Climate Investment Roadmap - Guide for Investors

A Decade of Unprecedented Climatic Shifts

The climate over the past ten years has exhibited changes of a magnitude rarely seen before, and these shifts are overwhelmingly negative in their impact.

Devastating wildfires in California have led to the complete destruction of communities, with the resulting smoke impacting air quality thousands of miles away in cities like New York. Simultaneously, regions across Europe and Japan have experienced catastrophic flash flooding.

These events are widely documented through media outlets such as YouTube and CNN, yet a sense of resignation often prevails.

The IPCC's Stark Warning

The latest 6th Intergovernmental Panel on Climate Change (IPCC) report has determined that human-induced climate change is accelerating at a rate exceeding previous projections. This has prompted a “code-red alert” designation.

Projections indicate that a global temperature increase of just 2 degrees Celsius could result in over 300,000,000 fatalities worldwide attributable to climate-related causes by the year 2100. Even this figure represents a comparatively optimistic assessment.

The scale of global warming is immense and can feel insurmountable. This raises a critical question: what viable actions can be taken?

The Power of Human Adaptation

Despite the gravity of the situation, a sense of optimism remains. Throughout history, humanity has repeatedly faced the limitations imposed by the natural world and has consistently overcome these challenges through technological innovation.

Our species has a demonstrated capacity for adaptation, and modifying technology and behaviors in response to environmental changes is a recurring theme in our past.

Technology and Conscious Consumption

While governmental regulation can encourage corporate responsibility, it is ultimately technological advancements that will provide sustainable solutions to meet our needs.

The very patterns of thoughtless consumption that contributed to climate change can be countered by embracing mindful consumption practices.

Following the Carbon Trail

How can the principles of capitalism be leveraged to achieve a global reduction in greenhouse gas emissions? The key lies in tracing the flow of carbon, which reveals three primary obstacles hindering progress towards net-zero emissions.

The following discussion provides a broad overview of complex industrial sectors, intentionally omitting detailed specifics to focus on the fundamental challenges.

This is a high-level examination of these significant industries.

Electrification: A 36 Gigaton CO2 Challenge

Total Addressable Market: $7 Trillion

Currently, the largest source of global carbon emissions stems from energy production, with the combustion of coal, oil, and natural gas continuing to fuel transportation, urban centers, and industrial processes – even with ongoing coal mining in 2021. This results in approximately 36 gigatons of CO2 released annually. The continued reliance on coal is largely due to its affordability, immediate availability, widespread accessibility, portability, and significantly higher efficiency compared to lithium-ion batteries, alongside enhanced safety features.

However, its eventual elimination is imperative.

According to the IPCC report, fossil fuels are responsible for 89% of worldwide CO2 emissions. The report also emphasizes the necessity of halving these emissions within the next decade to mitigate the risk of a 1.5-degree Celsius rise in global average temperatures.

Wind and solar power, while promising, are intermittent sources; therefore, generated energy requires storage solutions rather than being dissipated when demand is low, as is currently the practice. A diverse range of clean energy alternatives exist, including nuclear, tidal, hydroelectric, geothermal, and emerging technologies like fusion, which is experiencing continuous advancements.

Meeting growing energy demands will necessitate more than a doubling of current clean energy production. Yet, until effective energy storage solutions are available for use in vehicles, marine vessels, aircraft, and other applications, the complete displacement of oil and coal will remain unattainable. The primary obstacle to a fully electric global economy is energy storage – we require batteries that are larger, safer, and more environmentally friendly, deployable across grids, vehicles, and homes, ensuring reliable power when needed.

While individual consumers may not directly purchase these batteries, they will power all the products they acquire. Electric power will eventually extend to automobiles, cargo ships delivering goods, and airplanes transporting passengers. Boeing has recently placed an order for 100 electric planes from Heart Aerospace, and has also made a significant investment in the company. The Yara Birkeland, the world’s first electric cargo ship, designed by Marin Teknikk, is nearing its inaugural voyage.

Numerous companies – at least a dozen focused on electric aircraft and six dozen on electric vehicles – are currently operating. However, the scalability of these efforts, and the replacement of fossil fuel-powered planes, ships, and cars with comparable performance, hinges on the development of a battery capable of delivering sustained, high power output over extended durations. Without this crucial breakthrough, many of these companies will remain in the developmental phase.

Presently, lithium-based battery technology possesses only one-tenth the energy density of gasoline, which boasts approximately 50 megajoules per kilogram. This limitation is substantial. The lithium-air battery, with a theoretical energy density of 40 megajoules per kilogram, represents the closest potential improvement, but requires the invention of novel electrolytes to function effectively. Similar to Chuck Yeager’s breaking of the sound barrier, a breakthrough in energy density is needed to unlock a sustainable, green future.

Recent research indicates that melanin, the pigment responsible for skin color, demonstrates potential as a powerful cathode material, potentially enabling the creation of rechargeable sodium batteries. This could lead to large-scale “salt” batteries, offering a safe and clean grid storage solution. Furthermore, researchers are utilizing viruses to construct nanolayers of various elements, aiming to enhance cathode performance. Alternative research explores enzymatic catalysts to power batteries, potentially utilizing sugar water to slowly charge vehicles or homes with bio-electricity. It’s important to note that none of these solutions are expected to reach the market within the next decade; they are all currently in the research and development stage.

The companies that succeed in the electrification transition will integrate these technologies across various industries, delivering a seamless and positive experience for consumers. An electrified world will offer benefits such as rapid wireless charging for devices and vehicles, and self-regulating national power grids, resulting in a quieter, more efficient, and cleaner environment. The potential for a fully electric world is a prospect to be embraced.

Re-Engineering Materials: A 10.2 Gigaton Emission Challenge

Total Addressable Market: $12 Trillion

The items surrounding you – from flooring and furniture to appliances and walls – were all produced using unsustainable methods and contribute significantly to carbon emissions. Currently, consumers lack viable eco-friendly alternatives, a situation demanding immediate change.

Durable goods and the structures we inhabit collectively generate over 10.2 gigatons of CO2 annually, representing almost a third of global emissions. The foundations of polluting industries must be dismantled and reconstructed with a singular focus: long-term sustainable production.

Cement Production

Worldwide cement manufacturing releases approximately 2.5 gigatons of carbon dioxide each year. Numerous companies specializing in green cement are exploring diverse strategies to eliminate CO2 emissions associated with cement and concrete production. I invested in Carbix at IndieBio, a firm utilizing captured CO2 to create olivine cement; they’ve produced initial bricks but are still several years from widespread availability.

A primary obstacle for many green cement developers is demonstrating comparable structural integrity. Achieving large-scale production also requires substantial investment. Nevertheless, several companies offering more environmentally friendly concrete solutions are poised to enter the market within the next few years.

Steel and Aluminum Manufacturing

The production of steel and aluminum is exceptionally energy-intensive. Aluminum, in particular, is often described by commodity traders as “congealed energy.” Transitioning foundries to clean energy sources and reducing their carbon footprint could eliminate 8% of total emissions.

The Role of Wood

Trees represent our most significant natural carbon sinks, absorbing CO2 from the atmosphere and releasing the oxygen essential for life. Despite this crucial role, deforestation continues.

Fortunately, innovative companies are developing bio-composites from flax and other natural fibers, achieving stiffness exceeding that of steel while remaining lighter than wood. Sustainable bamboo is also being explored for exterior building panels, and some are even experimenting with mushroom mycelium to cultivate entire structures.

Alternatives to Leather and Traditional Fabrics

Cattle contribute 7.1 gigatons of CO2 annually, accounting for 14.5% of global warming. Beyond consumption, their hides are extensively used. Leather is prevalent in items ranging from footwear and furniture to handbags and apparel. Replacing this material is vital to reducing reliance on livestock.

Thankfully, a growing number of companies are making significant progress in eliminating plastic and leather from the fashion industry. These ventures are gaining considerable momentum with consumer brands seeking to offer vegan and sustainable product options.

Synthetic fabrics like polyester are derived from petrochemicals. Fermentation technologies offer a pathway to produce oils from sugar solutions using algae or yeast as biological factories. This process is scalable and currently operational, while cell-free synthesis represents a newer, complementary approach. We can anticipate the emergence of new eco-friendly fabrics within the next five years.

Reimagining Industrial Chemicals

The breakdown of oil yields a complex array of chemicals used in a vast range of products, including fuels, antifreeze, cosmetics, and food additives. To eliminate dependence on oil, these chemicals must be replaced through fermentation, converting sugar into desired compounds.

The sugar source can be derived from corn or even captured CO2 emissions. Furthermore, living cells are not always necessary, as cell-free synthesis allows the enzymes themselves to perform the conversion. Numerous startups are dedicated to recreating these chemicals through various fermentation and synthesis methods.

A shift towards sustainable, carbon-neutral materials can potentially eliminate up to 10 gigatons of emissions from our economy. Ultimately, our homes and their contents will become carbon-neutral through this process of rematerialization. I am optimistic about overcoming this challenge, as it inherently leads to superior products for all.

Food: 3.6 gigatons C02 emitted

TAM: $10 trillion

A presentation I delivered began with an image of cave dwellers armed with spears, facing a formidable prehistoric bear. This illustrated a fundamental point: the pursuit of protein has historically been a matter of survival. The shift from hunting to agriculture instigated a societal restructuring, leading to the development of urban centers and specialized labor.

While civilization flourished alongside domesticated animals like sheep and cattle, these same animals are now contributing to significant environmental challenges. They are responsible for 10% of global greenhouse gas emissions, and the worldwide appetite for meat is rapidly increasing.

Over the last six years at IndieBio, investments were made in companies such as Clara Foods, Geltor, Upside Foods (formerly Memphis Meats), and NotCo. These investments aimed to revolutionize agricultural practices through techniques like fermentation, plant-based ingredient development, and cell-based cultivation.

These innovative startups are reimagining commonly consumed foods, including burgers, mayonnaise, popcorn shrimp, egg whites, poke bowls, sausages, and chicken wings. As wealthier nations increasingly consume processed foods, food has transitioned from a basic necessity to a manufactured product.

Cows are now primarily associated with burgers, pigs with bacon, and chickens with nuggets. Numerous companies have emerged, focusing on “food-as-product,” and dedicated conferences now explore this evolving landscape. The assertion that “food is hot” is an understatement within Silicon Valley’s innovative ecosystem.

Having witnessed the early stages of this food revolution, the sheer scale of these transformations is apparent once they gain momentum. However, it’s also crucial to recognize that revolutions can sometimes falter. Cell-based foods are anticipated to become available to consumers next year, allowing them to determine the revolution’s value.

Predicting the ultimate form of society after these revolutions take hold and become the new standard is a complex undertaking. A personal connection to history informs my perspective on future developments. My mother’s cherished curry chicken recipe, utilizing bone-in chicken thighs, serves as a starting point.

To create a low-carbon, animal-free version of this recipe, a substitute for chicken is required. Options like Just’s cell-based chicken nuggets are unsuitable, as breaded nuggets or soy-based alternatives wouldn’t meet the standard. A “Beyond Curry” option simply wouldn’t gain my mother’s approval.

Cultivating Genuine Food Through Biofarming

A fundamental shift in agricultural practices is necessary to ensure food accessibility for all, not solely a privileged few. This requires a focus on producing authentic, natural food sources.

Think of staples like steaks, chicken breasts and thighs, cuts with bones, and spare ribs. The emphasis should be on providing the raw ingredients for preparing complete, wholesome meals, rather than heavily processed alternatives.

The Emergence of Food 3.0: Biofarming

Biofarming represents the next evolution in food production – what we term Food 3.0. A key challenge for biofarming will be delivering both exceptional flavor and complete nutritional value.

The goal is to create delicious foods requiring minimal processing, ideally only the simple preparation methods found in traditional home cooking.

Regenerative agriculture offers a pathway to carbon-neutral vegetable and plant cultivation. However, realizing this potential hinges on assisting farmers in achieving sufficient yields to maintain profitability, even during seasonal fallow periods.

Fortunately, a variety of innovative technologies are currently being developed to support these efforts and enhance agricultural outcomes.

The Current Situation is Not Yet Irreversible

Recent reporting by Bloomberg indicates that, between 2009 and 2019, climate change-related events contributed to over 5 million deaths annually worldwide. This represents a staggering one in ten deaths globally.

Currently, the full extent of climate change’s impact remains unknown, as we do not systematically record deaths attributable to factors like anxiety or decreased birth rates. Accurately quantifying the total suffering caused by climate change is therefore a significant challenge.

The question remains: how much further will these effects be allowed to progress before collective action is taken? How many more lives must be lost?

A Different Future is Possible

The emerging reality does not have to be defined by these grim statistics. Scientific expertise can be directed towards resolving the conflict between carbon emissions and continued production.

Investment strategies can prioritize companies dedicated to restoring the planet and fostering sustainable practices. Furthermore, entrepreneurs have the potential to establish businesses that fundamentally transform the carbon economy, creating unprecedented opportunities.

The strategies outlined offer a pathway to eliminate the vast majority of human-caused carbon emissions.

Hope Remains and Action is Required

Despite the challenges, complete devastation is not inevitable. Through collaborative effort, a viable future can be constructed and actively defended.

Collective action and a commitment to change are essential to securing a sustainable future for all.