Why current investment models are useless for effective climate investments
𝘕𝘢𝘵𝘶𝘳𝘦’𝘴 𝘥𝘺𝘯𝘢𝘮𝘪𝘤𝘴 𝘥𝘰𝘦𝘴𝘯’𝘵 𝘤𝘢𝘳𝘦 𝘢𝘣𝘰𝘶𝘵 𝘩𝘶𝘮𝘢𝘯 𝘦𝘤𝘰𝘯𝘰𝘮𝘪𝘤𝘴
Any investor worth his/her salt is expected to ask of a prospective investee company – what’s your revenue model?
I feel that economics-based models are useless for high impact climate investments.
Preposterous, you say. More so coming from a guy who just got almost all the Indian climate VCs (100 of them) at one place at CLIMAFIX.
Our specialty focus areas include
Well, getting them all at one place only reinforced my feeling about this!
First, consider this absurdity: All of India’s scooters annually emit something like 35 million tons of CO2, only a bit more than 1% of India’s total CO2 equivalent emissions (CO2eq= CO2 + non CO2 GHGs). That is, even if we were to replace ALL scooters in India with electric, and if all these electric scooters were to somehow magically be powered with zero carbon power, we would have offset emissions by about 1%!
And VCs keep throwing money at electric scooters because that’s where exit opportunities lie.
Nature doesn’t care where your exit opportunities lie. It cares about how much CO2 is out there!
Some of the really large GHG emitters in India are coal power plants, steel & cement makers, and heavy vehicles such as trucks.
India is not decreasing, but adding, coal power plants. Steel and cement making companies are taking their own sweet time on investments. There is hardly any startup in India working on making zero carbon trucking, and the few large companies working at it are ramping up only gradually.
A mix of economics, development and business imperatives drive the above.
As much as nature doesn’t care about economics, it doesn’t care about human development and business imperatives. Nature’s business is nature!
At the CLIMAFIX summit, I moderated the TITANIC session with the theme, “Are we rearranging deckchairs while the ship is sinking?”? All the panelists agreed that we need to do much, much more. The top key words were: Adaptation & lifeboats, Tech leapfrogging, Rethinking solutions & Economic sustainability.
I disagree with the last suggestion that climate action solutions should be economically sustainable.
Because it ignores the most important fact: That the concept of economic sustainability (where environment was not part of economics) was the key driver that led us to this mess.
To repeat: Nature’s dynamics doesn’t care about human economics.
I have not articulated everything I wished to (character limit to LinkedIn posts, thank god for these :-)), but what do all these mean to investors and their investments? I don’t know the full answer, but I know part of it: Investments should not have economic sustainability as the main criterion (eventual criterion, perhaps, not the starting one) and in some cases, may even have to completely do away with that criterion.
Preposterous, I still hear you mumbling…
See my LinkedIn post on this topic
