Episode eight, season three of the Climate Curious podcast is now live with our special guest, climate tech investor, Gabriel Kra.
The big idea
Some would argue that rampant capitalism is the greed-driven system doomed to destroy itself, that got us into this climate mess.
But for others, it’s capitalism that’s really going to get us out of it.
For climate tech investor Gabriel Kra, climate change isn’t just a problem, it’s an investment opportunity. And one that’s going to see some pretty tidy returns.
“We need to change the way we think about the climate challenge. Because things are different this time. We need to stop thinking about it as just a problem and start thinking about it as an opportunity which will motivate us to solve.”– Gabriel Kra
Wait, I thought capitalism was to blame for this mess?
Okay first a wee refresher on capitalism.
Capitalism is an economic system for dealing with money and wealth. In a capitalist country, citizens, not governments, own and run companies. These companies compete with other companies for business. Because they’re competing with each other, they’re incentivised to act fast. They decide which goods and services to provide based on demand (that’s what people want to buy).
For years, these rules and incentives of capitalism enabled oil and coal companies to extract fossil fuels without paying the true cost of the damage they were causing. That was easy to do because nature was hard to value and the destruction was often hard to see in real time.
“Capitalism has produced enormous wealth, but in part that’s because it has been able to treat nature as self-replenishing, hyper-abundant and free.”– Andrew Zolli, Chief Impact Officer at Planet
Gabriel agrees: “Our whole economy was built over the past 200 years without realising that it was polluting the atmosphere. But somebody has got to pay. And now we’re paying for it. Right now. When we have floods. When we have fires. When we have heat waves. That’s us paying for that pollution.”
Can capitalism save the planet?
In a capitalist world, when shit hits the fan, sure governments can intervene, but with enough demand for shit to get out of the fan, companies start getting into the business of excrement removal from ventilating systems too. That’s what’s called market forces.
Let’s take an example of how the world responded to a very serious episode of turds flying every which way: COVID-19. It felt like the world (and its economy) was ending leading to giant market demand. So super smart biotech companies (like Pfizer-BioNTech and Moderna) focused their efforts on creating a giant shit-aspirator. Or in other words, a vaccine.
Ergo, capitalism, because it promotes technological innovation (and that tech is what is going to save us), is a system ready to save the planet.
Gabriel is the managing director and co-founder of Prelude Ventures. Founded in 2013, they’re a San Francisco outfit that invests in climate tech that’s going to make “a really meaningful and hopefully massive impact on mitigating climate change”. It’s the kind of tech that’s often invented by a small group of entrepreneurs. The kind of tech that needs to be further developed, scaled and grown into a massive company. Remember how Facebook was created in Zuckerberg’s dorm? It’s the same thing but instead of an Orwellian behemoth of a social network, it’s tech that’s going to save the planet.
What is climate tech?
Artificial intelligence that tracks honey bees. Hydrogen atoms that make energy without greenhouse gases. Vacuuming carbon out of the atmosphere.
These are all examples of technology focused on solving or mitigating the impacts of the climate crisis, also known as, climate tech.
According to Gabriel, this is just the beginning because it’s a sector in its infancy. Like the YouTube of the climate world. And there are loads more problems we need answers to. But instead of seeing that as daunting or impossible, Gabriel sees each climate problem as an opportunity.
“We need to get food on 8 billion plates. Right? So [we’ve got to figure out] how to grow wheat, corn, rice and soy with less fertiliser? Because fertiliser releases a tonne of methane and CO2 into the atmosphere. So we need to invent a better way to do that.”
And how will we do that? You guessed it: climate tech.
It’s the same thing for steel and cement. They’re two materials that account for 4% of global emissions. But we still need buildings and infrastructure. So we need to come up with (and in Gabriel’s case, invest in) a climate tech solution.
The first wave
There was a first wave of climate tech but it went by another name: “cleantech”.
A decade and a half ago, “cleantech” was decidedly on the rise among venture capital investors. It became one of the hottest investment sectors practically overnight (think dogecoin on steroids). From 2005 to 2007, dollars invested quadrupled.
But this was not to last. Gabriel explains: “There was this incredible pullback, prompted by the Great Recession of 2008.”
Cleantech underwent one of the worst boom-and-bust cycles in the history of tech investment. Venture capitalists lost over half their money and cleantech came to be seen as a string of investment failures. “Not enough of us knew,” Gabriel says, “that this was going to be the greatest business opportunity of our generation. We underestimated how hard it was going to be to disrupt entrenched companies that did not want to change”
From fringe to in: how climate tech got its sexy back
Back then, it was pretty niche. “We were the only ones doing what we did. If I went out and said I’m a clean tech investor, I had to explain two or three times to [other investors] what that meant.”
But now, rebranded of course as ‘climate tech’, things are starting to shift.
Whereas once, solar panels were banned because it was thought they would ‘uglify’ the landscape, now they’re the height of elegance.
Gabriel says “the first half of 2021 was the biggest ever semester in the history of venture capital”. Investment in companies developing climate tech grew to $87.5 billion in the first half of 2021 (PwC, 2021). That’s up a whopping 210% from the same time in 2020. In fact, 14 cents of every venture capital dollar now goes to climate tech.
Climate tech is sexy now.
So why now?
Gabriel puts it down to three reasons:
- Renewables are cheaper than fossil fuels
Renewable energy sources are now price-competitive with fossil fuels whereas back in the middle of the cleantech boom, they were over four times more expensive.
And the relative cost of renewables is only going to continue to plummet in the years ahead.
- We have better tech
Consider lithium ion batteries and how they enabled the electric vehicle revolution. Now we’re working on batteries that last for days, not hours, and can be charged in a matter of minutes. We’re armed with the best tech and it’s enabling us to solve problems in whole new ways.
- We can see climate change happening in real-time
In 2021, climate change is no longer a distant theoretical concern. It’s happening here and it’s happening on our doorsteps from the constant wildfires in California to the record-busting heatwaves in Europe.
“It’s more visceral now. I live in California. We’ve had five fire seasons in a row, where we don’t go out of the house because it’s so smoky, that it’s dangerous. They cancelled school because the smoke was so bad. Everybody is seeing it.”
- Something clicked during lockdown
For many people, the worldwide disaster that has been COVID-19 was the catalyst for moments of reckonings and spiritual awakenings.
“We were all wondering what was going to be the impact of this horrible thing that was happening, and sometime in the Fall, the dust began to settle from that, and all of the sudden, there was this massive interest [in climate tech]”
What needs to happen now?
There are two main things:
There are solutions that already exist (like solar, wind and other renewables). We need to implement these and make them the norm.
There are things that we don’t have answers to yet that we need to create solutions for (like making steel and cement, feeding the planet…)
Both of these things require money.
A pay-for-your-pollution system
Investment in climate tech is great. But how do we stop people from investing in the bad stuff?
We need to kiss goodbye to the flawed logic that things that are bad for the planet are cheaper. Because they’re not. You’re just not paying for their ecological impact.
Gabriel cites an interesting example: In the US “we passed laws in the 70s, because big chemical companies were getting rich fast because they were dumping their pollution into the rivers and lakes. We were like, ‘well, you got [sic] to pay for that’.”
If your product or process is damaging the environment or polluting the atmosphere then you need to pay for the entirety of its lifecycle and impact on that environment. Right now, when you buy a piece of fast fashion, you’re just paying for the materials and maybe a couple pennies on labour. You’re not paying for its impact on the climate. But that day could soon be here.
We need to make rules that say: if you’re investing in oil and gas, things that are incredibly negative for us that cause climate disasters, there’s actually going to be a price to pay.”– Gabriel Kra
What if your pension could change the world?
You may not think of yourself as an investor, but if you have a bank account and a pension, you are one.
Where you put your cash is way more important than you’d think. Investing in a sustainable pension cuts your carbon impact 21x more than stopping flying, going veggie and changing energy supplier.
This is big news.
More than $52 trillion US dollars was invested in pension funds around the world in 2020 (ironically, that’s the same amount of money that analysts think we need to spend to limit global warming to 1.5°-2°C. ). But a big chunk of this money contributes to the deforestation of rainforests, finances war that leads to famine, and supports new fossil fuel projects.
“The impact of your pennies and pounds is a moral and ethical choice. [When you invest your pension in fossil fuels] you’re not actually investing in your future because the things you’re investing in are actively making that future disappear.”– Gabriel Kra
Each pound you spend is a vote for the kind of world you want to live in.
- Email your employer or your pension fund
Most of us are enrolled in a pension through work. But lots of companies don’t know that having a sustainable pension is so important to their employees. So why not email the HR department to start the conversation? Or go straight to the source and call on your provider to demand a pension you can be proud of.
Find some handy pre-written templates here.
- Tell someone else
Most people don’t know what their pensions are investing in or the impact that those investments have on the world. So spread the word and pass it on.
Until next time – stay curious!
How can I listen?
Further reading and watching:
Want to save the world? We need a lot more Elon Musks. New York Times. November 16, 2021.
Capitalism is killing the planet – it’s time to stop buying into our own destruction. The Guardian. October 30 2021.
Cleantech Investing Is Back. Will This Time Be Different? Forbes. August 17, 2020.
Climate tech 2.0 must sell venture capital on its future. Financial Times. October 21, 2021.
You may be accidentally investing in cigarette companies by Bromwyn King. TEDxSydney talk. June 2017.