Forget banks: Investors should be worrying about the climate
Reports issued by the United Nations Intergovernmental Panel on Climate Change are usually grim affairs. But even by that standard, last week seemed particularly grim.
As a result, the world has already warmed by 1.1 degrees Celsius and we are on track to reach 1.5 degrees Celsius the “safe” limit set by the Paris Agreement by the early 2030s.
So unless we make drastic changes, the world will exceed the amount of warming that is considered safe in just 10 years.
There’s a good chance that by the time 30- and 40-year-olds retire, the world will be screwed.
Hurricanes, heat waves, polar vortexes, wildfires, floods, droughts all the things that make us stock our pantries, invest in backup power, and shore up our insurance policies.
We’ll get more and more nostalgic for them. Wasn’t it cute how bad we thought things were back then?
Where the hell is the panic?
Sure, a lot of people have concerns.
The problem is that most of them don’t have (or can’t put in) the amounts needed to disrupt the problem.
Meanwhile, those who do are largely experiencing one of the greatest crises—and one of the greatest opportunities of their lives.
There are a handful of investors who “get it”, but most don’t.
Rather than investing in fusion or batteries or carbon capture or network management tools, content seems to be investing its money in ad optimization software, corporate payment cards, corporate SaaS platforms – CRM, marketing or payments, take your pick! – or anything to do with metaversion, really. One after another after another.
(AI chatbots will soon join the list because, come on, have you seen what happens after the latest toy lands on “60 Minutes”? It’s like a bunch of high school kids rushing to monkey with the latest TikTok trend.)
When they’re not busy funding incrementalism, they’re giving failed wunderkinds hundreds of millions of dollars or blowing runes on regional banks.
Is this what he longs for?
It would be less frustrating if venture capitalism wasn’t tailor-made to deal with such a problem. Large but manageable risks? Cheque.
Needle movement technology? Cheque. Huge benefits and potential to reshape trillion dollar markets? Check and check.
Where is everyone?
To illustrate the problem, let’s compare two completely different markets.
Here we have software-as-a-service that investors have lavished money and attention on because these companies produce recurring revenue that is often more stable and predictable.
In total, SaaS companies worldwide raised $122 billion last year, according to PitchBook.
In other words, VCs have invested more money than the entire GDP of Slovakia in financing companies that rent software on a monthly basis, instead of selling perpetual licenses.
On the other hand, we have clean energy, which includes everything from batteries to renewable fuels, building electrification, solar, wind and more.
Investors invested $40 billion here last year. In case you’re bad at math, the investment that eliminates carbon pollution in countless sectors of the economy was a third of what was spent on monthly software sales alone.
Venture capitalists once backed companies that experienced large and consequential swings.
In 1946, an American R&D pioneer VC presented the founders of High Voltage Engineering with a check for $200,000 to develop a new technology known as X-rays to treat cancer.
At $2.8 million in today’s dollars, that may not seem like a lot of money. But remember, apart from ARD, there was no venture capital back then.