Happy, healthy and successful New Year to all my readers. Given what is happening in Washington DC today I could not resist diving back into commenting on developments in the USA.

I was struck by several recent articles about the views of the nominee for US Energy Secretary Chris Wright. As has been widely reported he has said: “There is no climate crisis, and we’re not in the midst of an energy transition either”.

He has also claimed that any negative impacts of climate change are “clearly overwhelmed by the benefits of increasing energy consumption.” Given the importance of his future role, (subject to Senate confirmation), for the US, and global energy scene, I decided to do some more research for myself and went to the source. In 2024 Chris Wright’s oil services company, Liberty Energy, published a 177 page ‘Bettering Human Lives’ report¹ which includes a lot of data and thought provoking analysis about the global energy picture.

Liberty Energy’s, and clearly Chris Wright’s, key takeaways are as follows:

1. Energy is essential to life and the world needs more of it!
2. The modern world today is powered by and made of hydrocarbons.
3. Hydrocarbons are essential to improving the wealth, health, and life opportunities for the less energized seven billion people who aspire to be
4. Hydrocarbons supply more than 80% of global energy and thousands of critical materials and products.
5. The American Shale Revolution transformed energy markets, energy security, and geopolitics.
6. Global demand for oil, natural gas, and coal are all at record levels and rising — no energy transition has begun.
7. Modern alternatives, like solar and wind, provide only a part of electricity demand and do not replace the most critical uses of hydrocarbons. Energy dense, reliable nuclear could be more impactful.
8. Making energy more expensive or unreliable compromises people, national security, and the environment.
9. Climate change is a global challenge but is far from the world’s greatest threat to human life.
10. Zero Energy Poverty by 2050 is a superior goal compared to Net Zero 2050.
    

Several of these points are indisputable. Throughout the report there is an emphasis on the link between energy use and economic development with all its massive benefits in health, education and welfare, and an admirable commitment, in words and actions through a Foundation, to reducing energy poverty and increase the use of clean cooking.

Overcoming energy poverty, and poverty in general, is without a doubt one of the major global challenges we face – we need to make everyone wealthier. But the argument that this can only be done by using more fossil fuels seems to be another example of the primary energy fallacy. It is not primary energy that drives development but rather the level of services being delivered, and those services need energy which can be delivered in different ways using different technologies. Take a remote village in a developing economy, it is clear that the people in the village want to have more lighting, which directly improves education and safety; more pumped water, which directly improves health, education and women’s safety; more cooling for AC and cold chains, which directly improves nutrition, health and incomes through reducing food loss; more computing and internet services which helps education, and farmers check prices, avoid middle-men and access markets; and more mobility for commerce and leisure. These are all services that require energy input. The point is that we do have a choice over the technologies we use to provide them.

We can either hook them up to a conventional grid or provide a local fossil fuel generator, or we can install solar, batteries, LED lighting, micro-grids, induction cooking and efficient cooling systems. The first has a capex, takes money out of the local economy, exposes people to volatile fuel prices, and produces carbon emissions, and air pollution. The second version still requires capex of course, but has no fuel costs, no exposure to volatile energy prices, and produces no carbon emissions or air pollution. Are the people of the village better or worse off? At a very real level they don’t care where their energy come from, they just want more services at the lowest cost. Chris Wright’s view is that the lowest cost always comes from fossil fuels but, even ignoring externalities, the rapidly falling cost of solar, batteries and related technologies make this at least questionable – and something that should be questioned in every situation.

Of course we may not be able to provide 100% of those energy services in the renewable scenario in all cases quite yet, but there is more evidence that we can and are increasingly likely to be able to do it routinely at less cost than the fossil fuel/grid approach. Work in India and elsewhere demonstrate that the rapid declines in the cost of solar and batteries can mean that the total delivered energy cost can be less than that of connecting to the grid.

The Bettering Human Lives report goes on to say:

‘The reality is that these politically favored technologies’ [referring to renewables and batteries] ‘have not, will not, and cannot replace most of the energy services and raw materials provided by hydrocarbons. Today they are deployed almost exclusively in the electricity sector, which delivers only 20% of total primary energy consumption. Manufacturing is the largest user of energy globally, mostly in the form of process heat that cannot effectively be supplied via electricity’.

Well of course it is true that renewables and batteries are mainly in the electricity sector. But here again we see the primary energy fallacy, we should be focused on end-use energy not primary energy. Also the statement about manufacturing process heat is rapidly being overtaken by events, at least for low and medium-temperature process heat, with electrification and heat pumps increasingly being deployed into these applications. Industrial heat pumps are well suited to many applications in the food and beverage, pulp and paper, and chemicals sectors, which collectively account for c.15% of global industrial emissions. McKinsey expect the market for industrial heat pumps to grow at more than 15% per annum up until 2030². At the moment most of the installations are up to 5 MWt but the trend is towards larger machines and higher temperatures. A 2024 study by Fraunhofer ISI showed that more than 60% of EU industrial heat demand could, in theory, be met by electrification and that with technologies that will be available by 2035 this could rise to more than 90%³. Now, having written my PhD on the potential for energy efficiency in industry I am the first one to challenge the definition of potentials, technical potentials are definitely not the same as economic potentials, which are not the same as achievable potentials, but the opportunity is clear. When we look at investment decisions being made we see signs of real investment in these technologies happening, examples include:

UPM announced it will install eight 50-60 MW electrode high pressure steam boilers across paper mills in Germany and France⁴ .

A pilot electric steam cracker in a BASF refinery that produces the 850^oC temperature to produce ethylene has gone into operation, the technology has been developed in a collaboration between BASF, Linde and Sabic⁵.

According to data from Global Energy Monitor’s (GEM) Global Steel Plant Tracker, 93% of the new steel plant capacity announced in 2023 was for electric arc furnace (EAF). According to GEM this is part of ‘a transition away from coal based steel making’ and that if these developments and planned retirements take effect ‘global operating steel capacity should sit just under the IEA’s net zero-aligned target of 37% EAF steelmaking by 2030, and with heightened momentum the goal is increasingly attainable’⁶ .

A 2 MWh heat energy battery is supplying 1,000oC heat to an ethanol plant in California on a commercial Heat-as-a-Service (HaaS) basis, supplying energy at a cost per MMBtu lower than gas-fired heat⁷ .

It is true that some of these developments, like the electric steam cracker, are being supported by governments or concessionary finance and that the viability of electrification depends on the relative price of power to fuels but the trends are clear.

The Liberty Energy report also says:

aviation, global shipping, long-haul trucking, and mobile mining equipment have no viable replacements in sight.

With the rapid developments in electric heavy goods vehicles⁸, and a good economic case, it is clear that EHGVs are the future⁹, we will of course need more investment in the rapid charging network but that is starting to happen¹⁰. As for mining equipment, in December 2024 Australian mining company Fortescue placed a $400m order for more than 100 electric mining vehicles with Chinese manufacturer XCMG¹¹. This order follows a $2.8 billion deal with Liebherr for 360 autonomous electric trucks, 55 electric excavators and 60 electric dozers in September 2024 and a deal to buy 30 electric graders in October 2024 from Canadian manufacturer Maclean. Fortescue has invested heavily in developing its own electric vehicle technology which will be incorporated into these machines¹². Aviation and shipping are more difficult of course but again progress is being made in electrification and alternative fuels.

The Bettering Human Lives report goes on to say:

Some retort that we don’t need more energy, we just need to use energy more efficiently. The pioneering 19th century English Economist, William Stanley Jevons, addressed this conjecture in his 1865 book The Coal Question. He concluded that increases in energy efficiency led to more, not less, coal consumption.

[referring to a graph] we can see two centuries of increasing efficiency in energy usage to generate economic value (GDP) combined with two centuries of growing demand for energy. Since 1990, energy efficiency has increased 36% and total energy consumption has increased 63%.

There is no highly energized poor country, and no low-energized rich country. Health, prosperity, and opportunity require energy.

Just how bad these energy and climate policy decisions are can be gauged by falling energy consumption in many Western countries. In the United Kingdom, energy use has fallen by 30% to levels not seen since the 1950s, while the rest of Europe has declined to 1990s levels. British electricity consumption, amazingly, has fallen by about a quarter since 2003 and is now back at levels last seen in the late 1980s.

I have addressed the Jevons paradox too many times to do it again here, it resurfaces about every decade and is often mis-used. The literature is extensive. Yes of course there is a rebound effect but it is less than one. The really interesting graph is what our energy use would have been if we had maintained the same energy intensity as in the 1970s. See page 5 of the 2012 ACEE report by Skip Laitner et.al¹³.

As for the statement about there being no highly energized poor country and no low-energized rich country this again makes the primary energy fallacy. Energy intensity is a matter of technology choice. Denmark for instance aggressively introduced energy efficiency and wind power after the oil crises¹⁴ and in 2023 wind made up 58% of total generation¹⁵. You cannot say that Denmark is a poor country.

It is true of course that UK energy use has fallen by 30% to levels not seen since the 1950s and that electricity consumption is now at levels last seen in the late 1980s. But in those time periods the adoption of energy using appliances, central heating, cars, foreign holidays etc. has grown enormously – as has GDP. We are not less well off because energy use has fallen. We may be less well off than we could have been because of many factors, including the price of energy, but much of the change has happened through improved efficiency and changes in underlying technologies.

The nominee Secretary of Energy’s thinking seems to mirror the prevailing views of the late 1970s and early 1980s when I first studied the energy system. Then forecasts, global and national, all showed ever increasing energy use as GDP increased – the underlying assumption was that the relationship between energy use and GDP was fixed. Forty years on we have seen economic growth but energy use has not risen in step. In fact in the US and the UK energy use has remained nearly constant despite forty years of economic growth – as I wrote in 2013, we are living in what in the early 1980s was considered by nearly all experts and energy industry gurus as a totally impossible ‘low energy future’ – and we did it almost without trying¹⁶. The relationship between energy use and GDP has changed because of the effect of energy efficiency and changes in industrial structure. What’s more the relationship between GDP and fossil fuel use is changing because of the rise of renewables. We can decouple fossil fuel energy use and GDP. Our energy statistics system, established as it was in the fossil fuel age, with its focus on primary energy and millions of tonnes of oil equivalent does not help our understanding.

These energy supply dominated views still all too often dominate the energy debate and energy policy. Whether they are simply because people have not changed their views, or are examples of people ‘talking their own book’, who knows. The nominee does at least have a technical energy background and experience investing in alternatives such as geothermal and fusion power, which is a positive.

We do need to acknowledge the reality of our dependence on petrochemical derived materials and fertilisers, and ask ourselves the tough question whether alternatives are realistic. We cannot argue with the fact that hydrocarbons have delivered most of the improvement in economic well being, health etc. to date – but that was the past, it does not mean the future will be the same. There are two clearly competing world views here – one being the ‘you can only drive economic development with more fossil fuels’, the other being ‘you can drive economic development with energy efficiency and renewables’. Time will tell which of the competing world views is correct.

References

1. http://libertyenergy.com/wp-content/uploads/2024/02/Bettering-Human-Lives-2024-Web-Liberty-Energy.pdf
2. https://www.mckinsey.com/industries/industrials-and-electronics/our-insights/industrial-heat-pumps-five-considerations-for-future-growth
3. https://www.agora-industry.org/fileadmin/Projects/2023/2023-20_IND_Electrification_Industrial_Heat/A-IND_329_04_Electrification_Industrial_Heat_WEB.pdf
4. https://www.upm.com/about-us/for-media/releases/2023/04/upm-electrifies-heat-and-steam-production-at-its-mills-in-finland-and-germany/
5. https://www.chemistryworld.com/news/basfs-electric-cracker-demonstrator-goes-online/4019439.article
6. https://globalenergymonitor.org/report/pedal-to-the-metal-2024/
7. https://rondo.com/calgren-case-study
8. For example: https://www.scania.com/group/en/home/products-and-services/trucks/battery-electric-truck.html
9. https://electriccarguide.co.uk/the-electric-hgv-guide/
10. For example: https://www.pragmacharge.com
11. https://www.electrive.com/2024/11/28/fortescue-orders-xcmg-electric-mining-equipment-worth-400-million/
12. https://zero.fortescue.com/en
13. http://www.garrisoninstitute.org/downloads/ecology/cmb/Laitner_Long-Term_E_E_Potential.pdf
14. https://www.whatthedenmark.com/blog-post/green-transition
15. https://www.iea.org/countries/denmark/energy-mix
16. https://www.onlyelevenpercent.com/surprise-you-are-living-in-a-low-energy-future-almost/

Well clearly the US election did not go the way I thought or hoped it would. The result will affect us all for many years in many ways, but none of them are likely to be good. I wrote about how I felt about the 2016 election here and right now I can’t add to that right now. I have made a decision to move on and spend less time reading and thinking about US politics, even though it is a life-long interest. I will just take action where I can. I started by acting on my belief in the power of impact investing, impact managing and impact consuming by coming off of X and moving my social media activity to Blue Sky. It is impossible for me to support any of Elon Musk’s businesses as he is clearly anti-democracy and many other things I don’t agree with.

Anyway as part of moving on I am now re-focused on working, writing and speaking to help accelerate the very necessary transition to a net zero and regenerative world. To that end ep is working on a number of projects including: our Net Zero Delivery Vehicle, an innovative public-private partnership to bridge the development gap between good ideas and bankable, large-scale, systematic net zero projects; a project working on distributed energy solutions in Ukraine; and ep Assets move into delivering distributed energy projects in the UK in response to client demand. We announced a partnership with Pixii, the fastest growing technology company in Norway in 2023, to introduce their Pixii box technology and energy storage solutions to the UK. ZPN Energy, where I am non-exec Chair, is rolling out its battery backed rapid EV chargers and mobile charging solutions. At CBHH we continue to raise capital for impactful energy transition and natural capital companies.

It is clear that electrification, and particularly distributed energy systems using solar PV, batteries, EV charging and flexibility is the next phase of the energy transition – driven by the drive to decarbonisation, economics, power supply constraints, and a desire for higher levels of resilience. The impact of this change will be massive and produce much higher levels of overall energy efficiency as fossil fuel use is displaced. It will also require us to move on in our thinking in several ways. Firstly all building and facility owners need to think of themselves as energy producers as well as consumers – the now over-used word prosumer applies. We are no longer just consumers and we need to take responsibility for our own energy generation and use as far as possible. At ep we believe all buildings should be power stations, producing power as well as providing ancillary services in the various grid support markets.

Secondly we need to re-think ‘energy’. Since the 1970s energy has been used in a way that confuses fuel and electricity. We need to make the distinction clear again, electricity is very different to fuel. Try putting fuel into an electrical device, or try putting electricity into your internal combustion engine car. Electrification, switching from fuel driven heating or mobility, to a low or zero carbon electricity grid, or a local micro-grid, results in so many benefits at all levels including big reductions in emissions.

Thirdly we need to think in new ways about energy statistics. We need to think about the quantity of energy services being delivered, it is that quantity that will be linked to wealth and GDP, not the level of primary energy being used. Memes on the internet saying something like there are no rich low energy countries, primarily being used to push a fossil fuel or nuclear agenda, are meaningless. Energy intensity, as measured by primary energy, will fall rapidly as more and more energy i.e. electricity, is generated close to where it is used, and metered energy taken from the grid falls; it will also fall as high efficiency electrical heating and mobility displaces low efficiency fossil fuelled systems in heating and transport. As I have said before, the level of energy efficiency in the economy is a choice, it is just a choice that we have generally made without thinking about it.

Despite the undoubtedly chaotic efforts of the incoming US Administration, and other wannabe dictators around the world, I believe the energy transition and particularly the move towards distributed solar and batteries will prove to be unstoppable. Their efforts to protect incumbent fossil fuel interests may delay things but at the end of the day they are dinosaurs looking up as the giant asteroid approaches.

In other news my 2013 book ‘Energy Efficiency. The Definitive Guide to the Cheapest, Cleanest, Fastest Source of Energy’ is now out in paperback at a reasonable price, available from the publisher, all good book sellers and Amazon. It has stood the test of time well as a broad introduction to the subject but I am working on what will be a companion book, revisiting the subject and looking at some of the major changes that have happened in the last decade, notably the advent of cheap solar and batteries, and the growth of interest and activity in financing energy efficiency. I also published a collection of blogs from the first ten years of onlyelevenpercent.com – available on Amazon.

The title of this blog comes from the lyrics of ‘Move On’ by David Bowie

The news that Jeff Bezos has stopped the editorial board of the Washington Post from publishing an endorsement of Kamala Harris reminded me of a piece I wrote back in 2021 entitled ‘Upstanding and Bystanding – Time for some Personal Corporate Social Responsibility’, which seems even more relevant now. This was inspired by a visit to the Dallas Holocaust Museum which categorised people during the holocaust as; perpetrators; bystanders; upstanders and of course victims.

It is clear, as it has been for a long time, that Donald Trump is a narcissistic psychopath who is threat to democracy, the rule of law, the global economy and global security, as well as many other bad things. He has created a cult that supports him, aided and abetted by Republican politicians like Mitch McConnell and many others who made the decision that supporting Trump was in their best interest, even though they knew full well what he was like and what he stood for. Even if they are not direct perpetrators they are collaborators.

The events in the USA since 2016 demonstrate clearly how any country can slowly slide towards authoritarianism, and answers once and for all the old question: how did Hitler and the Nazis came to power in pre-WW2 Germany? The process must have been very similar. Now we have leading newspapers, the Washington Post and the LA Times, spiking endorsements because their owners don’t want to upset Trump. If Trump is elected, next they will be publishing positive pieces about him and spinning news stories to make him look good. What comes after that? Amazon sourcing and delivering the modern equivalent of SS uniforms or AWS providing data services for the equivalent of the Stasi Records Agency?

The real irony of course is that The Washington Post is the newspaper that broke the Watergate story, and that four years after the takeover by Jeff Bezos the paper adopted the masthead ‘Democracy dies in darkness’. Bezos has at the very least dimmed the lights on democracy.

The original piece is here.
https://www.onlyelevenpercent.com/upstanding-and-bystanding-time-for-some-personal-corporate-social-responsibility/

Although our main focus at ep Group is the energy transition, we recognise that climate and energy is only part of the transition we need to make to move towards, and then beyond, sustainability. The issue of biodiversity loss is as important as climate. In 2022 we did some work for Cambridge Conservation Initiative looking at the emerging area of investing in natural capital and in 2024 we are working on a natural capital transaction through Cameron Barney. This piece is a primer on natural capital.

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What is natural capital?

Capital can be defined as a resource used or available for use in the production of goods and services. Typically we think of financial capital when using the term but there are five types of capital:

– Manufactured capital e.g. machinery and buildings
– Financial capital
– Human capital e.g. knowledge and skills
– Social capital e.g. levels of trust and connections amongst people
– Natural capital – the stock of natural ‘resources’ including eco-systems, species, water, soils, minerals, the atmosphere and the oceans, as well as natural processes and functions

Natural capital underpins all other types of capital and our ability to produce actual goods and services.

Natural capital is crucial for our survival because it produces essential ‘ecosystem services’ which can be divided into five categories:

– Provisioning: material outputs from nature such as food, water, timber and energy
– Regulating: indirect benefits generated through regulation of ecosystems such as carbon sequestration, the water cycle and crop production
– Supporting: fundamental ecological processes that support the delivery of other ecosystem services such as nutrient cycling and soil formation
– Cultural: non-material benefits from nature which can be spiritual, aesthetic or recreational.

If the contributions of natural capital were to be valued in the same way as other types of capital, they would be valued at $125 trillion , equivalent to 1.25 x Global GDP in 2022.

Biodiversity, defined as the variety of life, is a critical aspect of natural capital, and one we should be deeply concerned about. According to the WWF Living Planet Report 2022 , between 1970 and 2018 wildlife populations declined 69%, while freshwater species declined by 83% and migratory fish declined by 76%. Almost everywhere we look we see declining wildlife populations and biodiversity. One particularly important part of this is the decline in insect life – sometimes known as ‘insectageddon’. Insects provide ecosystem services valued at between $235 and $577 billion per annum and are absolutely critical for food production as three quarters of the crop types grown by humans require pollination by insects. In the UK ‘wider countryside butterflies’ declined by 46% between 1977 and 2017 while habitat specialists fell by 77%. For those of us old enough to remember the 1970s the famous cartoon that shows a driver with a car windscreen covered in insects in the 1970s, or even the 1990s, and a driver with a car windscreen with no insects in 2020, accurately reflects our experience.

How much capital flows into natural capital and what is needed?

So how much financial capital flows into natural capital and what is needed. UNEP, in 2021, estimated that the flow of funds into natural capital was $133 billion, up from $52 billion in 2010, a 9.85% CAGR. Of this $133 billion only $18 billion was private finance. Deutz et, al. estimate that the financing gap between what was invested and what is needed is between $598 and $894 billion per annum. For comparison purposes the global carbon markets in 2023 were estimated at $949 billion and global investment into the power sector in 2023 was $1,200 billion .

To bridge that gap we need to do two things: reduce the flow of capital into activities that have negative impacts on biodiversity, including reforming harmful subsidies; and scale-up mechanisms to increase private and public capital flows into conservation and regeneration. Areas such as biodiversity offsets, natural infrastructure, green financial products, nature based solutions to carbon emissions, are all expected to grow rapidly.

Growing recognition of the need to invest in natural capital

There is growing recognition amongst financial investors and corporates of the need to increase the flow of capital into protection and restoration of natural capital and biodiversity – becoming ‘nature positive’. This is driven by several factors including:

• growth of ESG investing and ‘green’ or sustainable finance – driven by demand and recognition of the problem
• regulations such as the EU Taxonomy and its national equivalents
• Pillar 3 of the Basel III Accords – disclosure requirements on capital adequacy and operational risks
• disclosure guidelines and increasingly regulations e.g. the Taskforce on Nature Related Disclosures (TNFD).

Why invest in natural capital?

Why should institutions invest in natural capital? There are four main reasons:

– risk management; including: physical risk, litigation risk, transition risk and systemic risk
– market opportunity: there is a large opportunity to deploy capital at scale
– regulations such as the EU Taxonomy and national equivalents
– ESG drivers

The barriers

Despite the need and the interest in investing in natural capital there are many barriers. Surveys of investors have identified the following barriers:

• Terminology: there is no common language between project developers and the finance sector
• Multiple, diverse stakeholders: including the private sector, the public sector, NGOs, and local communities – many of which have very different view points and objectives
• Lack of awareness: failure to understand he consequences of insufficiently valuing natural capital
• Measurement tools and metrics: investors want quantifiable, standardized information
• Mindset: natural capital lies outside normal investment concerns and is seen as complex
• Valuation: no framework and legislation, and quantification of tangible value is difficult
• Stock vs. flow: natural capital is not reflected as a capital stock, but rather a flow of resources
• Cash-flow implications: evidence is lacking on how natural capital impacts on cash flows
• Timing / short-termism: conflict between short-term investment horizons and long-term nature of biodiversity projects
• Reporting: trustees and asset owners require visibility and frequency in reporting
• Policy: policy makers not currently designating value for natural capital
• Diversified global firms: natural capital risks are considered small relative to overall business activities
• Performance criteria: consequences for mismanaging natural capital are sufficiently minor as not be a disincentive, at least in the short-term
• Corporate strategy: natural capital is not linked to corporate strategy
• Perceived costs: perception that sustainability related activities are a cost and not profitable
• Diversified portfolio requirements: institutional investors obliged to take all attractive investment opportunities despite their impact on natural capital
• Lack of opportunities: a lack of credible investment targets rather than a lack of capital. Developing projects requires multiple stakeholders coming together and is complex, lengthy and expensive.
  

These key barriers can be boiled down to:

– Risks – real and perceived
– Development time and complexity
– Lack of capacity in project development as well as in project evaluation and underwriting
– Lack of standardization.

The issue of standardization is fundamental – investors like standardisation but by its very nature it is hard to standardise nature and biodiversity!

Of course, as well as specific ‘natural capital’ or biodiversity projects, we need to ensure that every-day, ‘normal’, projects address biodiversity issues. For example, we should not be funding solar farms when we can design solar farms that increase bio-diversity. Every project, whatever its core purpose, should be evaluated for its impact on biodiversity and measures incorporate to improve it.

Multiple financial instruments

There are multiple types of financial instrument for natural capital including:

– Carbon markets
– ‘Carbon +’ (i.e. incorporating biodiversity criteria into carbon markets)
– Reducing Emissions from Deforestation and Forest Degradation (REDD)
– Biodiversity offsets
– Specific species bonds e.g. Rhino Bonds
– Green Bonds

Multiple standards

Another issue is that there are multiple evolving standards and metrics for measuring biodiversity including:

– Biodiversity Metric 3.0
– Global Biodiversity Score (GBS)
– Biodiversity Footprint for Financials (BFFI)
– Species threat abatement and recovery metric (STAR)
– Net Environmental Contribution (NEC)
– ENCORE

There are several initiatives underway to standardize or align different measurement systems. Biodiversity data is location specific & unique to the asset, and therefore it is inherently difficult to aggregate data.

It seems that we are at a turning point in investing in natural capital. Research from 2024 suggested that over half of UK investors were looking at natural capital investments.

Some examples of natural capital investing

Mirova’s Sustainable Ocean Fund (SOF)
A public-private partnership with Conservation International and the Environmental Defense Fund (EDF), the SOF is dedicated to implementing ocean-friendly practices in developing countries and small island states. Projects include supporting fisheries to maintain sustainable levels of marine fish stocks, providing financial incentives for low-impact aquaculture, responsible seafood supply chains, and wastewater management. The SOF has pledges from EIB, AXA, IADB, and Caprock Group. USAID has committed a $50m risk-sharing guarantee to attract further investment into the fund. The SOF is expected to deploy $100m with USAID support and closed in early 2022 at $132m in capital commitments.

Agriculture Capital
Agriculture Capital is a regenerative agriculture and food investment firm that currently manages two investment funds. The Funds invest in permanent cropland and synergistic midstream assets to create a vertically integrated enterprise that grows, packs and markets high-value produce. Through an owner-operator model, the Funds employ a value-added approach to farm and food operations, focused on regenerative farm practices and the processing and sale of that produce as a means of enhancing returns. Agricultural Capital applies its regenerative agriculture model to farms, marketing, packing and nursery companies. The total portfolio covers 20,000 acres and produces table grapes, citrus, blueberries and tree nuts across California, Oregon, Washington and Australia. It has consistently reduced water and energy use, increased soil health and increased wild pollinators by a factor of 9x.

The AGRI3 Fund
The AGRI3 Fund was created by UNEP and Rabobank, together with partner IDH and supported by FMO, the Dutch development bank. It aims to catalyze private investment into forest protection and sustainable agriculture with the aim of unlocking at least $1 billion in finance towards deforestation-free, sustainable agriculture and land use. The Fund provides de-risking financial instruments and grants for technical assistance for food value chain actors, and particularly farmers.
The fund targets $150m to allow an exposure of up to $300m. It is an evergreen fund with an open architecture allowing future partnerships with commercial banks beyond Rabobank. IDH manages the AGRI3 Technical Assistance Fund which provides reimbursable grants to projects at pre- and post-investment stages to improve project quality and strengthen environmental and social impacts.
The fund has closed transactions including:

– Forest protection and renovation of degraded pastureland in Mato Grosso. $5m, 10 year project covering >2,500 hectare forest protection and replanting, and renovation of 1,200 hectare of renovation of degraded pasture land
– Sustainable pepper farming in the Chongquing region. $10m, 3 year project.
– Sustainable production of citrus fruit and sugarcane in Brazil. 10 year loan $20m from Rabobank.

Rhino bonds
Rhino bonds were issued by the World Bank in 2022 and were the world’s first wildlife conservation bond. The total issued was $150 million as five year bonds and the returns were outcomes based related to net growth in Black Rhino population. The outcomes were independently measured and the project was supported by grant funding from the Global Environmental Facility. Purchasers of the bonds included:

– Nuveen (lead)
– AllianceBernstein
– ASN Impact Investors
– BlueBay Asset Management
– Mackenizie Investments
– HNWs.

Overall population of black rhinos has increased.

Phyla

Phyla Uses high yielding Pomgania tree to restore degraded land and produce biomass, seedcake and oil which can be used to produce multiple products including synthetic aviation fuel (SAF). It aims to regenerate one million hectares of degraded land by 2030 and has projects and partnerships in multiple countries. Cameron Barney are advising Phyla.

Conclusions

The decline in natural capital is as life threatening as the worst scenarios for climate change. We have to arrest the decline in natural capital, restore it and ultimately regenerate it. This can be done by applying private financial capital – often blended with public capital, and there are now enough examples of how this can be done.

Natural capital is an emerging asset class but there are still many barriers including: development complexity; lack of clarity on revenue models; lack of understanding & know-how; lack of standardisation & competing standards. Natural capital investing shares some characteristics with infrastructure – in that it is long-term and large-scale. As well as investing in projects surrounding natural capital there is a burgeoning private equity opportunity of ‘natural capital tech’ or ‘agri-tech’ or ‘bio-diversity tech’ including: sensors; data; drones, DNA sampling, AI applied to measuring and regenerating natural capital.

Investing in natural capital, and ensuring projects of all type are nature positive, has to become the norm rather than the exception.

The recent death of astronaut Bill Anders led to a lot of the media attention on the famous photo taken by Bill during the Apollo 8 mission called ‘Earthrise’. The photo, taken on Christmas Eve 1968, is often described as being the most viewed image and one of the inspirations for the environmental movement.

Former US Vice President Al Gore used the photo in his ‘An inconvenient truth’ presentation and said:

“That one picture exploded in the consciousness of humans. It led to dramatic changes. Within 18 months of this picture the environment movement had begun.”

The story behind the mission and the photo, like much of the Apollo programme is, incredible. In 1967 and 1968 Apollo was recovering from the terrible fire of Apollo 1 which killed astronauts Gus Grissom, Ed White and Roger Chaffee on the launch pad, while trying to meet President Kennedy’s target of reaching the moon by the end of the decade, and beating the Russians in the space race. The fire required an extensive redesign of the Apollo Command Module to improve its safety which delayed the programme. The fire was in January 1967 and the first crewed Apollo flight, Apollo 7, flew in October 1968 to test the newly designed Command Module and its Service Module. During the planning of the Apollo programme it was envisaged that the next flight would test the Command Module and the Lunar Module in high earth orbit but as 1968 rolled on the incredibly complex Lunar Module was late. At the same time there were intelligence reports that Russia, having completed the uncrewed, circumlunar Zond 5, was planning a manned circumlunar flight before the end of 1968. In August 1968 George Low, then Manager of the Apollo Spacecraft Program Office, proposed that Apollo 8 leave earth orbit and orbit the moon without a Lunar Module.

The next crew in line, commanded by Jim McDivitt, was offered the flight but turned it down, preferring to stick with their planned joint test of the Command and Service Modules and the Lunar Module in earth orbit. The final decision to proceed with the lunar orbit mission was delayed until Apollo 7 flew successfully but between August and December new procedures had to be developed and the crew trained. The fact that the flight went from proposal to implementation in five months is incredible now. Obviously at some point to land on the moon there had to be a lunar orbital test but there were still a lot of unknowns at that time, and the procedures had to be developed and tested, and the crew trained in a very short time. It was an audacious decision.

Apollo 8 was the first crewed flight, and only the third ever flight, on the massive Saturn V. This in itself is incredible, especially when you see how many test launches some of the current privately financed launchers have made and know that one of the two previous un-manned Saturn V launches had not gone well at all, but NASA was confident they had solved the problems. The launch on 21st December went well, and after two and half hours in earth orbit, the Capsule Communicator (‘CapCom’) Michael Collins – later to become the first person to orbit the moon alone on Apollo 11 – quietly said the words, ‘you are go for TLI’, (trans lunar injection). With the successful firing of the Saturn’s third stage, humans left the relative safety of earth orbit for the first time.

On its flight to the moon and its first three lunar orbits orientated in a way that meant the crew couldn’t see the earth, and so the earth rise was a surprise. As the spacecraft came round the moon Bill Anders saw the earth come up. The first few photos were in black & white but Anders quickly asked for a colour film and got the famous shot. Frank Borman, the Commander, and always a stickler for following the flight plan, said, jokingly: ‘Hey, don’t take that, it is not scheduled’. The photo is usually reproduced with the lunar horizon horizontal but in reality as the spacecraft orbited the lunar equator the moon was orientated 90 degrees to how you normally see it. Bill Anders famously hung a copy in his office in the ‘correct’ orientation (as shown here).

The Apollo 8 crew stayed around the moon for ten orbits and in one of the most famous, and most moving TV transmissions of all time, read from the book of Genesis. Exactly on schedule, and behind the moon, they fired the Service Module’s engine and as they rounded the moon and re-established radio contact with Mission Control, Command Module Pilot Jim Lovell, later to go on and command the ill-fated Apollo 13 mission in 1970, radioed, ‘Please be advised there is a Santa Claus’. On 27th December the crew safely splashed down in the Pacific and were recovered by the USS Yorktown.

There is no doubt that the photo had a huge impact on our view of the earth, and it did help jump start the environmental movement. It has been reproduced so many times we tend to take it for granted but seeing the earth as ‘the grand oasis in the big vastness of space’, as Jim Lovell called it, has to make you think about the fragility of earth and our place in the universe. Many people might argue that the space race, and indeed any space exploration, is a waste of money. I would argue that it is built into our DNA to explore, and that images like Earthrise which help change our perspective and help us realise our true place in the universe make it worth every penny. Bill Anders once said: “We came all this way to explore the moon, and the most important thing is that we discovered the Earth.”

After Apollo 8 the programme proceeded at an amazing pace. In March 1969 Apollo 9 tested the Lunar Module in earth orbit and included a spacewalk using the lunar spacesuit. Two months later, in May 1969, Apollo 10 flew to the moon in a dress rehearsal for the landing and flew the Lunar Module down to 50,000 feet. Then in July 1969 Apollo 11 made the first landing, only seven months after Apollo 8.

With the passing of Bill Anders, there are now only 6 of the 24 men who visited the moon between December 1968 and December 1972 left alive, and the youngest, is 88. Most of the managers and engineers who made it all happen have also left us. The Apollo programme was an incredible and inspirational achievement and the men and women who made it happen, some 400,000 in total, were truly legends who walked amongst us.