production process.\u00a0 A pilot line began operations in summer 2020, and a trial delivery of the first fossil fuel-free steel took place in August 2021[3]<\/sup><\/a>, with automotive giant Volvo Cars using it in the production of prototype vehicles and components. \u00a0It is hoped the technology will be ready for industrial-scale production as early as 2026[4]<\/a>. \u00a0Other steel companies are also advancing towards hydrogen-based steel production, including a demonstration plant being designed in Germany.<\/p>\n

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Green or recycled concrete is another green tech with huge promise. \u00a0Concrete is responsible for about 7% of global CO2<\/sub> emissions[5]<\/sup><\/a>.\u00a0 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.\u00a0 There are a number of advanced technologies being developed around the world, however, which could drastically cut emissions from concrete production.<\/p>\n

\"\"In 2021, the Bill Gates-led investment fund Breakthrough Energy Ventures (BEV<\/a>) invested US$ 27 million in Ecocem<\/a>, an Irish company that has developed an \u2018eco-friendly\u2019 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. \u00a0<\/p>\n

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.\u00a0 Other investors in BEV include Amazon\u2019s Jeff Bezos and Michael Bloomberg, founder of the eponymous media group.<\/p>\n

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Takafumi Noguchi, professor of architecture at UTokyo\u2019s School of Engineering.
\nPhoto credit: \u00a92018 UTokyo<\/figcaption><\/figure>\n

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[6]<\/a>. \u00a0The 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.\u00a0 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.<\/p>\n

\u201c<\/em>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,\u201d<\/em> said Takafumi Noguchi, a lead researcher on the project.<\/p>\n

Seeing the bigger picture<\/h2>\n

Most green tech ventures aren\u2019t going to be overnight successes\u2014even if they ensure we will have a world to wake up to. \u00a0No 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. \u00a0Try persuading shareholders or eager investors expecting quick returns to go all-in for the long game. \u00a0Not an easy task.<\/p>\n

This is one advantage that private investors have over public corporations and the City or Wall Street. \u00a0Private equity, particularly private family equity, is \u2018patient\u2019 equity. \u00a0If you are investing your own funds, you can set your own objectives \u2013 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.<\/p>\n

Electric vehicles are a great example of the power of private capital. \u00a0Tesla, , Polestar, Lucid, NIO. \u00a0Virtually all of the biggest disruptors that pioneered the electric vehicle market are start-ups with significant private capital backing. \u00a0And it was private capital that reaped the rewards as these innovators went on to establish themselves on the global stage.\u00a0<\/p>\n

It’s not only about investing in current opportunities, but also supporting the R&D that can drive forward innovation in these areas. \u00a0As McKinsey estimates, mature climate technologies could go 60% of the way to abating emissions and stabilizing the climate by 2050. \u00a0The other 40% must come from tech that is still being developed and refined[7]<\/sup><\/a>. \u00a0<\/p>\n

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.<\/p>\n

The Jameel Family is a huge proponent of this approach for private family philanthropy.\u00a0 It already supports multiple joint research centers at both MIT (J-WAFS<\/a>, J-PAL<\/a>, J-WEL<\/a> and the Jameel Clinic<\/a>) and Imperial College London (Jameel Institute<\/a>), 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.<\/p>\n

Victims\u2026 \u00a0or visionaries?<\/h2>\n

Of course, governments can play the longest game of all.\u00a0 Green tech could enable emerging economies to sidestep the transformation challenges of carbon-based nations\u2014closing the gap or even leapfrogging them. \u00a0<\/p>\n

Emerging economies have had the raw end of the deal. \u00a0The first nations to reap the benefits of industrialization did so without heed for the consequences. \u00a0Now emerging economies are chastised for catching up to the carbon-based successes of the developed world.<\/p>\n

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 \u2013 and their investments – into green tech.<\/p>\n

At the moment, they’re lagging behind. \u00a0According 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.[8]<\/sup><\/a>\u00a0 Being late to the game has its advantages, though. \u00a0Less red tape, less infrastructure, fewer vested interests. \u00a0In 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.\u00a0<\/p>\n

Emerging economies can be far more ambitious in their investment strategies and regulatory frameworks. \u00a0Rather than investing in legacy, carbon-based technologies like oil or gas fields, for example, they could invest in new sustainable technologies like green hydrogen.<\/p>\n

Take a look at Namibia. \u00a0Ambitious plans for a green hydrogen project near the town of L\u00fcderitz 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[9]<\/a>.<\/p>\n

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James Mnyupe
\nPresidential Economic Advisor<\/figcaption><\/figure>\n

Production at the plant could start in 2026, providing around 300,000 tons of green hydrogen per year.<\/p>\n

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.<\/p>\n

“The idea is to turn Namibia into not just a green hydrogen hub, but into a synthetic fuels industry powerhouse,”<\/em> says James Mnyupe, the government’s presidential economic advisor and hydrogen commissioner.<\/p>\n

The impact is set to be international, with agreements already signed with Germany, Belgium and Rotterdam in the Netherlands.\u00a0 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.<\/p>\n

New tech for new energy<\/h2>\n

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. \u00a0Renewable energy is the obvious choice: solar, wind, and hydroelectric are the big ones. \u00a0Wind power has increased 75-fold over the past two decades[10]<\/sup><\/a> and, as explored in this Abdul Latif Jameel Perspectives<\/a> article, its growth shows no sign of stopping. \u00a0\u00a0Solar power<\/a> has shown similar levels of exponential growth.\u00a0 I\u2019m immensely proud that Abdul Latif Jameel, through our flagship renewables business Fotowatio Renewable Ventures (FRV<\/a>), is one of the pioneering companies pushing forwards global progress in renewable energy.<\/p>\n