Which private investors are directing their billions towards the energy transition?

TL;DR

• Transitioning to renewable energy is essential not only for its environmental benefits and contribution to meeting the world’s global climate change goals, but also due to its economic advantages.  

• Despite this need, there is still an acute funding gap that needs to be filled for renewables to reach their potential.  

• Private investors are helping to make up this shortfall by funding organisations that are progressing renewables as well as supporting groups who are tackling the impact of climate change in developing nations head on.  

• Bill and Melinda Gates, William and Flora Hewlett, and David and Lucille Packard are just a few of the individuals who have formed foundations – and contributed billions – to tackle climate change and promote renewable energy initiatives.  

• But their contribution goes beyond financials, their entrepreneurial natures, understanding of innovation and technology, and willingness to wait for the return on their investment makes them important players in driving and accelerating energy transition.

The detail

With fossil fuels still accounting for over 75% of global greenhouse emissions and nearly 90% of all carbon dioxide emissions, the need to transition to renewable energy sources is more urgent than ever. Global emissions must be reduced by almost half in the next six years if targets are to be met and the vision of achieving net-zero by 2050 is to remain realistic.   

Renewables are far more than simply a greener alternative to fossil fuels. Economically, a transition to renewable energy makes sense: the cost of solar power fell by 85% between 2010 and 2020, the cost of onshore wind energy fell by 56%, and offshore wind energy prices dropped by 48% in the same period. It’s also predicted that the renewable energy industry will generate 14 million new jobs – a net gain of nine million when accounting for the potential job losses that may arise from a move away from fossil fuels.  

When considering investment requirements, renewables remain the clear frontrunner. In 2022, $7 trillion was spent on subsidising the fossil fuel industry while it’s estimated that only $4 trillion a year would need to be invested in renewable energy to achieve net-zero by 2050.  

29% of our electricity currently comes from renewable sources, but a more widespread shift is already underway. The World Energy Outlook predicts that by 2030, there will be ten times as many electric vehicles on the road, renewable energy will own 50% of global electricity share, and investment in new offshore wind projects will be three times the sums directed towards creating new coal and gas-fired power plants. 

Even more promising is the fact that these predictions are based on existing governmental policies; progress could be made even faster if climate pledges are delivered on time.  

A worthwhile investment  

Despite this positive outlook and an array of climate pledges giving good reason for optimism, money talks.  

Substantial ongoing investment is essential to ensure renewables can scale up effectively and achieve their ambitious goals. According to the International Renewable Energy Agency (IRENA), cumulative investments must amount to $44 trillion by 2030, with transition technologies representing 80% of the total. 

Private investors have an important role to play in bridging this gap. While 41% of planned investment by 2050 remains largely targeted at fossil fuels, there are several individuals who are leading the charge and making a tangible difference to the future of renewable energy.  

A man who needs no introduction  

Bill Gates, the Seattle-born Microsoft founder, is one of the most famous men in the world and someone who has arguably become just as well known for his philanthropic efforts as for his transformative impact on technology.  

He is a passionate voice in the climate change debate. Having published a book in 2021 entitled, “How to Avoid a Climate Disaster”, he proposed a plan to prevent climate change’s worst effects. Bill has also been credited with inspiring Warren Buffet to contribute $45 billion to the climate cause.  

Alongside his former wife Melinda French Gates, Bill founded the Bill & Melinda Gates Foundation in 2000. Since then, climate change has been one of the Foundation’s foremost causes. It has invested more than £2 billion towards climate technologies including direct air capture, solar energy, and nuclear fission.  

Even so, Bill believes that philanthropy cannot be the only solution. Indeed, he argues that investment and technical support are necessities in propelling low-carbon ideas beyond the pilot phase and scaling up manufacturing. This includes funding mitigation and climate adaptation-related work such as technology to help control forest fires, using coral reef structures to create barriers to flooding, and developing crop strains that can withstand droughts.  

The Foundation has pledged to invest at least $1.4 billion between 2022 and 2025 to help the world’s poorest farmers adapt to the challenges of climate change including tackling rising temperatures, shifting rainfall patterns, tropical storms, and pest outbreaks. Climate-related losses on Africa’s small-scale farms are almost twice to help the world’s poorest farmers adapt to the challenges of climate change including tackling rising temperatures, shifting rainfall patterns, tropical storms, and pest outbreaks. Climate-related losses on Africa’s small-scale farms are almost twice the global average, yet less than 2% of climate finance is directed towards these communities.  

Current initiatives include: 

• Funding Canada’s International Development Research Centre to support African-led efforts to develop varieties of native forage grasses that can improve animal productivity and soil fertility; 

• Supporting the Kenya Agricultural Livestock Research Organisation to use weather intelligence to provide climate-smart agriculture information to farmers in East Africa via SMS text; 

• Helping the African Group of Negotiators Experts Support to empower African researchers and scientists who are generating and disseminating evidence to shape national policies.  

In 2015, Bill also spearheaded the foundation of the Breakthrough Energy Coalition. This is a fund dedicated to clean energy initiatives, avoiding a climate disaster, and making sure that everyone on the planet can enjoy a good standard of living.  

William and Flora Hewlett  

The Hewlett Foundation, chaired by William and Flora Hewitt, also supports work that ensures energy sources are clean and efficient.  

In reaction to the fact that, in 2018, funding for climate comprised less than 3% of global philanthropy, the Hewlett Foundation has prioritised investing in strategies designed to avoid the worst effects of climate change and spare human suffering by reducing greenhouse gas (GHG) emissions.  

In 2022, it awarded 180 grants, had 342 active grantees, and contributed $175 million to the cause. These grants are focused on cleaning up power production, minimising the use of oil, preserving forests, addressing non-CO2 greenhouse gases, and financing climate friendly investments.  

David and Lucille Packard 

The David and Lucille Packard Foundation has a similarly disruptive goal: to support bold, creative climate solutions that would not otherwise get the support they need to have a chance at making a big difference.  

Here, the Foundation issues grants to initiatives that are working on the ground to enact lasting change. Its beneficiaries include the ClimateWorks Foundation, which has received 30 grants totalling $161,595,050; the Meridian Institute, which has received 22 grants representing $3,303,425; and the Rockefeller Philanthropy Advisors, which has had 50 grants totalling £100,288,769.  

Forests, People, Climate is one of several enterprises that the Foundation supports. It partners with funders and civil society organisations to end and reverse tropical deforestation while delivering on just and sustainable development. By working across Indonesia, the Congo Basin, and the Brazilian Amazon, Forests, People, Climate focuses on making standing forests more valuable that cut forests and influencing changes in national policy to prioritise forest protection.  

The David and Lucille Packard Foundation is also using its power to inspire other donors and address funding gaps by broadening the coalition working to strengthen climate resilience and adaptation through the National Climate Resilience Framework.  

Indeed, Nancy Lindborg, President and CEO of David and Lucille Packard Foundation, previously stated: “The new National Climate Resilience Framework provides an essential roadmap to help focus and align federal and non-federal action toward the shared vision of a safer, greener, more equitable, and vibrant nation.” 

The invaluable impact of private investors  

With an increasing number of philanthropic foundations and private investors contributing to the fight against climate change, the global transition to renewable energy can be accelerated and optimised for success.  

As well as providing financial support and bridging the funding gap, the individuals behind these Foundations are often savvy businesspeople, technically minded, and open to innovation. Individuals such as Bill Gates aren’t afraid to take risks or wait to see a return on their investment, and understand that investing in infrastructure and technology is essential to produce impactful results.  

They are also willing and able to fund organisations that are taking chances and approaching problems creatively while simultaneously helping to lobby governments and enact policy change. This multi-pronged approach goes beyond simply plugging a monetary gap, it is furthering the energy transition on several fronts and maximising the chances of finding solutions that will shape and support a sustainable future for renewables.

— Lew 👋

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