The next investing trend is climate restoration
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Call it the ‘next economy’, the multi-trillion dollar opportunity, or even ethical investing, but as business leaders pack the snow gear for the Davos economic conference next week, the trend they’ll be talking about is how to make money from the climate emergency.
Already global fund manager Blackrock has announced its ‘climate epiphany’: CEO Larry Fink wrote this week in a letter to investors that “awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance”.
He said companies, investors, and governments must prepare for “massive capital shifts” as people and organisations reallocate their finances into sustainable strategies.
Already millennials are demanding, and receiving, more climate accountability from the companies they invest in.
At the annual World Economic Forum talkfest at Davos in the Swiss mountains next week two groups will be announcing their own version, a report on how to make money from the “multi-trillion dollar market opportunity for investors and corporations”.
At Davos, Arizona State University’s Thunderbird School of Global Management and the Foundation for Climate Restoration are pitching climate restoration innovations as an investment theme over the next decade.
Climate restoration is removing some of the trillions of tonnes of excess CO2 from the atmosphere. It has also been called geoengineering, and spurred ideas such as sucking carbon dioxide directly out of the air or sea water, and accelerated weathering of rocks to quickly bind CO2 into mineral phases.
Until now it has often been called the ambulance at the end of the cliff, with critics saying efforts to prevent that CO2 from getting out at all should be the main focus. But as the impact of a lack of action becomes apparent, the tone is shifting.
“Given the climate emergency, climate restoration is a critical third pillar of climate action, complementing ongoing mitigation and adaptation efforts,” Arizona State University’s Thunderbird School of Global Management and the Foundation for Climate Restoration said in a statement.
“New technologies and natural solutions for reducing CO2 levels in the next 30 years already exist and the costs for global-scale implementation are projected to be less than 1-3 per cent of the global annual GDP.”
Climate restoration efforts may seem like edge technologies today, such as Ice911 Research’s efforts to rebuild Arctic sea ice, but global investors are eyeing these as the next big thing.
This type of tech is as yet unattainable for the average investor, but the Australian market already has options that fit into this newly badged investment theory.
Eden Innovations’ (ASX:EDE) concrete additive which has the byproduct of needing to use less concrete — a substance that produces about 8 per cent of the world’s CO2 emissions.
Electric cars and green energy are two areas Australian investors are already familiar with.
Investors with US trading accounts likely already have Tesla in their portfolio, one of the pioneers of the electric car industry and certainly the fastest growing car company in the world, after unveiling in early January a massive jump in cars delivered in 2019.
In Australia there are more opportunities further up the value chain.
Companies like Rectifier (ASX:RFT) and Redflow (ASX:RFX) service the home and car battery markets, while in Western Australia Hazer (ASX:HZR) is in the process of commercialising a low-emission hydrogen production process.
And there’s a whole range of clean tech stocks, from renewable energy to water and waste, available on the ASX. Indeed, the Deloitte Australia Clean Tech Index has consistently beaten the broader market over the last year.
In the US, Green Alpha Investors chief investment officer Garvin Jabusch includes biotech in his list of industries that fall into his ‘next economy’ thematic.
But he warns that in order to fully invest in a sustainable economy, investors will need to return to active management of their portfolios rather than allocating capital to an index.