The truth about ESG investing

Welcome back to Impact in your Inbox. Our monthly newsletter on all things impact, private equity and climate tech — by Liza Rubinstein, Co-founder and Head of Impact at Carbon Equity. Let’s get to it!

How sustainable are your investments?

Many investors want to have a positive impact on the world alongside making a financial return; however, this isn’t simply done by selecting a sustainable ETF or fund. This article clears up the confusion on ESG investing. Plus, it explores the maze of investing sustainably so you can make more confident investment decisions and have more investor impact.

Learn the truth behind ESG

Climate investing in the private market 101

New investors often come to us looking for the opportunity to go beyond public market investing — and get started in private equity. This, of course, comes with many questions.

Sit down with Jacqueline van den Ende, our Co-founder and CEO, Wiebe Visser, our Managing Director, and me to discuss the most common climate private equity questions and discover:

  • The different strategies within private equity
  • The value, holding periods and more about private equity funds
  • Private equity’s role in solving the climate challenge
  • Investing in climate venture capital and private equity through Carbon Equity

Watch the webinar

Interesting reads

The Climate Economy Is About to Explode

In short: The widely cited figure for how much the US’s Inflation Reduction Act (IRA) will spend fighting climate change is $374 billion. This article estimates it could raise to more than $800 billion and eventually equate to roughly $1.7 trillion over the next 10 years.

How Crucial Is Venture Capital to the Climate Fight?

In short: As the climate crisis worsens and governments reshape markets (with legislation like the IRA), we can expect a surge in climate startups. Venture capital is well-positioned to be a major funder of these startups. More than the money though, top venture capital fund managers also bring valuable experiences and networks to their portfolio companies.

Bill Gates: You’ll never solve climate change by asking people to consume less

In short: According to Gates, the only real solution to climate change is to innovate and create better and cheaper low-carbon alternatives. Other climate change advocates say that using and consuming less (often called degrowth) is also necessary to get to net zero. What do you think?

Clean hydrogen has a leak problem—and the tech to monitor it is nascent

In short: The oil and gas industry has been struggling with methane (a potent greenhouse gas) leakages for decades. According to this article, hydrogen also poses a leakage problem that needs fixing through investments in monitoring tech, currently just starting to be developed. We’re on the lookout for more of these technologies.

The Role of Critical Minerals in Clean Energy Transitions

In short: Clean energy technologies come with a high mineral resources footprint. Can we obtain enough to get to net zero? The IEA detailed its key recommendations: diversification of supply chains and in minerals used, innovation to reduce material intensity and the scaling up of recycling. To get there, we need clear and strong signals from policymakers.

3 awesome innovations

Form Energy is a long-duration electricity storage startup working to help balance our electricity grid. It announced its Series E of $450M, joined by Energy Impact Partners.

Woltair is a marketplace that helps homeowners get to net zero — by connecting them to installers of heat pumps, plus solar and energy storage solutions. ArcTern Ventures led its €16.3M Series A funding round.

Microharvest developed one of the most efficient and easy-to-scale protein production lines. It grows bacteria with great protein content, which can be used for human food or animal feed. It recently raised an €8.5M Series A led by Astanor Ventures.

Show me the data

decoupling of economic growth and CO2
Sources: Financial Times and Our World in Data

This visual is showing 16 countries and their ‘decoupling’ of GDP and CO₂ emissions. By 2016, 70 countries, or one in three worldwide, had seen five years of growing GDP while reducing carbon emissions.

You can also see that quite a few countries have decoupled since 1990, like Finland, Germany, the Netherlands and Sweden. Yet for others, it’s more recent: Spain didn’t decouple until the late 2000s, Australia only decoupled after 2010 and Mexico is one of the more recent countries to do so around 2014.

How have many countries been able to decouple their growth and emissions?

For the first 200 years after the invention of the steam engine, economic growth was coupled with carbon emissions. This began to change in the 1980s due to nuclear power. For the first time, countries grew their power supply and increased activities requiring power — without increasing emissions.

The pace of decoupling started to accelerate further once the service economy made its rise and the cost of renewable power plummeted. Here’s one example.

In 2009, coal was still a lot cheaper than renewables. But by 2020, both wind and solar had become far cheaper per unit of energy. This has changed the CO₂ outlook of emerging economies like India. In 2019, the IEA forecasted that the country’s coal facilities would grow by 80% by 2040. A year later, they revised that to just 10%.*

It’s encouraging to see how a mix of investing, innovation and market forces can allow for green growth and emission reductions. However, we still must channel trillions in investments, continue innovating and establish strong market forces to reach our net zero goals.

Note: GDP isn’t a perfect measure of economic or human wellbeing. That said, increasing GDP while reducing emissions is a good indicator for this exercise.