In the realm of ESG (Environmental, Social, and Governance) and SRI (Socially Responsible Investment) investing, the issue of carbon capture and emissions control are set to become the foremost issues and investment opportunities of our time.
According to Bloomberg, Legal and General, Inc. (LGIM), one of the world’s largest asset managers, overseeing $1.3-trillion, has created a market model of the climate crisis, and sees both risk and big opportunity. Their model forecasts that whether or not politicians do something about climate change, they can allocate funds to climate related investments now, and profit over the long-term. And, in the event politicians do finally act, the profits from those investments will be even greater.
Emissions reform has polarized Canadians. For example, Ontario’s Doug Ford Conservative government, did away with carbon credits, stating they are a waste of provincial taxpayers money, while the Trudeau Liberal government’s newly introduced federal 'carbon tax' is already hurting Canadian pocketbooks by passing on costs at the pump.
We know as consumers, that emissions reform likely means that we will pay more for fuel, clothing and cars, for example, but as investors, however, we are still mostly in the dark as to what opportunities in the emissions reduction space look like. One way we may make up for the inflation caused by emissions reforms in the long run will be to participate in the investment opportunities in the 'emissions' space, and in the ESG/SRI space in general.
Oil companies, which are shouldering much of the blame for climate change, and will likely shoulder an increasing cost for emissions reforms, have been leading the way, investing in the solutions – Carbon removal companies.
According to New York Times, “investing in carbon-reduction initiatives is part of an emerging effort by fossil-fuel industries to remain relevant and profitable in a warming world. With electric cars and solar and wind power becoming increasingly affordable, executives acknowledge that business as usual could put their companies at risk.”
So far, in the emissions removal space, a lot of attention has been focused on how industrial polluters can take a socially responsible stance by cleaning up after themselves, or innovating processes of their own that are cleaner. But how can investors capitalize in a direct way from the trend and opportunity in environmental and social responsibility is unclear, because for the most part, the emissions issue has been something that impacts the bottom line of industrial polluters. Professional ESG/SRI investors have long made the case that ESG more than attitude. It is a 'factor.' Companies that invest and work at being good, responsible corporate citizens are and perform, on average, better, than those who don't.
But, how can you quantify this directly? Which are the companies in the 'emissions' space, that are going to make an impact in a direct way, and benefit directly from the business of emissions capture, reduction, and trade?
There are, in fact, four Canadian companies that have made significant inroads in the area of capturing carbon emissions in a quantifiable and commercial ways, so-termed 'negative-emissions technologies,' and managed to win the long-term hearts and minds of some very prominent and early investors. These four Canadian companies, Carbon Engineering, CarbonCure, Investys, and Pond Technologies have collectively managed to raise in close to $200-million from the collective likes of Bill Gates, Husky, Chevron, CNRL, Inventiv Capital, and numerous other venture capital firms.
1) Carbon Engineering, based in Squamish, British Columbia, has innovated industrial-sized direct air capture arrays that can deliver large-scale negative emissions by removing carbon dioxide directly from the atmosphere, using only water and energy inputs, and process it into pure compressed CO2 that can be stored underground, or converted into fuels, using their Air to Fuels™ technology. This company has captured the interest of Bill Gates and numerous other venture capital firms, including Thomvest Asset Management, chaired by Canadian billionaire, Peter Thomson, as well as Chevron, Occidental and BHP. Carbon Engineering is privately owned.
2) CarbonCure, based in Dartmouth, Nova Scotia, manufactures a technology for concrete producers that introduces recycled CO2 into fresh concrete. In a process known as CO2 mineralization, the CO2 is converted to a mineral and becomes permanently captured. Best of all, CO2 makes concrete better. Concrete is the most abundant man-made material in the world; it is the backbone of modern society. But cement, the critical ingredient that gives concrete its strength, is responsible for up to 7% of the world's carbon dioxide (CO2) emissions. CarbonCure has attracted investments from a number of well-heeled Venture Capital firms. CarbonCure is privately-owned.
3) Inventys, based in Vancouver, BC, has innovated what will be a gigatonne marketplace for CO2 trading, enabling industrial sources/producers of CO2, i.e. Cement plants, steel manufacturers, chemical plants) to capture their emissions with Inventys' carbon capture solution, and then be able to trade their captured CO2 on the Inventys market platform to those industrial consumers whose processes require CO2, i.e. Concrete additives, plastics, fuels, construction materials. Inventys is privately owned.
4) Pond Technologies, based in Markham, Ontario, has successfully engineered a process of permanently capturing CO2 emissions at the source using its proprietary algae-based carbon capture bioreactors that connect directly to the emissions stacks of, for example, concrete producers and steel manufacturers. In turn, the algae biomass from its technology can be used for producing large amounts of superfoods, such as Astaxanthin and Spirulina, high-protein feed for fish and livestock, biofuels, and bio-plastics. Pond has received its first commercial scale order for its technology from Stelco Inc.'s Lake Erie Works. The Stelco project, for which Pond has received a binding commitment from New York-based boutique investment company Inventiv Capital for an investment of up to $7-million for Phase 1, and up to $13.5-million for Phase 2 of the project, is expected to produce 3,500 metric tonnes of algae and capture approximately 6,500 metric tonnes of CO2 per year. The balance of the project financing has been secured from the Ontario Centres of Excellence (OCE) and Pond. In addition, Inventiv anticipates deploying roughly USD $100-million in funding into projects using Pond's technology, over the next one to two years. Pond Technologies is a publicly-traded company, listed on TSXV (ticker: TSXV:POND)
It's worth noting that raising capital in the past number of years has been no less than an uphill climb. It has been challenging to raise money, in particular, because of the newly legalized cannabis business/industry. Companies associated with cannabis have vacuumed up the lion's share of venture and public capital, as well as a great deal of attention.
This small group of Canadian companies are at the leading edge in emissions capture, innovating new kinds of alchemy that ingeniously use permanently captured Carbon Dioxide in processes that strengthen concrete, produce sustainable amounts of superfoods (powerful algae-based anti-oxidants with substantial health benefits), new-school clean hydrocarbon biofuels, and a massive CO2 exchange marketplace that will facilitate trading of captured CO2 between industrial companies who produce large amounts of CO2 and those whose manufacturing processes consume large amounts of CO2.
Up until recently, the perspective on responsible investing has been largely viewed as an investment factor, and investors have been broadly focused on the idea of investing in companies that are implementing responsible ESG-centric initiatives. And, more specifically the focus on the emissions reduction/capture issue has been centred around industrial companies taking steps to clean up their process so as to reduce their own emissions.
These four Canadian companies actually have the technology to help large industrial polluters improve their environmental and social responsibility in a dramatic and impactful way, by providing them with the means to substantially shrink their emissions, and profit from it. Investors have the opportunity to enter this space at this early stage when valuations are attractive.
If you're willing to spend a relatively small amount of time learning about these companies' in-market solutions, you will reach an understanding of why now, while the 'emissions capture' industry is in it's infancy, is the time to be pondering investment.
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