San Lie: Where do you fit into the innovation curve that is making Europe autonomous?
This column was originally written in Dutch. This is an English translation.
By San Lie, Director of ASN Impact Investors
Global warming is happening fast, but innovative technology is sometimes developing at an exponential pace. In the race to make Europe cleaner and more autonomous, investors must choose a position that suits them.
I recently heard Diederik Samsom explain at an event how the future of Europe depends on our investments in innovation and clean energy. As chief of staff to former European Commissioner Frans Timmermans, Samsom helped develop the European Green Deal, the policy that aims to make the EU climate neutral by 2025. So he knows what he is talking about when he outlines the urgency of the energy and industrial transition that Europe – both government and private markets – must throw its full weight behind. A double urgency, I would say: Europe must become climate neutral and energy independent as quickly as possible.
Extreme weather events are getting closer
The fact that the earth is warming up is nothing new. What is new, however, is that this seems to be leading to extreme weather events at an accelerated pace. And they are getting closer and closer. Think of last year's heavy rainfall in Valencia, which led to massive flooding and more than 200 deaths. A combination of cold air and a warming Mediterranean Sea. These two do not mix well and, according to meteorologist Reinout van den Born, are even “a ticking time bomb”. What many people do not know is that parts of Morocco and Algeria were also hit by unusually heavy rainfall and flooding last year, resulting in deaths. “Climate change is hitting us in the face,” says Samsom.
Replacing imported gas
No one doubts the need for Europe to become self-sufficient in energy and raw materials. Since the war in Ukraine, we have drastically reduced gas imports from Russia, but now 60% of our liquefied gas comes from the US, followed at a distance by Russia, Algeria and Qatar.
Do we want to keep it that way? The structural solution that will make Europe stronger and more stable is the transition to renewable energy sources that replace (largely imported) gas.
Technology is developing exponentially
Even though the images of flooding were discouraging, I left the meeting feeling slightly optimistic. Because Samsom, a former environmental activist, Labour Party politician, senior European official and now chairman of the board at Gasunie, is above all a brilliant physicist, a systems thinker who understands technological innovation. Yes, climate change is happening fast, but technological developments often progress exponentially, was his message.
For example, solar energy generation has grown a hundred times faster than previously predicted by the International Energy Agency (IEA). In the coming years, it will be AI that promises to dramatically accelerate research into new materials and climate tech. “The race between climate change and human efforts to combat it is becoming exciting, but we still have a chance,” Samsom said.
Our active role in the innovation race
What strengthened me in our own ambitions was the role we can play as a financial community in that innovation race towards an independent and climate-neutral Europe, with each of us choosing our own strategic position on the curve.
Venture capitalists drive the development of new technology in search of high-risk/high-return propositions. Pension funds have the strategy and clout to apply proven technology to, for example, the energy infrastructure that accelerates the decarbonisation of our society.
A greener Europe is also more competitive
Finally, a climate-neutral and autonomous Europe is also more competitive. Just take a look at the extensive recommendations in the famous Draghi report. Among the green investments that strengthen the EU, of which, according to Draghi, “the private sector must provide the lion's share”, I found countless examples that already constitute a strong business case for investors who take action in time.
Europe's independence, its competitiveness and the climate: the energy transition is a race with many winners, and as investors, we provide their energy.
San Lie is Director of ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.