Convergence, Compounding and Climate

Convergence, Compounding and Climate

January 10 2022

Countries, companies and institutions have pledged to be net-zero by 2050, that’s 28 years from now. Achieving net-zero emissions (decarbonization) will require massive investment and breakthrough technologies – including some that have yet to be invented.


For perspective, 28 years ago in 1994, capital markets were just starting to understand the potential of the internet. America Online mass mailed discs to prospective users and its dial up connection is now a modern noise meme. AOL’s market cap at IPO two years earlier was a whopping $61.8 million. Google was not a verb, or even a company. Elon Musk was an undergrad at Penn and Steve Jobs was at a personal low point in his career.


Fast forward 28 years: The convergence of foundational technologies has brought us handheld supercomputers, the IoT, blockchain, cryptocurrency and a burgeoning metaverse. Electric cars are poised to overtake internal combustion engines. Breakthroughs enabled by advances in semiconductors, communications technology and software have all improved standards of living globally. Advances in foundational technologies including semiconductors, software, material science, and life sciences in a capitalist system will compound to solve seemingly intractable problems, like climate change.


If dial up modems were the end of the line, the world would be different today.


Many institutional investors have recently stepped-up investment in venture capital and private equity to offset low yielding fixed income securities at the portfolio level. Fund managers, such as Sequoia Capital, are trying to extend the duration of their portfolios beyond the typical 7-10 year fund structure to capitalize on big winners for longer. In the context of energy transition investing, we think focusing on longer periods make sense. One million compounding at 10% annually grows to $14.4 million after 28 years excluding taxes — top funds will do better.


Over 250,000 PhDs are awarded annually around the globe. Many of these graduates will go on to achieve major breakthroughs in science, technology, life sciences and finance. Khan Academy and MOOC providers like EdX and Coursera offer first rate educational opportunities for the masses, which will increase productive “human capital” over time.


All of these factors may lead us to a “Jetsonian” 2050. Already we are seeing revolutionary improvements in intermittent renewables such as solar and wind, nuclear power, storage technologies, grid technologies and demand management, hydrogen, water resource management, waste management, and recycling.


More resources regarding investing in early-stage companies can be found at:

https://www.angelcapitalassociation.org/

https://nvca.org/

May 3 2022

Last week we attended the largest Offshore Wind conference in North America. In short: we were blown away. The companies involved and emerging technologies on display all create a compelling forecast for investors.

March 25 2022

This week we explore how the Exxon Mobil proxy contest and Carl Icahn’s emotionally driven attack on McDonald’s over their practice of caging pregnant pigs are signals of a new era of shareholder activism.

September 14 2022

In the second video of our series of conversations with Michael Sonnenfeldt, Michael and partner Ben Wolkon discuss their climate investment strategies and reveal some of the innovative companies they are backing.