Principled investment: From empty ESG words to sustainable deeds

If the majority of the world’s investors considered the right targets and took the right risks, the energy transition could be achieved in a decade, says Alexandre Garese, founder of the industrial investment company Kouros.

The slogan chosen for COP27 this year was “Together for Implementation,” reflecting the urgent need for businesses to go beyond empty promises, to real, tangible change.

Today, it is widely accepted that the change required to secure our planet’s future cannot happen without the private sector changing behaviour and redirecting capital flows in a concerted way.

The regulation and penalisation of unsustainable business practices, which was introduced into the markets at an incredible rate in the last few years, removed any incentives to ignore the impact of a business on the world around it. What once seemed impossible is now an essential fact: environmental harm equals the destruction of value for any business.

Innovations that help our society decarbonise, on the other hand, attract investor funds like a magnet. This month, the total value of green bonds issued to date globally reached $2 trillion and is expected to hit the $5 trillion mark in the next few years.

As a result, the economic risk of inaction – including missed opportunities – is far greater than the benefits from investing in polluting or unsustainable assets.

If this rationale was accepted by more investors, leading them to take the right risks and direct their funds towards sustainable energy sources, the energy transition would happen significantly faster than currently expected – in a way that creates wealth for the risk-takers.

Investment success, and the success of businesses, is now governed by the ability of entrepreneurs to factor in the long-term perspective into decision-making. This principle cannot be adopted simply because it is a fashionable trend but has to genuinely align with the business’s day-to-day mode of operation.

Short term global economic shocks, including the energy crisis, war in Ukraine, economic downturns, should not be a reason to lose focus on the long-term benefits of sustainable investments. The transition to Net-Zero requires a long-term approach to consider value for investments. Even when the short-term context is not favourable, prudent investors and businesses should stay the course.

This belief guides my own investment philosophy, with sustainability at its heart. When I founded Kouros in 2016, I wanted to build a dedicated investment platform to trigger the shift of capital from a carbon-based system to a new decarbonised and sustainable energy system. At that time, there was no talk of an energy crisis. However, nowadays, global geopolitical issues mean that the role of sustainable investment is now more important than ever.

Kouros investment platform is unique in that it is both an investment fund and an entrepreneurial project; financing the growth of existing ground-breaking start-ups and building new businesses from the ground up. Kouros seeks simultaneously to replace fossil fuels by renewable energies and to remove carbon from the atmosphere, by building and growing not only carbon-neutral, but even carbon-negative businesses.

Instead of concentrating on isolated innovations, we approach the question of the energy transition as a whole by financing accelerated decarbonisation ventures and building right links at value chains key places.

Based on a manufacturing process that converts biomass residues into hydrogen and biochar (a solid and stable form of carbon – in other words, a local carbon sink), Kouros has designed entirely new businesses to pave the way for accelerated decarbonisation. Carbonloop produces on-site green gas from biomass to replace natural gas and decarbonise industrial sites. Hyliko helps companies manage the footprint of their fleets by leasing, maintaining and refuelling trucks powered by carbon-negative hydrogen. By using Hyliko’s hydrogen from biomass, customers need three times less trucks to decarbonise their fleet, compared to hydrogen coming from electrolysis. Carbonloop and Hyliko are first-of-their-kind accelerated decarbonisation players.

The application of this unique model of investor and entrepreneur to replacing fossil fuels and removing carbon from the atmosphere, I believe, is the surest and the quickest way to get to Net-Zero, and to generate return on investments while creating sustainable business practices. More investors should now consider how they can implement change, considering the right targets, taking the right risks, and generating long-term returns both economically and environmentally.

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