Delivering Net Zero: Lord Turner’s Energy Transition Commission echoes why the Clean Growth Fund is needed
Jonathan Tudor, Investment Partner, Clean Growth Fund
Last week the Energy Transition Commission, the body that Lord (Adair) Turner chairs, published its report ‘Making Mission Possible: Delivering a Net-Zero Economy’. I agree with all its recommendations, and the reasons behind them.
The ETC’s mission is to help us achieve the Paris climate objectives of limiting global warming to well below 2°C, preferably to 1.5°C. The report points out something that I could see during my career in energy with both Centrica and BP, viz. much of the technology needed to tackle emissions or reduce our addiction to fossil fuels already exists.
The ETC also claims that a prosperous net-zero economy can be achieved by mid-century. Again, this is something I also believe. However, this will not only require the adoption of new technologies, but a shift to new products and services coupled to new business models. I certainly believe that these shifts in business model predominately occur in start-up companies who have the agility often lacking in larger organisations.
But here is the dilemma; without the scale to drive costs down, some new solutions are hard to sell (in my view, even harder to sell at a price that makes commercial sense). Again, I agree with Lord Turner’s point that to achieve this change, we will need innovative finance from both public and private sectors.
Venture Capital companies have a long history of helping to take risk out of scaling young companies, but in recent years early stage venture funds have shied away from the clean technology. Whilst the assertion by Andreessen Horowitz (A16Z – the VC firm) that software is eating the world is on the whole true, software cannot eat all the CO2 and methane, so investment will have to back hardware again, including solutions for CCS, biomass and hydrogen. In Europe, I’m afraid that there is a paucity of early stage investors who understand clean tech and have the operational experience to support companies in navigating this scaling challenge.
At the Clean Growth Fund, we are in tune with the ETC and Lord Turner. We have blended public finance with private capital by having BEIS and CCLA as cornerstone investors in our fund, but we are actively looking to back early stage businesses in the sectors the reports highlights. We also have the operational sector experience to support them. However, I know that our collective experience isn’t everything. It will need patience, partnerships, syndicates with corporates, infrastructure investors and project finance.
Galvanised by Greta Thunberg, we have all seen the swathes of school children on a Friday demonstrating about the lack of action on climate change. These children are the consumers of tomorrow – it looks like they want technology to succeed in preserving a diverse environment where they can all have a meaningful quality of life, so let’s give it a go.
Post Script: in the period preceding the creation of the Clean Growth Fund, Lord Turner expressed his support: “the Fund will play a crucial role in driving an essential energy revolution. Achieving that revolution requires input from many different players – governments, energy companies, new technology challengers, NGOs and investors. Often these different players start with different points of view; but they need to be united in their commitment to limit global warming to well below 2°C.”