Investing for Climate Change

Paul Boerboom, Sep 23, 2021 1:06:35 PM

On Thursday 16th of September 2021, Paul Boerboom (CEO) of Avida International, together with Stéphane Lamoine of Beam Earth, Dr. Steffen Hörter of Munich re Partners and Chris Limbach of PGGM, led a webinar on the topical issue of Climate Change Investing: how to invest in our planet?

Initial comments
  • Most investors want to do something about Climate Change but do not necessarily know where to begin the process. The question is therefore one not of intent but of implementation.

  • It is a question not of ‘if’ but ‘how’ when it comes to Climate Change.

  • Munich Re makes new renewable energy investable by providing insurance in the constructing and operating risk of renewable energy infrastructure.

  • Research still needs to be done into the effectiveness of different technologies.

Hydrogen and Beam Earth’s approach

Hydrogen production and use is growing rapidly, for example, it is a major part of the UK (United Kingdom) government’s net zero strategy (although, the UK government are mainly investing in blue hydrogen, which releases CO2 emissions). Not all Hydrogen production is environmentally friendly. Grey Hydrogen, which is processed from natural gas and methane, is the cheapest to produce ($1.75 per kilo) but releases a significant amount of CO2 into the atmosphere; this is the same for Blue Hydrogen which is produced by burning fossil fuels. Green hydrogen, which is produced through electrolysis, is clean but currently very expensive.

Beam Earth are applying their knowledge and experience to the production and extraction of Natural Hydrogen. Natural Hydrogen (or White Hydrogen as it is sometimes called) is the recommended source of hydrogen since it is cheap to produce (extracted from the ground) and is very clean. The figures surrounding future Hydrogen investment are significant and growing. It is estimated that $300 bn will be invested by 2030, with over 122% use by that time, so thinking about how hydrogen is extracted is paramount. Stéphane posited that Natural Hydrogen is the alternative of choice since it is fully renewable, there are well documented reservoirs, a low cost of production ($0.5-$1 per kilo), low CO2 emissions and does not involve heavy use of industrial structures.

New and relevant technologies and resources are paramount for the success of these Climate solutions.

Furthermore, what the COVID vaccine demonstrated is that if enough energy, resources, and time are put into something, it can take a much shorter period to have its desired impact (vaccine took 1 year instead of the usual 5- 8 years). In the same way, if the push for successful technologies in producing Natural Hydrogen becomes a priority, then this alternative source is much more likely to succeed. Furthermore, this is not about reinventing the wheel but relying on similar technologies used in responsible oil and gas production.

Investors are well advised to educate themselves to make the right investment decisions that have the biggest impact, both in financial and environmental terms.

 
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Comments from side of investors

Steffen and Chris then added the following:

  • The importance of speed in order to achieve the best returns on your investments in this space.

  • Thinking harder about development risk is necessary for pension funds and investors.

  • The key question: ‘is your current approach agile enough to support these kinds of innovations?’

  • Trustees need to have sufficient understanding (for example, on different renewable technologies) to be able to support an effective Climate strategy.

  • Munich Re has many engineers not just on the underwriting side, but also in their investment team.

  • Genuine Climate change impact requires research and a critical understanding of the technologies, which should be across an organisation.

  • Specific knowledge required to make effective decisions in the Climate change space requires the right governance model (for example, if Trustees take investment decisions they need to possess this detailed knowledge).

  • Some pensions funds are already investing in Natural Hydrogen, for example, the Australian super funds, have already acquired 50% of the government’s concessions for the extraction of Natural Hydrogen.

Key questions
  • Key question is how do we enable this transition sooner. Aiming for a CO2 neutral portfolio in 2050 is equivalent to doing nothing, since this will be the goal of most economies.

  • What should you do to enhance your investment process or implementation?

 

Are you looking for impactful options in this space? Contact us!

Contact me to discuss options for investing in Climate Change
 
 
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