Climate Investing: What it is, What's Propelling it, and Where to Start
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Climate Investing: What it is, What’s Propelling it, and Where to Start

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The following content is sponsored by iShares by BlackRock.


Climate Investing

Climate Investing: What it is and Where to Start

Across all sustainability issues, 88% of global investors rated the environment as the number one priority. Clearly, investors are recognising the urgency of climate change and the need for related investing strategies.

In this graphic from iShares by BlackRock, we define climate investing, the forces giving it momentum, and how investors can begin to implement it in their own portfolios.

What is Climate Investing?

Climate investing involves selecting sustainable strategies where climate risks and/or opportunities are key considerations. This helps investors align their portfolios with the transition to a low carbon economy.

What’s Propelling it?

There are a number of long-term structural forces accelerating the shift to climate investing.

  • Extreme weather damage: In 2020 alone, damages from natural disasters hit $210 billion—the highest amount ever recorded.
  • Global climate regulations: Around the world, 134 countries have made a carbon neutral pledge.
  • Clean energy innovations: Renewable energy is getting cheaper, with production costs of solar photovoltaic technology falling 89% between 2009 and 2019.
  • Favourable investor sentiment: Almost two-thirds of people in 50 countries believe climate change is a global emergency.

In response to this momentum, the number of companies disclosing on climate change has almost doubled in the last five years. This transparency can enable investors to make more informed decisions.

How Can Investors Navigate This Fast-moving Transition With ETFs?

New products with climate considerations are helping investors with the transition, and one widely available vehicle is Exchange Traded Funds (ETFs). In fact, annual inflows into global sustainable ETFs have grown substantially.

YearAnnual Inflows
2016$1.4B
2017$4.1B
2018$6.8B
2019$29.3B
2020$87.8B

In 2020, inflows into sustainable ETFs were 63 times higher than they were in 2016. ETFs are a useful tool because they offer the transparency investors need to pursue specific financial and climate goals.

The Three Climate Investing Approaches

Within sustainable ETFs, there are a range of funds that incorporate climate considerations. To bring clarity to this space, BlackRock has categorised climate investing into three key approaches:

  • Reduce exposure to carbon emissions or fossil fuels. For example, this could involve minimising or eliminating companies that have high carbon emissions relative to their sector peers.
  • Prioritise companies based on climate risks and opportunities. In practice, this could mean increasing the weighting of companies based on their commitments to align with Paris Agreement temperature goals.
  • Target climate themes and impact outcomes. For example, an investor could invest in a specific sustainable activity or project, such as clean energy.

“We believe that the biggest potential benefits will accrue to the global investors who are quickest to ready their portfolio for the new era of climate investing.”
—Manuela Sperandeo, EMEA Head of Sustainable Indexing at BlackRock

No matter an investor’s approach, iShares believes that they can help catalyse the shift to sustainable investing.

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The Road to Decarbonization: How Asphalt is Affecting the Planet

The U.S. alone generates ∼12 million tons of asphalt shingles tear-off waste and installation scrap every year and more than 90% of it is dumped into landfills.

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Road to Decarbonization - How Asphalt is Affecting the Planet

The Road to Decarbonization: How Asphalt is Affecting the Planet

Asphalt, also known as bitumen, has various applications in the modern economy, with annual demand reaching 110 million tons globally.

Until the 20th century, natural asphalt made from decomposed plants accounted for the majority of asphalt production. Today, most asphalt is refined from crude oil.

This graphic, sponsored by Northstar Clean Technologies, shows how new technologies to reuse and recycle asphalt can help protect the environment.

The Impact of Climate Change

Pollution from vehicles is expected to decline as electric vehicles replace internal combustion engines.

But pollution from asphalt could actually increase in the next decades because of rising temperatures in some parts of the Earth. When subjected to extreme temperatures, asphalt releases harmful greenhouse gases (GHG) into the atmosphere.

Emissions from Road Construction (Source) CO2 equivalent (%)
Asphalt 28%
Concrete18%
Excavators and Haulers16%
Trucks13%
Crushing Plant 10%
Galvanized Steel 6%
Reinforced Steel6%
Plastic Piping 2%
Geotextile1%

Asphalt paved surfaces and roofs make up approximately 45% and 20% of surfaces in U.S. cities, respectively. Furthermore, 75% of single-family detached homes in Canada and the U.S. have asphalt shingles on their roofs.

Reducing the Environmental Impact of Asphalt

Similar to roads, asphalt shingles have oil as the primary component, which is especially harmful to the environment.

Shingles do not decompose or biodegrade. The U.S. alone generates ∼12 million tons of asphalt shingles tear-off waste and installation scrap every year and more than 90% of it is dumped into landfills, the equivalent of 20 million barrels of oil.

But most of it can be reused, rather than taking up valuable landfill space.

Using technology, the primary components in shingles can be repurposed into liquid asphalt, aggregate, and fiber, for use in road construction, embankments, and new shingles.

Providing the construction industry with clean, sustainable processing solutions is also a big business opportunity. Canada alone is a $1.3 billion market for recovering and reprocessing shingles.

Northstar Clean Technologies is the only public company that repurposes 99% of asphalt shingles components that otherwise go to landfills.

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A Visual Guide to the Science Behind Cultured Meat

Cultured meat could become a $25 billion market by 2030, but investment into the technologies that underpin the industry is required.

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A Visual Guide to the Science Behind Cultured Meat

Cultured foods—also known as cell-based foods—are expected to turn our global food system as we know it on its head.

In fact, the cultured meat market is estimated to reach an eye-watering $25 billion by 2030 according to McKinsey, but only if it can overcome hurdles such as price parity and consumer acceptance. To do so, significant innovation in the science behind these products will be crucial for the industry’s growth.

In the graphic above from our sponsor CULT Food Science, we provide a visual overview of some of the technologies behind the creation of cultured meat products.

What is Cultured Meat?

To start, cultured meat is defined as a genuine animal meat product that is created by cultivating animal cells in a controlled lab environment—eliminating the need to farm animals for food almost entirely.

“Cultured meat has all the same fat, muscles, and tendons as any animal…All this can be done with little or no greenhouse gas emissions, aside from the electricity you need to power the land where the process is done.”
—Bill Gates

Because cultured meat is made of the same cell types and structure found in animal tissue, the sensory and nutritional profiles are like-for-like. Let’s dive into how these products are made.

The Science and Technology Behind Cultured Meat

The main challenge facing the cultured meat market is producing products at scale. But thanks to the vast amount of research in the stem cell biology space, the science behind cultured foods is not entirely new.

Given that we are in the very early days of applying these learnings to producing food products, those looking to invest in companies contributing to the industry’s growth stand to benefit. Here is an overview of some of the technologies that underpin the industry that you should know:

1. Bioprocess Design

This is the process of using living cells and their components to create new products. According to experts like the Good Food Institute, bioprocess design holds the key to unlocking cultured meat production at scale.

Specifically, innovation in bioreactor (where the cells grow) design represents a massive opportunity for companies and investors alike.

2. Tissue Engineering

Tissue engineering techniques are used to produce cultured meat that resembles real meat textures and flavors. The first step is taking tissue from the animal for the purpose of extracting stem cells and creating cell lines.

The extracted stem cell lines are then cultivated in a nutrient rich environment, mimicking in-animal tissue growth and producing muscle fibers inside a bioreactor. The muscle fibers are processed and mixed with additional fats and ingredients to assemble the finished meat product.

3. Cell Lines

Cell lines refer to the different types of cells that can be propagated repeatedly and sometimes indefinitely.

Access to cell lines is a major challenge facing the industry today and is an area that requires significantly more research. This is because there is not just one cell type that can be used in cellular agriculture to produce cultured food products.

4. Cell Culture Media

Cells (or cell cultures) require very specific environmental conditions. Cell culture media is a gel or liquid that contains the nutrients needed to support growth outside of the body.

More research in this space is needed to determine optimized formulations and make these products more affordable.

5. Scaffolding

Scaffolds are 3D cell culture platforms that mimic the structure of complex biological tissues, such as skeletal muscle. This platforms can be created through the use of 3D Bioprinting.

Scaffolds are predominantly made up of collagen and gelatin. The problem is these are both animal-derived ingredients which defeats the purpose of cell-based products. Therefore, more sustainable plant-derived options are also being explored.

Investing in the Future of Cultured Meat

CULT Food Science is an innovative investment platform advancing the technology behind the future of food with an exclusive focus on cultured meat, cultured dairy, and cell-based foods.

The company’s global portfolio spans four continents and includes exposure to a diverse pipeline:

  • Cell lines
  • End products
  • Scaffolding technology
  • Growth medium
  • Intellectual property

>>>Want to stay updated? Click here to subscribe to the CULT Food Science mailing list.

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