FGA at The Economist – Sustainability Week

At the East London location of the Barbican, on Tuesday 22nd March, was the in-person day of the 7th Annual Sustainability Week of The Economist, focusing on green investment and scaling technology for the energy transition, moving away from fossils fuels.

The panels of the day consisting of assets managers, carbon reporting companies, economists, academics, commentators, and technical experts in infrastructure and green tech.

Alok Sharma addressed the room with an opening keynote summarising some of the achievements of COP26 which included 60% of the FTSE announcing net zero pre-November event in Glasgow. Also sharing that 90% of the global economy has signed up to net zero and 40% of all global assets owners have made the pledge.

Swampy, the original climate activist in the UK from the 90s, made a cameo appearance in Alok Sharma’s speech which was a reminder that the work on climate has been happening for a long time and highlighting further the need to accelerate the transition. Also significant that there are many activists like Swampy now, and mostly wearing suits, so we have come a long way since 1996.

Alok discussed the themes of 2022 being ‘doing’ and ‘how’.

So what is it we need to do?

Switch from a fossil based energy system to green electricity and hydrogen as discussed in ‘What we need to do now’ by Chris Goodall. A very practical and positive book on how to achieve an energy system shift globally to limit global temperature rise.

How?

Estimates of funds required to switch energy systems were coming in at $2.5-5 trillion per year up to 2050. Greening brown industries and transition plans were part of the how and discussion on not stranding brown assets which would mean that they were not gone but being passed to those willing to still invest in fossil.

Utilities and infrastructure have historically been government led as towns and council have developed over the years often becoming privatised to improve running efficiencies and to become profitable businesses. This is why that a big part of the debate included use of strategic Public/Private Partnerships (PPPs) to give green first-of-it-kind tech, unstable tech or low return on investment tech and solutions an opportunity to show return. Hurdling investment was a topic which supported low return projects to demonstrate stability and profit over time. Although asset managers do not want to take on such risk with their pension funds, sovereign wealth and private client’s money, the bottom line.

However the question was still asked, which ones are the right ones to back? Which will be the green cash cows? Can they take the burden of the question marks or dog/laggards? And over how long in order to get to a point of profitability? The BCG matrix concept comes into play when working out what the portfolio energy mix will be.

There was a lot of discussion around hydrogen being a safe bet for asset managers which we do need more of but without green electricity it will only be able to serve some industries and definitely not aviation until 2035 as discussed by the Jet Zero Council in this recent update published 21st March. 200-300 seater hydrogen planes won’t be online until 2035. However e-fuels using green hydrogen and carbon should be in play before then. For aviation bio SAFs still do need to be in place and due to planes being in service for 25 years and being deployed now the market for SAF will be around for many decades to come. There are currently no hydrogen planes being submitted for certification and with us never having flown hydrogen societally before it is likely to take 5+ year for safety checks for these new planes. It is necessary to contextualise, look to the comparisons, the long term rollout plans, certification and public acceptance when it comes to investing in new tech and especially as new energy sources that are needing new infrastructure and behavioural changes like hydrogen needs.

Companies such as bp said:

By 2025 – 25% of portfolio will be transition

By 2030 – 50% transition projects and 40% less oil & gas in the portfolio

Various approaches were discussed when it came to understanding and choosing ‘green investments’

One commentator mentioned as well as Risk & Return, the next check is climate.

On an ESG approach – bottom line, does it harm the planet?

Topics at the table:

*Transition plans, should they be mandatory?
* ‘50 shades of green’ in investment terms
* Greening the brown economy
* Low cost capital for transition green projects
* The definition of transition
* Greening aviation ♻️✈️
* How to not strand brown assets
* ESG criteria for investments
* Reporting and supply chain
* Investment in Hydrogen

A few thoughts from our side were:
* Finance for green electricity, is it a given that it will be invested in? Although mentioned it was not emphasised that we do need a lot more for green hydrogen too (e.g.25 x times more in the UK in the next 2 decades)
* if investors/governments need to run at low or no ROI for new tech, how long can they manage this/hurdle this for? – 5 years? More?
* less discussed was customer /consumer readiness levels for paying for green

*although climate optimism was discussed, mitigation and water management was less discussed which we will likely need to do in conjunction with reducing carbon in general

At the event there was no plastic on badges or any single use, very nice vegetarian food, reusable plates, cups, cutlery and no paper flyers or schedules. ♻️✅

The work FGA have been doing, which has been recognised by institutes such as Imperial College London and our clients, is how we apply the energy transition work to businesses travel and sports. We are also working to find the finance for sustainable aviation fuel and low carbon projects which is ongoing work for us.

To start to conversation about green investments or how to switch-to-green in your business contact: sarah@flygreenalliance.org