A look at some of the key investment opportunities for charities addressing climate change

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Creating economic value through tackling climate change

Decarbonising our energy system is essential to addressing climate change. The companies developing the solutions have the potential to create enormous societal and economic value over the coming decades.

This is good news for charities making both financial and social investment choices. Here are four areas where Baillie Gifford’s Lee Qian, manager of Positive Change and Keystone Positive Change Investment Trust, sees exciting opportunities emerging.

1. Electrification
Electrifying energy use with renewable sources is crucial. While slow progress has been made due to limitations in high-density and high-temperature applications, technological advances offer hope for accelerated electrification.

Cheaper and better batteries are enabling the electrification of transportation. Electric vehicle pioneer Tesla has steadily brought down the cost of electric vehicles through innovation and scale. While Joby Aviation is leading the development and commercialisation of electric vertical take-off and landing (eVOTL). Joby’s aircraft have a range of up to 150 miles and a top speed of 200 miles per hour.

Elsewhere, Calix is developing an electric kiln to decarbonise industries like lime and cement production, while Boston Metal's molten oxide electrolysis technology aims to electrify steel production by separating oxide from iron without carbon. Both companies are addressing electricity's limitations in high-temperature applications.

2. Renewable generation and the grid
Demand for renewable sources of electricity has quintupled over the past decade. Companies such as Ørsted, the world leader in offshore wind, play a key role in building the necessary infrastructure to keep up with demand.

Ørsted is also a major developer of onshore wind and solar projects and invests in newer technologies such as green hydrogen.

Energy storage is becoming critical to managing supply and demand on our networks enabling grid stability through frequency management and synthetic inertia. Tesla is a leading provider of stationary energy storage systems and software, and Northvolt is building out global battery production capacity, with an emphasis on sustainability through using renewable power and recycling.

3. Hard-to-abate sectors
Decarbonising food production is a complex challenge that requires multiple solutions. Deere’s precision agriculture offerings leverage advancements in digital technologies, such as using machine learning to identify weeds from crops, helping farmers obtain higher yields while reducing pesticide and fertiliser usage.

The construction sector is slow to decarbonise and digitalise, with many projects finishing late and 10% of materials wasted. Autodesk's software for architecture, engineering, and construction helps design energy-efficient buildings and streamline workflows to reduce rework.

4. Carbon removal
There is increasing consensus that engineered solutions will complement nature-based solutions to remove existing CO2 emissions from the atmosphere.

Climeworks, a leader in direct air capture (DAC), has an ambitious scale-up plan to capture 1 million tons of CO2 from the atmosphere by 2030, and to be on track to gigaton capacity by 2050, achieving climate impact at scale.

Summary
Climate change is an urgent challenge that needs addressing, but there are reasons for optimism. We believe that companies addressing climate change have the prospect of creating enormous societal and economic value over the coming decades.


Disclaimer: This article is for professional use only. Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.

All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk.

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