The Amazon founder Jeff Bezos has set aside USD10 billion to combat climate change. If he wants to have the greatest possible impact, here’s where he should invest the money.
Written by
Stephen Freedman, Senior Product Specialist
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If you had USD10 billion to invest to combat climate change and protect our planet, where would you put that money? That is the conundrum facing Amazon Chief Executive Officer Jeff Bezos, who has set aside precisely that amount in his new philanthropic “Earth Fund”.
From the futuristic (such as drones which generate wind power) to the prosaic (water pressure monitors which anticipate pipe leaks), there is a growing range of viable environmental technologies he could channel that money to.
Drawing on our own two-decade experience in thematic impact investment, we think the following three areas are particularly well-placed to benefit from Bezos’s billions.
1. Wood of the future
We need more research into advanced wood-based materials for construction. Traditional building materials such as cement and steel are very energy intensive to manufacture. In contrast wood-based building materials may not only require less energy to produce, but, more importantly, can also act as carbon storage for the duration of their existence. There is, therefore, a tremendous opportunity in materials science to find new ways to use advanced wood-based materials in urban construction to replace steel and cement on a growing scale. The engineered wood market is forecast to grow at a compound annual growth rate of 25 per cent.1 Because it is at an early stage of development, it would benefit from both more funding for fundamental and applied research.
2. Clean batteries
The clean energy industry has not been lacking in investment, but one area that has lagged is the storage of that energy. In the US alone, it is estimated that 120 gigawatts of energy storage will be needed by 2050 – five times more than is currently available.2 Research also needs to focus on improving the environmental footprint of batteries (in particular lithium-ion) and on making them more recyclable. Additionally, while advances have been made in terms of fairly short-term storage, the integration of renewable energy at scale into the power grid requires robust solutions for longer-term storage, spanning several months to create a buffer again seasonal variations in energy production and consumption. Hydrogen-storage, if it can be perfected, could be a viable solution to store surplus renewable energy.
3. Green plastic
Plastic has an image problem. It is hard to recycle, does not easily decomposed and can be fatal to wildlife on land and sea. Rather than abandoning it altogether, we need to make it greener.
Bio boom
Biodegradable plastics: global market value data and forecast from 2018 to 2027 (USD billion)
Source: Markets and markets, 2019
That means developing viable bio-based biodegradable plastics to replace the current fossil fuel-based plastics. These either release CO2 into the atmosphere if incinerated after use, or pollute ecosystems if left to decompose. Today’s bioplastics are an improvement, as they reduce reliance on fossil fuels. But many are synthesized to be chemically equivalent to conventional plastics, which means they will have the same adverse environmental impact at the end of their lifecycle. Hence the need to develop biodegradable bioplastics with a focus on finding just the right speed of biodegradation for each specific application. By 2027, the value of the global biodegradable plastics markets is forecast to reach USD12.4 billion – a four-fold increase in a decade.3
Aside from developing new technology, we need to better understand the world around us and our impact on it. To this end, research into ecosystem services – the benefits that we get from the natural environment and healthy ecosystems – would be extremely helpful.
By identifying a commonly accepted suite of ecosystem services and placing a value on them, we can better focus conservation efforts and stimulate investment into green infrastructure. A lack of understanding of what needs to be preserved, how and why has made it difficult to coordinate such initiatives.
READ MORE ABOUT SUSTAINABLE AND THEMATIC INVESTING
Stephen Freedman, Senior Product SpecialistDecember 2019
About
Stephen Freedman
About
Stephen Freedman
Stephen Freedman joined Pictet Asset Management in 2019 as Senior Product Specialist in the Thematic Equities team. Before joining Pictet, Stephen was at UBS Wealth Management, where he most recently served as head of Sustainable Investing Solutions for the Americas, based in New York. Prior to that he served in various Investment Strategy roles, including head of Thematic Investing Strategy and head of Tactical Asset Allocation. He started his career with UBS in Zurich in 1998 as an economist and public policy analyst. Since 2019, he has been teaching environmental finance at New York University. Stephen holds a PhD and a Master in Economics from the University of St. Gallen. He is a CFA charterholder and earned the FRM designation from the Global Association of Risk Professionals.
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