The Next Big Entrepreneur Will Solve Climate Change
The Evolution of Climate Change Awareness
My initial involvement with clean technology funding began in 2005, a time when “climate change” was largely considered a concern for the future.
The recent occurrence of Hurricane Katrina was largely attributed to governmental shortcomings in protecting vulnerable populations during a natural disaster, rather than being viewed as an early consequence of a changing climate.
Al Gore’s documentary, “An Inconvenient Truth,” had yet to be released. The extent of human-generated CO2 emissions and their effect on global temperatures were still subjects of discussion.
Shifting Perspectives
While the scientific community and many investors possessed an understanding of the issue, public and political sentiment remained largely indifferent.
By 2021, the term “climate change” itself appears to be an understatement; we are now facing a genuine climate crisis.
Evidence of this crisis is widespread and increasingly severe.
Global Impacts of the Climate Crisis
We are witnessing unprecedented wildfires across Greece, Portugal, and the entirety of the West Coast of North America.
Catastrophic flooding has impacted Germany, while historically moderate regions like the Czech Republic have experienced devastating tornadoes.
The Caribbean and the Philippines have been subjected to record-breaking hurricanes.
Severe drought conditions in Syria contributed to the outbreak of civil war.
The Great Barrier Reef is experiencing widespread destruction.
A Worldwide Phenomenon
These are just a few examples; nearly every corner of the globe has been significantly impacted by these events.
The climate crisis is demonstrably real, actively unfolding, and inflicting substantial harm.
Prioritizing Climate Solutions
The question then becomes: how should we respond, and how do we best direct our financial resources, time, and intellectual capacity towards developing effective solutions?
I firmly believe that addressing climate technology, alongside advancements in medicine, represents both a financial and a moral obligation – it must become a primary focus for humanity.
The Compelling Financial Case for Decarbonization
Failure to diminish carbon footprints within both investment portfolios and business operations risks obsolescence. A significant financial shift is underway, driven by converging stakeholder interests.
Pension funds and endowments are facing mounting pressure to disinvest from fossil fuel assets. Investor sentiment is shifting away from major players like Royal Dutch Shell and ExxonMobil, coinciding with a surge in publicly listed ESG and energy transition companies – over 70 have launched via SPACs and IPOs in the U.S. within the last year and a half alone. I anticipate that at least ten of these will achieve decacorn status, with two or three potentially becoming hectocorns.
For the insurance sector, conventional natural hazard risk assessments are proving inadequate. The accuracy of FEMA flood maps is diminishing, as events previously considered once-in-a-century are now occurring with increasing frequency. Existing fire risk maps require comprehensive revision. Having personally witnessed the effects on both the East and West coasts of the United States, the extent of the damage is undeniable. Assets rendered unusable by fire or flood inherently lose value. Discussions with major insurance providers reveal unprecedented levels of engagement on these matters.
Governments are progressively implementing stricter building regulations. For instance, approximately 10% of buildings in London were projected to be non-compliant with updated codes by early 2022. While adoption in U.S. cities and states has been slower, mirroring past regulatory trends where the EU pioneered and the U.S. followed, this change is inevitable.
A growing demand for sustainable buildings is emerging from tenants, particularly among Gen Z and millennial demographics. Major consumer brands, including Amazon, Microsoft, and Unilever, are allocating substantial investments to climate technology innovation.
As has often been the case, technological advancements are offering solutions to address shortcomings in governmental and societal responses. Numerous promising technologies have matured, facilitating their integration into mainstream applications. The levelized cost of electricity generated from solar and onshore wind power decreased by 85% and 56%, respectively, between 2010 and 2020.
Despite encouraging progress in energy and transportation technologies, significant work remains, particularly within the real estate and critical infrastructure sectors. Simply deploying currently available technologies in the built environment will prove insufficient. Even disregarding financial considerations like payback periods and returns – which are frequently challenging to achieve – existing technologies would only address less than 50% of carbon emissions in the built environment, as determined by a Fifth Wall analysis. Consequently, a dual-pronged approach is essential:
- Accelerate the deployment of existing technologies to reduce payback periods from over a decade to a range of two to five years. This requires growth capital and, ultimately, infrastructure investment.
- Foster the development and refinement of novel technologies through government funding, national laboratories, university research, and investment from angel investors and venture capital firms.
Addressing this crisis necessitates a substantial influx of capital, exceeding even the encouraging levels observed in recent years, during which climate tech VC investment experienced a 40-fold increase between 2013 and 2019. We are already witnessing the emergence of multibillion-dollar tech and biotech venture and growth funds; now is the time to establish comparable climate tech funds on a global scale.
A Compelling Moral Obligation
Beyond the financial justifications, a plea to basic human compassion is essential. Repeatedly, I’ve encountered highly intelligent investors suggesting that now isn’t the opportune moment for climate investment. They even contend that climate change doesn’t represent a viable investment strategy.
This perspective, citing difficulties, scale, and capital intensity, is deeply frustrating. If substantial investment isn’t warranted now, when will it be? Should we wait for the complete devastation of California’s ancient forests? Or until hurricanes obliterate the Outer Banks of North Carolina?
Consider the scenario where Amazon’s valuation reaches $5 trillion, yet its workforce struggles to secure insurable housing on the West Coast. It’s clear that our collective focus has been misdirected. Prioritizing climate solutions is paramount.
For two decades, exceptional talent has been channeled into maximizing ad clicks and social media engagement. While advancements in computing and connectivity are undeniable, the intense focus on platforms like Facebook and Twitter represents a significant misallocation of intellectual capital, given the pressing issues of health and climate change.
A new breed of business leadership is required. I envision the next Mark Zuckerberg pioneering a revolutionary battery technology. The next Jeff Bezos should embody the spirit of Ryan Morris at Turntide Technologies, who is transforming the electric motor industry.
Similarly, the next Jack Dorsey should concentrate on developing sustainable building materials, like a novel cement. The next Steve Jobs needs to devise sustainable methods for water consumption, production, and transportation. Elon Musk, despite any controversies, demonstrates the need for ten more individuals with his level of ambition and drive.
Therefore, I urge the upcoming generation of entrepreneurs to prioritize carbon reduction over click-through rates. Focus on solutions, not just engagement.
If the complexity of the climate crisis seems insurmountable, let us turn to biotechnology. Throughout history, humanity has demonstrated a remarkable capacity for decisive action in times of crisis.
The rapid development and deployment of vaccines, monoclonal antibody treatments, and ventilator technologies during the pandemic were life-saving. The innovations from Moderna, Pfizer, and BioNTech averted an even greater catastrophe – a testament to the power of biotech entrepreneurship.
This same urgency must be applied to climate technology. Critics often label climate tech investors, including myself, and climate scientists as alarmists. However, I contend that we are not sounding the alarm sufficiently.
The crisis is already unfolding, yet our psychological wiring often prevents us from fully grasping its severity. Humans struggle to react to prolonged, gradually worsening threats. We are, in essence, the proverbial frog slowly boiling in oceans increasingly saturated with CO2.
The Imperative of Climate Technology Investment
Throughout the last decade and a half, my experience has encompassed both successes and setbacks in the pursuit of climate solutions. Significant investment shortfalls were witnessed in areas like biofuels and early solar technologies. Conversely, substantial progress and triumphs have been achieved in fields such as battery technology, carbon nanotubes, graphene nanomaterials, agricultural technology, and advancements in both solar and wind power.
I possess a realistic understanding of the challenges inherent in establishing climate tech ventures. It’s a sector demanding substantial capital outlay, and the refinement of these technologies often requires years of dedicated effort, heavily reliant on hardware development. The difficulties in collaborating with established utility and real estate entities are also well understood.
These organizations often prioritize minimizing capital expenditures and ongoing maintenance, making the adoption of innovative technologies a complex undertaking. We have frequently misjudged the optimal timing for market entry. However, the sheer scale and complexity of the climate crisis necessitate the engagement of the most talented scientists, entrepreneurs, legal professionals, and financial experts.
There is no alternative. Personally, I cannot accept the prospect of informing my children that I stood idly by while our planet was harmed. I firmly believe that the continued construction of energy-inefficient buildings and the operation of fuel-intensive vehicles will, within three decades, be viewed with the same condemnation as the use of tobacco or asbestos – as utterly inexcusable practices.
The COVID-19 pandemic represented the first global crisis faced by our generation. The climate crisis, however, is a far larger and more protracted challenge, one that will span multiple generations. Aspiring entrepreneurs, I urge you to prioritize solutions focused on carbon reduction over those driven by short-term digital engagement. Support will be provided for such endeavors.
Why Investment Matters
- Scale of the Problem: The climate crisis demands significant resources and expertise.
- Long-Term Impact: Current unsustainable practices will be viewed negatively by future generations.
- Generational Challenge: Addressing climate change requires sustained effort across multiple generations.
Investing in climate technology isn't merely a financial decision; it’s a moral imperative. It’s about securing a sustainable future and avoiding the historical condemnation reserved for practices demonstrably harmful to human health and the environment.