An Opportunity for Investors (and Startups) to Help Tackle Climate Change
Whether it’s the bush fires in Australia or the global campaign waged by Greta Thunberg, climate change is never far from the headlines. But if we are to find answers to the challenges the world faces, investors have a role to play in picking – and backing – winning solutions that will have the biggest critical impact.
We therefore need to ask ourselves – how can investment priorities be aligned with environmental and climate goals to ensure we reach a ‘win-win’? How can we ensure that winning ideas with the greatest impact get the funding they need to make a difference?
One such idea is investing in clean technology companies.
Total funding for clean tech startups has declined during most of the past decade, according to data from the research firm Pitchbook. In 2018, $6.6 billion was invested in clean tech which is only about 15 percent of what went into software startups. It’s clear that more must be done to improve investor understanding of clean technology and carbon project investments.
We have all seen the disruptive force that has reshaped industries and created entirely new sectors. As Hub71, we are seeing that same disruptive force be brought to bear on environmental challenges. This is one of the biggest areas of opportunity for investors – especially in the ventures space.
Technology and startups
Startups are famous for looking at traditional problems and finding innovative solutions. Investors can, and should, be a part of that solution by focusing on one of humanity’s greatest challenges while creating significant returns in a market where demand for new ideas is unrelenting.
Although it may be a long-term dividend – more and more governments and companies are getting on board the sustainability train. Not to mention, innovative startups from around the world are heads-down and focused on solving this global issue.
So, how can we better align on environmental goals, the role of technology and innovation, and the investors’ need to deliver attractive returns?
There must be a way to encourage responsible and impactful investments, and not just because climate change is ‘trending’ but because it’s a sound investment strategy.
The world is changing, are investors ready to keep up?
Masdar invested $43 million in the UK government’s $491million Charging Infrastructure Investment Fund; becoming the first commercial investor to a scheme which aims to more than double the country’s electric vehicle charging infrastructure with 3,000 new rapid charge points by 2024. That’s not a risk, that’s science.
As published in a recent report by the International Energy Agency, ‘electric car deployment has been growing rapidly over the past ten years, with the global stock of electric passenger cars passing five million in 2018, an increase of 63% from the previous year.’
Interestingly, 45% of electric cars on the road in 2018 were in China, compared to 39% in 2017. In comparison, Europe accounted for 24% of the global fleet, and the United States 22%. Chile’s aim is to electrify 100% of its public transport by 2040 and 40% of private transport by 2050. New Zealand also has high ambitions and has adopted a transition to a net-zero emissions economy by 2050.
Clean technology is the way forward.
There are some estimates that onshore wind and solar power are already competing with coal and gas in Germany, and that within five years they will be cheaper to build than new coal and gas plants in China, the US and India.
By the late 2020s, some people say it will be even cheaper to build new onshore wind and solar power than run existing coal and gas plants.
At the very least, tackling climate change provides investors with a lucrative first-mover advantage. At the very best, Environmental, Social and Corporate Governance (ESG) markers will become ‘standard’ for every company and investor on the planet.
More can be done by governments and investors – and change is happening
Here in the United Arab Emirates, we are quickly becoming a leading hub for renewables projects in solar, wind, nuclear, and waste-to-energy. Although the demand for energy is growing, especially in developing countries, we will see a move towards de-carbonization, a decreased use of hydrocarbons for producing transportation fuels, increased efficiency, a decrease in energy intensity and a created energy mix. The energy market and technology are converging into highly dynamic opportunities, creating an exciting environment for investors.
In April 2017, Dr. Thani Bin Ahmad Al Zeyoudi, UAE Minister of Climate Change and Environment, joined 170 nations that have signed the Paris Climate Agreement, which brings all nations into a common cause to undertake ambitious efforts to combat climate change. This is a sovereign agreement which the UAE government takes very seriously.
On January 14, 2020, Hub71, a Mubadala-backed global tech hub, signed a collective endeavor called the Abu Dhabi Climate Initiative alongside the Ministry of Climate Change and Environment, Environment Agency – Abu Dhabi, and Abu Dhabi Global Market; as part of Abu Dhabi Sustainability Week’s Sustainable Finance Forum, a dedicated series of discussions and initiatives on scaling sustainable finance. One of the three strategic pillars within its scope is The Climate Lab, which will be based at Hub71.
The Climate Lab at Hub71 aims to boost R&D in climate, water tech and is a call-out to all startups, and VCs, from around the world who want to change the future.
It’s a sign to show that Abu Dhabi is ready and waiting to receive great ideas. Startups and investors alike can come build, test and deploy innovative clean tech ideas, be it water technology solutions or climate change technologies. With our strategic partner, Mubadala, having launched a $250 million tech investment vehicle ready for deployment – Abu Dhabi is seeking startups and VCs who are bold enough to make a difference.
As Abu Dhabi’s Hub71 grows its network of innovative startups, business enablers, mentors, accelerators and VCs; we’re proud to be kicking off this series of climate change initiatives that looks at the entire sustainability ecosystem – one which will benefit us all.