Bankrolling Change

15 Jul 2020

By Stephan Ouaknine

In a time when we are watching society shift at a jarring pace, it is important for the world to understand there is another, more dangerous shift around the corner: Climate change has the potential to wreak even greater havoc on human health, economies, industries, and life as we have known it. 

If COVID-19 has taught us one thing, it’s that there is potential for massive economic damage. To stem the impact of a crisis, it’s vital that we invest a lot - and early. Yet, fewer than two in five Americans (38 percent) believe climate change will damage the U.S. economy if it is not addressed. Only about a third (35 percent) believe there is not enough money being invested in technology that could help prevent or fix climate change, according to a recent online survey* of more than 2,000 U.S. adults.

As we think through rebuilding our post-COVID world, let’s think about how we invest today to avert the crises of tomorrow. 

History is marked by cautious change and capital-intensive innovations like wind turbines and solar panels. While those innovations have created affordable, grid-scale renewable energy to the developed world, challenges abound. Remaining obstacles include lowering the price of clean energy so dramatically as to shut down fossil-fuel generation entirely, as well as solving the long-duration energy storage hurdle to address energy reliability. Food, transportation, and other sectors have only just started being addressed. What we really need is the catalyst of a second-wave disruption. (image courtesy AESP Green Energy)

The disruption of the automotive industry by electric vehicles accelerated the growth of the EV market share. EV adoption is growing swiftly, with global EV penetration estimated to go from 2.7 to 58 percent in the next twenty years. While that is great progress, the initial disruption is not enough to create seismic change. To greater incentivize EV adoption, consumers need better and more charging stations - and the apps to find them. The industry also needs to develop more robust batteries and solutions for the commercial real estate developers facing growing demand for such technologies. 

The roadblock to these second-wave innovations? Investment. 

Many people oppose investing in newer promising renewable energy technologies because they cannot see the viability of technologies already supported by government subsidies. They forget that massive industries such as telecommunications, aerospace, semiconductors, pharmaceuticals, and even the internet as a whole, were sparked by initial government involvement. In the natural evolution of transformative discoveries, it falls to the private sector to keep these industries maturing and innovating until government assistance is no longer needed. Cleantech—or Climate Tech as it’s now often called—is past the tipping point where government subsidies have created a crutch. We must walk on our own.

While many Americans believe climate change poses an imminent threat, this recent survey confirmed that Americans underestimate both the coming economic damage from climate change, and the role that entrepreneurs and investors can play in rectifying it. More Americans think efforts from large U.S. corporations (49 percent) and the government (47 percent) are very important in the fight against climate change efforts, as opposed to the contribution by U.S. entrepreneurs/start-up companies (33 percent), or U.S. investors/financial firms (32 percent).

This illustrates the need to better communicate the potential losses to come, and the economic benefits of climate-positive policies. We must work to shift investor perceptions of the cleantech industry and the expected investment performance. We’re living in a very different time than we were 10 years ago; the clean energy industry has matured enough to drive the growth of ancillary technologies. Support for climate-friendly products has reached the mainstream, creating high demand. The next wave of innovation has room for even more disruption, by reinventing how we grow our food, bypassing legacy energy grids, building smart cities, and cleaning up industries that are under tremendous pressure to reduce their pollutants. 

Another major challenge is the absence of political urgency in the U.S. The lackadaisical approach of big government should inspire the private sector to act now, and not wait for politicians to fall in line. Additionally, investor reticence has led to a lack of funding for cleantech/hardware innovation, in favor of more software-based tech solutions. This creates a bankability challenge for cleantech; it slows commercial adoption of emerging technologies, leading to an industry littered with potentially game-changing innovations that never make it to market. 

For the coming decade, investors need to make up for lost time. More conservative investors can focus on deployment of existing technologies through low-risk solar, wind, and battery farms. Investors interested in higher returns should look to second-wave, disruptive climate technologies. With investors involved in both project finance and technology innovation, we will create both the supply and demand, and successfully bring these disruptive technologies to market.

We only get one planet. We have the potential to make life on it sustainable, but it takes more than commitment: it takes an investment in climate solutions. Without that investment, our very survival is at risk. 

 

* This survey was conducted online within the United States by The Harris Poll on behalf of Inerjys Ventures between February 18-20, 2020 among 2,064 adults ages 18+. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Survey methodology

Stephan Ouaknine is Founder and Managing Partner at Inerjys Ventures, a global investment fund challenging the status quo in the cleantech sector.

Inerjys Ventures | http://www.inerjys.com

 

 


Author: Stephan Ouaknine
Volume: 2020 September/October