Initiative’s Goal and Partners:

Bill Gates introduces Breakthrough Energy Catalyst as an initiative aimed at developing critical clean energy technologies. The program is supported by seven founding partners including multinational companies like Microsoft and BlackRock. These partners are committed to not only reducing their own emissions but also financially backing projects that will make green technologies more affordable.

Funding and Scale:

The initiative starts with over a billion dollars in capital, aiming to leverage this initial investment to bring down the cost of environmentally friendly products like green aviation fuel and hydrogen. The goal is to make these green products affordable and accessible to all companies and nations. Government money and tax credits will also contribute, amplifying the impact of the initial investment.

Collaboration with Governments:

The initiative is not solely private-sector driven; it aims for collaboration with governments as well. Both the EU and the United States have expressed interest in the initiative, viewing it as complementary to their own efforts. By combining corporate expertise with government resources, the initiative aims to optimize the design and implementation of these green projects.

Breadth of Expertise:

Gates highlights the importance of a multifaceted approach that involves both private and public sectors. He argues that while governments possess significant resources, they may lack the breadth of expertise required for such projects. By teaming up with companies that are leaders in their respective industries, the initiative can tap into specialized knowledge and thus make more effective use of funds.

Future Prospects:

Gates anticipates the involvement of more companies and is optimistic about potential government funding from bills currently being debated. If these come through, it would significantly accelerate the pace of the initiative, propelling it towards its goals.

Climate Risk as Investment Risk:

Larry, a key supporter of Bill Gates’ Breakthrough Energy Catalyst, explains that his realization that climate risk is synonymous with investment risk motivated him to get involved. He emphasizes the fiduciary responsibility to manage clients’ capital in a way that considers the long-term sustainability and stability of investments.

Need for Rapid Technological Advancements:

He expresses concern that the world is not moving quickly enough to combat climate change. Larry underscores the need to reduce the “green premium” – the additional cost of adopting sustainable technologies. He warns that failing to do so could result in inflation and social issues, particularly affecting the emerging world.

Funding Early-Stage Technologies:

Larry argues that it’s crucial to invest in early-stage technologies, even if they come with risks and might not be profitable. The aim is to accelerate the development of green technologies, like biofuels, green cement, and steel, to meet climate goals like the Paris Accord. Some of these technologies might become substantial ventures that BlackRock could fund later using client money.

Philanthropic Angle and Foundation’s Role:

Larry clarifies that the capital for this initiative comes from the BlackRock Foundation and is not aimed at generating profit. The foundation is invested in seeding new ideas to accelerate green technologies, aligning with its focus areas of climate change and financial literacy. The objective is not to seek immediate returns but to promote sustainability and better future investments.

Long-term Benefits:

He outlines that these philanthropic investments will also serve to make BlackRock more informed investors in the science and technology of green advancements. This, in turn, will allow them to better manage large pools of money aimed at sustainability, even when those funds need to generate a return.

Funding Types:

Bill Gates describes that the $1 billion+ funding from seven initial anchor partners is a mix of grant money, modest return equity money, and offtake agreements. Offtake agreements are commitments by companies to buy future products like green hydrogen, even if they are priced higher than current non-green options.

Green Premium and Catalyst Capital:

The concept of a “green premium” is central to the discussion. This refers to the additional cost associated with using greener technology or methods over traditional ones. Gates aims to bring down the green premium in four areas: green hydrogen, sustainable aviation fuel, energy storage, and direct air capture. He emphasizes that initial projects would be funded through a mix of catalyst capital and government funds to facilitate this.

Learning from Wind and Solar:

Gates draws parallels between the early, high-cost phases of wind and solar technologies and the current state of the four green technologies. He mentions that public and private investment helped to scale up wind and solar, thereby reducing their green premiums. The same approach is needed for these emerging technologies.

Time Sensitivity:

The speaker emphasizes the urgency in scaling up green technologies, stating that unlike solar and wind, which had a 30-year pathway to commercial viability, we don’t have the luxury of time for these new technologies.

Challenges and Priorities:

Bill Gates points out that while great strides have been made in electric vehicles and electricity generation, they only account for a third of total emissions. To truly combat climate change, investments must focus on areas like steel, cement, and aviation fuel production, where the green premium is currently very high.

Global Implications:

Gates contends that making green technologies affordable is essential for global adoption, particularly in middle-income countries. He mentions that at the current state of the art, these countries cannot deny essential services like electricity to their citizens, if opting for the green route implies a high premium.

Risks of Inaction:

If these projects in green hydrogen, sustainable jet fuel, long-term battery storage, and carbon capture do not get adequate funding, the societal risks increase. Climate change-related issues are already affecting society, with insurance premiums rising by 18% annually due to increased risks from natural disasters.

Role of Philanthropy and Investment:

While the objective is not profit-seeking, the goal is to seed new technologies and ideas that can later attract more traditional forms of investment. The initial risk is too high for conventional client or shareholder capital, thus the role of foundations and philanthropic initiatives becomes crucial.

Impact on Future Investments:

The focus on seeding new technologies not only serves to fight climate change but also to inform future investment strategies in the green technology sector. These initial investments through foundations are considered necessary for understanding the science and technology that will be central to future green investments.

Time Sensitivity:

Speaker 02 emphasizes the urgency of tackling climate change. The time to invest in new technologies and inform investors is now. Immediate action is crucial for a sustainable future.

The $50 Trillion Goal:

Bill Gates’s book discusses the need for $50 trillion to achieve a green world. Speaker 02 believes that a large portion of this investment will come from the private sector and sees it as an opportunity for economic transformation.

Practicality and Timeline of Projects:

Bill Gates (Speaker 01) talks about the Catalyst program’s role in financing projects. The program will provide approximately 10% of the funding for various projects, focusing on effective design to reduce costs. Formal applications will open by the end of the year, and they plan to fund extensively throughout 2022.

Financial Leverage:

The Catalyst program aims to back up other forms of financing, like government funds. Gates highlights the strong interest governments have in creating new industries and jobs, making them likely contributors to these projects.

Green Premium and Timeline:

Bill Gates expects breakthrough technologies, like green hydrogen and sustainable aviation fuel, to drastically reduce the green premium within less than five years. Direct air capture technology may take up to 10 years to become financially viable.

Private Sector’s Role:

Once a project shows commercial viability and can reduce the green premium, Speaker 02 expects an influx of private capital. They argue that an enormous amount of capital is waiting to be invested in proven, reliable green technologies.

Investment Landscape:

Speaker 02 anticipates that climate will become a standard risk factor in all investing within five years. Once the technology proves itself, all kinds of capital will be attracted, not just ESG (Environmental, Social, and Governance) funds.

Partnership Efforts:

Speaker_02 highlights the collaborative nature of their effort to recruit CEOs for a project aimed at combating climate change, called Catalyst. Bill Gates is identified as the driving force, working behind the scenes. Speaker_02 serves as a “color coordinator” and leverages personal relationships to involve other partners.

Private Sector Engagement:

Speaker_01 (Bill Gates) observes that private sector involvement in climate change solutions has improved dramatically since the Paris Agreement in 2015. He is optimistic about the momentum and aims to have over 20 key partners involved in the Catalyst project.

Project Nature and Commitment:

Speaker_02 clarifies that Catalyst is more than just a venture fund; it is designed to use philanthropic money or below-market-rate capital to accelerate private sector solutions. The firms’ commitments are often large, reinforcing the gravity of the issue and the project.

Real Money and Real Solutions:

Responding to skepticism about the effectiveness of climate commitments, Bill Gates asserts that the project is indeed grounded in reality. Real money will be deployed for real-world projects to provide tangible solutions.

Expertise and Practicality:

Bill Gates emphasizes the expertise and sincerity of the companies and teams involved. He mentions BlackRock’s financial advisory role and highlights the technical skills of others like AccelerMittal in the steel industry. The next stage, he says, is to launch these projects and assist governments in directing funds effectively.