A New Landscape for Climate Investment
Investors are looking for on-ramps to clean-energy impact investments.
Investors are looking for on-ramps to clean-energy impact investments.
By 2030, Wright Electric, a New York-based start-up, plans to introduce a 186-seat electric aeroplane with a 1280km range for commercial use. Its battery technology, which will be used in about a dozen engines to propel a single aircraft, is a major step toward achieving zero-carbon emissions in air travel.
But the technology is just half the story of how a group of entrepreneurs and engineers, led by Wright founder Jeff Engler, are helping revolutionise air travel. The second half is about how groups called climate-technology accelerators and incubators are helping entrepreneurs turn potentially transformative ideas into practical use, not only with investment and philanthropic capital, but through mentorship, networking, and advisory services.
For investors looking for on-ramps to clean-energy impact investments, accelerators and incubators provide visibility into the landscape of promising start-ups and opportunities to deploy capital.
These groups, which have exploded in numbers in recent years, are the bridge between the academics, engineers, and scientists who conceive of solutions to the world’s environmental problems and the corporations, municipalities, and nations that are looking for ways to meet ambitious climate goals.
“Big corporations and cities have developed these strategic energy action plans—they may need 50% of their fleet to be electric by 2030 or reduce greenhouse gases by 50% by 2040—but they don’t know how to get there,” says Bob Irvin, executive director of Joules Accelerator, in Charlotte, N.C., which elevates climate-tech start-ups in North Carolina and South Carolina.
“Typically entrepreneurs need a corporate partner to get to scale,” says Emily Reichert, chief executive officer of Greentown Labs, one of the nation’s largest incubators with an accelerator program based in Somerville, Mass.
This public-private symbiosis is increasingly being recognized by lawmakers as the key to greening technology across industries. Seventeen states have created 23 so-called green banks—not official banks, but accelerators that channel investment capital to speed up the adoption of climate technology.
“Collectively they have deployed $1.9 billion of green-bank capital to cause $7 billion in total investment,” says Jeffrey Schub, executive director at the Washington, D.C.-based Coalition for Green Capital, which is an incubator for green banks.
While the roles of accelerators and incubators can overlap, and often the terms are used interchangeably, typically an incubator provides physical space—offices, conference rooms, or laboratories—and the relationships with start-ups can endure for years.
For example, start-ups in Greentown Labs’ incubator program have use of 100,000 square feet of office and laboratory space and an open timeline. “Our accelerator program is more of a boot camp with limited time, and is almost completely virtual,” Reichert says.
An accelerator’s role is to provide anything from mentorship to investment capital, typically over a period of weeks or several months. Some will invest in start-ups, while others will serve as matchmakers between entrepreneurs and investors.
Nate Kirchhofer, chief executive officer of BioZen Batteries, a Santa Barbara, Calif.-based start-up developing environmentally sound batteries capable of powering massive operations such as solar-power fields, worked with the Los Angeles Cleantech Incubator (LACI), which has an in-house six-month accelerator program.
“LACI helped us hone our pitch, and we raised money by being part of the program,” says Kirchhofer, an electrochemist. “One of the main benefits was the networking and tons of contacts—the possibility to talk to investors, mentors, and meet similar early-stage, like-minded clean-tech founders.”
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Food prices continue to rise at a rapid pace, surprising central banks and pressuring debt-laden governments
LONDON—Fresh out of an energy crisis, Europeans are facing a food-price explosion that is changing diets and forcing consumers across the region to tighten their belts—literally.
This is happening even though inflation as a whole is falling thanks to lower energy prices, presenting a new policy challenge for governments that deployed billions in aid last year to keep businesses and households afloat through the worst energy crisis in decades.
New data on Wednesday showed inflation in the U.K. fell sharply in April as energy prices cooled, following a similar pattern around Europe and in the U.S. But food prices were 19.3% higher than a year earlier.
The continued surge in food prices has caught central bankers off guard and pressured governments that are still reeling from the cost of last year’s emergency support to come to the rescue. And it is pressuring household budgets that are also under strain from rising borrowing costs.
In France, households have cut their food purchases by more than 10% since the invasion of Ukraine, while their purchases of energy have fallen by 4.8%.
In Germany, sales of food fell 1.1% in March from the previous month, and were down 10.3% from a year earlier, the largest drop since records began in 1994. According to the Federal Information Centre for Agriculture, meat consumption was lower in 2022 than at any time since records began in 1989, although it said that might partly reflect a continuing shift toward more plant-based diets.
Food retailers’ profit margins have contracted because they can’t pass on the entire price increases from their suppliers to their customers. Markus Mosa, chief executive of the Edeka supermarket chain, told German media that the company had stopped ordering products from several large suppliers because of rocketing prices.
A survey by the U.K.’s statistics agency earlier this month found that almost three-fifths of the poorest 20% of households were cutting back on food purchases.
“This is an access problem,” said Ludovic Subran, chief economist at insurer Allianz, who previously worked at the United Nations World Food Program. “Total food production has not plummeted. This is an entitlement crisis.”
Food accounts for a much larger share of consumer spending than energy, so a smaller rise in prices has a greater impact on budgets. The U.K.’s Resolution Foundation estimates that by the summer, the cumulative rise in food bills since 2020 will have amounted to 28 billion pounds, equivalent to $34.76 billion, outstripping the rise in energy bills, estimated at £25 billion.
“The cost of living crisis isn’t ending, it is just entering a new phase,” Torsten Bell, the research group’s chief executive, wrote in a recent report.
Food isn’t the only driver of inflation. In the U.K., the core rate of inflation—which excludes food and energy—rose to 6.8% in April from 6.2% in March, its highest level since 1992. Core inflation was close to its record high in the eurozone during the same month.
Still, Bank of England Gov. Andrew Bailey told lawmakers Tuesday that food prices now constitute a “fourth shock” to inflation after the bottlenecks that jammed supply chains during the Covid-19 pandemic, the rise in energy prices that accompanied Russia’s invasion of Ukraine, and surprisingly tight labor markets.
Europe’s governments spent heavily on supporting households as energy prices soared. Now they have less room to borrow given the surge in debt since the pandemic struck in 2020.
Some governments—including those of Italy, Spain and Portugal—have cut sales taxes on food products to ease the burden on consumers. Others are leaning on food retailers to keep their prices in check. In March, the French government negotiated an agreement with leading retailers to refrain from price rises if it is possible to do so.
Retailers have also come under scrutiny in Ireland and a number of other European countries. In the U.K., lawmakers have launched an investigation into the entire food supply chain “from farm to fork.”
“Yesterday I had the food producers into Downing Street, and we’ve also been talking to the supermarkets, to the farmers, looking at every element of the supply chain and what we can do to pass on some of the reduction in costs that are coming through to consumers as fast as possible,” U.K. Treasury Chief Jeremy Hunt said during The Wall Street Journal’s CEO Council Summit in London.
The government’s Competition and Markets Authority last week said it would take a closer look at retailers.
“Given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well,” said Sarah Cardell, who heads the CMA.
Some economists expect that added scrutiny to yield concrete results, assuming retailers won’t want to tarnish their image and will lean on their suppliers to keep prices down.
“With supermarkets now more heavily under the political spotlight, we think it more likely that price momentum in the food basket slows,” said Sanjay Raja, an economist at Deutsche Bank.
It isn’t entirely clear why food prices have risen so fast for so long. In world commodity markets, which set the prices received by farmers, food prices have been falling since April 2022. But raw commodity costs are just one part of the final price. Consumers are also paying for processing, packaging, transport and distribution, and the size of the gap between the farm and the dining table is unusually wide.
The BOE’s Bailey thinks one reason for the bank having misjudged food prices is that food producers entered into longer-term but relatively expensive contracts with fertilizer, energy and other suppliers around the time of Russia’s invasion of Ukraine in their eagerness to guarantee availability at a time of uncertainty.
But as the pressures being placed on retailers suggest, some policy makers suspect that an increase in profit margins may also have played a role. Speaking to lawmakers, Bailey was wary of placing any blame on food suppliers.
“It’s a story about rebuilding margins that were squeezed in the early part of last year,” he said.
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