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Al Gore and Lila Preston question everything in their new climate report

Generation Investment Management, a sustainability-focused public and private equity firm co-founded by former U.S. vice president Al Gore, has published a sustainability trends report every year for seven years with the goal of becoming the climate tech industry’s bible, like Mary Meeker’s “internet trends” reports were to dot-com entrepreneurs.

Reading the latest report, it appears it will achieve its goals. This year’s survey seamlessly transitions from transportation to plastics to buildings to land and food, showing the vast progress made and the roadblocks that continue to slow progress and sometimes stymie public policies.

The report also asks about much-hyped hydrogen (how much society will produce or how large the market will be) and whether rising demand for electric vehicles can be met since each EV requires more metals for its battery.

Yesterday, this editor spoke with Gore and Generation’s Head of Growth Equity Lila Preston about the good, bad, and ugly. Our conversation below has been edited for length; the full interview will be podcast later this week.

TC: I hate reports, but I loved yours. I didn’t realize dark chocolate production has the same greenhouse impact as beef. I wasn’t aware of the number of countries using congestion charging. Who are you educating and why?

AG: We’ve done this for seven years, and with each report, we try to give the most accurate picture of where this sustainability transition is, how far we’ve come, our momentum, how far we still have to go, our milestones, successes, and challenges. The past year showed that we have finally found the political will to advance global climate change efforts. The U.S., EU, Australia, and Brazil’s new climate policy ambition has started a global race to the top. We’re still far from done. We have more to do because society has not fully committed to writing the laws, mobilizing capital, revising long-standing practices, and building clean machinery and technology at the pace needed. We think that’s the situation.

Plastics to transportation are covered quickly in the report. The most difficult issue of our time?

AG: I’ll avoid answering your question by highlighting one factor as the main challenge, as tempting as it is. We must reach global decision-making. We are close; as others have said, Mother Nature is intervening. The cost-reduction curves for wind, solar, batteries, EVs, LEDs, clean buildings, sustainable forestry, and regenerative agriculture are powerful tailwinds.

However, governments worldwide still subsidize fossil fuels 42 times more than renewables. Nearly 80% of the financing for this amazing solar and wind buildout has come from private capital, while developing countries have been denied fair access due to political risk, rule-of-law risk, corruption risk, currency risk, offtake risk, and more. In order to reduce the absurd subsidies of governments’ destruction of humanity’s future and reduce the fossil fuel industry’s unhealthy control over policymaking in too many countries, developing countries need more access to private capital.

Generation closed a $1.7 billion fund last year. What do you fund and how do you prioritize? I’m seeing more startups feeding cows seaweed to reduce methane emissions. You can chase many opportunities.

LP: We have 18 years of experience navigating transitions and thinking about how sustainability shapes many sectors. I’ve studied food and agriculture trends and sustainability disruptions for years. So we focus on planetary health, people health, and financial inclusion, so system-positive investing.

Technology disruptions have hit food and agriculture many times. Getting channel and scale to market is hard. Since our first fund in 2008, we’ve focused on biology and biologicals replacing chemistry, including synthetic nitrogen, in crops. We’ve also focused on software that drives transparency in the generation and documentation of regenerative agriculture and carbon credits, animal husbandry innovations and better animal treatment, and replacing the animal ecosystem with alternative proteins to decouple food production from land intensity. We need to know: How do you combine [these] sustainability trends with a scalable, sustainable, and profitable business and drive impact by being large and significant?

Scaling synthetic biology to replace petrochemicals disappointed investors. Zymergen, a Bay Area company, wanted to make industrial materials more environmentally friendly, but they underestimated the challenge. A year after acquiring Zymergen, Gingko Bioworks trades at $2 per share.

LP: Scaling innovative, disruptive companies is hard regardless of climate. The first wave taught you how to focus on unit economics, a growth model without massive capital intensity, and management teams that have done this before and can scale up a new technology. Our learnings have led us to prioritize business quality in each sector roadmap.

This report reiterates Vice President Gore’s call for more funding. Should oil-producing nations like Saudi Arabia fund? US firms have been doing business in the region forever, but in the last six to 12 months, blue chip brands like Andreessen Horowitz have become more open.

AG: First, we’re not a venture firm, but I want to give a bouquet to the VC community because I don’t think they’ve gotten the credit they deserve for seeding most of these technologies that are now propelling the world’s climate change efforts, including solar, wind, batteries, and EVs. They didn’t all profit. Many made money but took less than expected. But they contributed greatly to the world’s effort to solve this crisis, and not everything of value has a price tag, so I hope they feel good about their work.

We don’t take money from petro states, and I think the fossil fuel industry has portrayed itself as the world’s climate crisis advisor and tried to appear to be on everyone’s side. Really, they’re not. A few may be, but their main goal in this debate has been to slow, block, and defeat any measure that could reduce fossil fuel production and burning by a barrel, ton, or [unit] of methane. Their so-called solutions all assume fossil fuel production and burning will continue to rise. For decades, some of the largest companies have committed fraud to confuse the public and slow progress. That sounds harsh, but it’s true and ongoing. Some are funding climate denial in public elementary schools! Why is it important? Yes, seriously. I believe that taking money from the biggest polluters, who are the root causes, is risky.

In a world where political infighting paralyzes the government, as Speaker McCarthy did this week by impeaching Joe Biden, how do you get politicians to take the environment more seriously?

AG: A study last week found that a vast majority of young Republicans are appalled by their party leaders’ climate policies. I think that generational shift will have a big impact soon.

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