Two decades ago when I coined the word “cleantech,” little did I imagine that in the years to come US$200 billion of venture capital would be invested in innovative cleantech start-ups and growth-stage companies around the world. Already investments in entrepreneurial innovation have dramatically reduced the cost of batteries, solar cells and other technologies – what some are calling “climate-tech” – while spawning whole new consumer offerings, such as alternative-protein foods, electric vehicles and smart thermostats. Today, there’s no shortage of scalable solutions, and more are on their way. And yet, the climate emergency becomes ever more perilous, with growing awareness that it’s a symptom of deeper ecological and social crises – inter-related crises dramatically exacerbated by the pandemic.
“Social responsibility” and “sustainability” are now inadequate concepts, so we urgently need to reframe our aspirations and perspective. We’re being called to a collective vision that maps clear strategic purpose, with agreed goals and timelines, while harnessing our ingenuity in new, more holistic ways. We must go beyond the linear, reductionist and siloed Cartesian thinking that still dominates our culture. If our challenges are exponential, so must be our response; incrementalism won’t suffice. Further, new “exponential” technologies – such as blockchain, genomics, machine learning and 3D printing – mean that now more than ever, solving complex, large-scale problems is possible and profitable, if the right strategic elements and partners are brought together. We can achieve exponential impact if we are wise in discerning and rewarding what is generative and what is not.
Living in the Anthropocene era, where humans are undermining the very basis of life while destabilizing the atmosphere, we must be clear about what needs to be done. Quite simply: we have to learn from and be inspired by Nature if we are to eliminate toxicity, waste and the consequent degrading of essential resources. In the emerging concept of a “circular economy,” we have the antidote to our “heat, beat and treat” industrial paradigm, which, despite its benefits, has taken us to the end of a line. It’s estimated that circularity will be a US$4.5-trillion market opportunity over the coming decade. Transitioning to circularity is made more feasible by next-generation smart technologies, although a fresh approach to investing is also required.
We might have the right tools to address the climate emergency, but do we have the right mindset, means and mechanisms to put them to best use?
We cannot invest in the circular economy the same way we invested in the “Cartesian economy.” What I call “systems-based investment for the circular economy” (SBICE) goes beyond investing in traditional asset classes by taking a holistic, systems-design perspective while integrating non-financial capital, including civic assets such as public utilities, libraries, community networks or sources of public data. For instance, if an institutional investor’s venture arm backs start-ups in the “electrification of mobility” space but its infrastructure team doesn’t back the build-out of charging stations, then that investor potentially enhances their risk, reduces returns and undermines the potential for rapid transition. In the SBICE scenario, financing might need to involve an integrated mix of growth equity for the start-ups, subordinated debt for the infrastructure roll-out and strategic grants to enhance public benefit.
Many non-financial actors, such as think tanks, NGOs and associations, can also bring exceptional intellectual, relational and social value if appropriately integrated, and yet this is also rarely done. Since circularity has an often-overlooked social dimension (after all, unemployment is a form of waste), there might also be an opportunity to train and employ people, particularly those previously marginalized, enabling inclusion while ensuring that the necessary workforce is available, further reducing risk and enhancing return potential.
Design thinking – an increasingly popular process for creative problem-solving that puts living beings at the centre – is required to conceive, implement and radically scale circular business and investment strategies. Design principles must be generative, smart, inclusive, resilient, empowering and elegant.
Wealth-holders and policy-makers need to move beyond the Cartesian paradigm, to think and act systematically in ways that harness our ingenuity for circular prosperity. The pandemic’s “great pause” gives us a chance to reframe how we meet humanity’s grandest challenge, the climate crisis.
Nick Parker co-founded the Cleantech and Delphi Groups and several pioneering investment firms. He currently develops, backs and advises new ventures for exponential impact in Africa, Asia, Europe and North America.
This article is part of a series of stories from our Winter Issue cover package: What it will take for us to get the climate message before it’s too late.
