Hello from New York. Last week, I had the pleasure of speaking to students at Vanderbilt’s graduate business school in Nashville, Tennessee. I was there for a debate with Justin Danhof of Strive Asset Management — the disruptive new outfit started by Vivek Ramaswamy, the author of Woke, Inc., about the pros and cons of environmental, social and governance (ESG) investing heading into 2023. It is always rewarding to hear from students about how they view ESG and what the sustainability job market looks like in the year ahead.
As we discussed at the event, ESG in the US is embroiled in political controversy at the moment (scrutiny that will intensify now that Republicans control the House of Representatives). But Wall Street has turned its attention to the big opportunities in clean technologies. As I highlight below, banks are scouring the market to identify new efficiencies and sometimes old technologies that are now becoming essential as battery component prices rise. Plus, Simon explores accelerating progress in the high-tech search for data on planet-warming methane emissions. — Patrick Temple-West
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Buzz grows around emerging battery technologies
As we highlighted in our special report on batteries earlier this month, electric vehicles cannot exist without metals for their batteries: lithium, nickel and cobalt. Security of supply is a looming problem for the years ahead, as are environmental concerns around the dirty business of digging these metals out of the ground.
This problem has prompted growing investor appetite for emerging battery technologies — options to build cleaner batteries and to make them more efficiently. “Without recycling [battery] materials, it is unlikely that mining and refining will be able to keep up with demand,” analysts at Credit Suisse write in a new report.
These battery technologies are part of a host of “under the radar” climate tech innovations investors have overlooked, Credit Suisse said. It’s these lesser-known innovations, the Swiss bank said, that “we believe could make a significant contribution to combating climate change in the coming decades”.
One notable clean recycling technology for batteries is known as electroextraction, a process to breathe new life into dead batteries. This technology can recover more than 90 per cent of the essential minerals for batteries, the bank estimated.
The bank concedes that electroextraction is not commercially viable yet. But if it can be scaled up, the technology could reduce the supply chain risks for electric cars. And early-stage businesses working on electroextraction are gaining investors’ interest.
In December 2022, Nth Cycle, a Boston-based metals and recycling company, won a $2.15mn grant from the US energy department to fund its work in battery recycling. Earlier in 2022, Nth Cycle raised $12.5mn from investors including MassMutual, the US insurance company.
A second technology that investors should take notice of is the iron-air battery, in which energy can be stored and discharged through the rusting and “unrusting” of iron. Relying on cheap, non-toxic materials, iron-air batteries could offer far lower storage costs than lithium-ion alternatives, Credit Suisse said.
Other big banks have also picked up on iron-air technology. In a report earlier this month, Morgan Stanley highlighted Form Energy, another Boston-based battery company. The company claims its iron-air batteries can feed power into the grid for 100 consecutive hours. Form Energy raised $450mn from investors in 2022 and this year is building a battery factory in West Virginia.
Rising interest rates and the resurgence of fossil fuels in 2022 hurt clean technology businesses. But with the US government’s Inflation Reduction Act from last year — combined with additional funding in Europe — banks are expecting clean technology investments to accelerate in 2023. (Patrick Temple-West)
No place to hide for big methane emitters
One of the more promising international climate developments in the past couple of years was November 2021’s Global Methane Pledge, through which more than 100 countries have pledged a 30 per cent cut in emissions of the gas by 2030.
Tackling methane emissions is one of the most crucial tasks in the climate fight given the gas’s extraordinary potency as a greenhouse gas — more than 80 times the warming force of carbon dioxide over a 20-year period.
But for all the ambition of the pledge, it will be tough to make progress towards it without greater transparency on where methane emissions are coming from. While a big portion comes from rice and animal farming, serious gains can be made by cracking down on large-scale methane leaks from industry and energy.
That’s the logic behind a new tie-up between the UN Environment Programme and Kayrros, a French start-up that has built an analytics platform using satellite imaging to detect and map large-scale methane emissions all over the world. This month, the UNEP announced that it would use Kayrros’s data in its newly established International Methane Emissions Observatory, a centralised information source on the global methane fight.
In a demo at Kayrros’s London office, I saw a world map studded with orange circles, each representing a big methane outburst in recent months. Clicking on a circle opened a colour-coded grid showing methane levels in the area in question, allowing analysts to estimate the amount emitted and, often, pinpoint the source — typically a gas pipeline or other piece of energy infrastructure.
The map yielded some interesting findings. Natural gas giant Turkmenistan, for example, appears awash with serious methane leaks. Russia is riddled with them too. In contrast, Qatar and the United Arab Emirates, despite their big fossil fuel industries, show no sign of major methane bursts in recent years.
One country to pay special attention to, Kayrros co-founder Antoine Halff told me, is the US, where there is evidence of large-scale outbursts across energy hotspots such as Pennsylvania and west Texas. Energy companies long showed little interest in these findings, he said. “Operators don’t have any appetite for the data, because they’re still in a mode of controlling the narrative, and reporting a fraction of [the methane emissions] we can detect from space.”
But those US executives now have a powerful financial incentive to pay attention. Under the recently passed Inflation Reduction Act, large emitters will be charged $900 per tonne of methane by 2024, rising to $1,500 by 2026.
Kayrros’s analysis shows that emissions from US energy facilities are about three times the level estimated by the Environmental Protection Agency. If the EPA takes action accordingly, Halff said, companies could be charged an annual $3.3bn in methane fees when the system kicks in next year.
Kayrros is far from alone in this field — Montreal-based GHGSat, for example, has put several of its own satellites into space, and has worked with energy companies including Shell to monitor methane emissions from their facilities. A project spearheaded by the Environmental Defense Fund, MethaneSAT, is scheduled to put another methane-detecting satellite into space later this year.
The UNEP, meanwhile, is building a system that will collect the data from these various satellites and send rapid alerts of methane bursts to national governments and infrastructure operators, piling pressure on them to take action. As Columbia University academics presciently put it in a late 2020 report, “our world is rapidly becoming a place in which methane emissions will have nowhere to hide”. (Simon Mundy)
Smart read
Our fellow newsletter writer Robert Armstrong reflects on an important commentary that financier Toby Nangle wrote in the FT earlier this month. Despite the ESG push, businesses continue try to win business with China, Saudi Arabia and other authoritarian states with records of human rights abuses.
“It seems like a good idea to invest with people who have and live by clear values, for the reasons that Nangle articulates,” Rob writes. “But people who turn their values into a big selling point are probably on the make, and should be studiously avoided.” You can sign up here to get Unhedged, Rob’s newsletter.
