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The Climate Countdown To 2050


Managing Director of Clean Energy Ventures, a VC firm investing in companies commercializing disruptive clean energy technologies.

2050 is said to be the magic number to make sure our planet is habitable amid climate change, but what are the next few years going to look like? Not only do we all need to continue contributing individually, but experts also say we need to spend upwards of $150 trillion over the next 30 years to place us on a pathway to 1.5 degrees Celsius, the atmospheric temperature needed to stabilize the impact of warming. But where will that money flow, and how will that change the global markets in the coming decades?

Investors are eyeing five trends, each associated with major opportunity and risk.

Gas stations will be a thing of the past.

Over the coming decades, expect new oil and gas drilling projects to fall under increased regulation and thereby be limited to select emerging markets. For the rest of the world, global drilling will see a significant decline as financial markets begin to discount the value of companies with heavy carbon-related risks.

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With trillions of dollars leaving the fossil fuel markets, companies like BP, Shell, Chevron and others will see conventional assets devalue and increasingly slice off new low-carbon initiatives into separately listed companies. Expect to see “old energy” companies abandon gas stations for charging infrastructure, depart from oil and gas wells to embrace renewable generation portfolios, and distance themselves from oil refineries by converting existing infrastructure into green hydrogen production.

In anticipation, institutional investors should begin to eliminate unwaveringly volatile fossil-based investments from their portfolios immediately. Simultaneously, entrepreneurs can capitalize on big ideas to fill the gap, addressing rather than causing climate change.

One-third of the current Fortune 500 will be supplanted by climate companies.

Today, Tesla is the only pure-play climate tech company valued at over $1 trillion. Over the upcoming decades, I predict we’ll see battery storage, transportation and mobility, decarbonizing equipment manufacturing, renewable utilities and global integrated energy companies (previously oil and gas companies) grow to a massive scale.

With public and private sector support for these pure-play companies, many of the current Fortune 500 will fall by the wayside. As a result, the M&A market will be bustling with activity as larger players look for both technology acquisitions to gain competitive advantage and asset acquisitions to achieve economies of scale.

In anticipation, investors—especially large institutions—should reassess their current portfolio risk profile in advance of reporting portfolio carbon emissions to the SEC. They should create vision, strategy and execution plans to factor in the ripple effects bound to hit the market as climate tech companies carve out more of the Fortune 500.

Energy access will be when you want it, how you want it.

With mass electrification underway, the grid of the future will need to be bolstered by scaled renewables and firming storage, alongside distributed resources on our rooftops leveraging EV batteries to provide backup power and distribution system support.

To create an improved electricity grid that is instantaneously reactive, reliable and secure, we need software improvements and marketplaces to increase the efficiency of grid solutions, whether by providing price incentives for consumers to run their dishwashers at night or signaling grid storage operators to dispatch power when the sun moves behind a cloud.

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By 2050, I envision a patchwork of solutions to be integrated through supra-oversight of regional grids, allowing us to avoid Texas-style outages and benefit from lower energy costs. While the FERC (Federal Energy Regulatory Commission) is already taking the first steps toward this future, it remains to be seen whether utilities can pivot in time and companies can scale solutions swiftly enough to meet our energy demand.

Investors should note the utilities that are profiting from investments in the clean energy economy (such as Avista, AES and National Grid, to name a few) and seek to partner with these companies in the long term.

Smart cities will dominate.

We are on a trajectory to decarbonize our transportation systems, but EVs alone are not the solution. We need decarbonized fuels, such as ethanol, methanol, hydrogen and even ammonia, to address areas where electrification may be challenging, such as long-haul trucking, mining, agriculture, marine and even aviation.

By 2050, smart cities—not as envisioned in Blade Runner or Minority Report—will see the emergence of integrated transportation systems with seamless public transport and an abundance of new micro-mobility options. Ahead of that, investors should pay attention to the market leaders in the “future of mobility” from manufacturing (i.e., EVs, eVTOLs) to infrastructure (i.e., charging, fueling) to monitoring through peer-to-peer networks and integrated transportation solutions.

Consumers will have a hand in driving the market.

Younger generations already share a commitment to reducing their carbon footprint and are holding businesses and leaders accountable for their actions as well. Three letters—ESG—will become mainstream and evolve to encompass climate, other environmental factors, social policies, fair employment practices and corporate governance. These considerations will become second nature to the average consumer, and the power of the purse will be increasingly common, whether through personal finance apps like Robinhood or purchases of sustainable brands.

Companies across a wide berth of industries will need to go beyond commitments to deliver on promises or risk the wrath of the next generation of consumers whose consumption patterns continue trending toward mission-based brands and personal value alignment.

Conclusion

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Addressing climate change alongside other critical challenges for humanity will require solutions from all angles, and that couldn’t be more important for investors. We’ll need the brightest minds on the planet from all backgrounds across the planet—whether in the hills of Cambodia or the halls of MIT—to create access and to be accessible. The augmentation of human capital has the potential to radically transform our capacity as a species to address humanity’s problems—and quickly, too.

We’re getting dangerously close to that magic number, 2050. Now, investors, entrepreneurs and consumers alike should begin paying attention to the market trends that will shape our global economy in the coming decades.


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