Introduction of Bill Gates:

The speaker introduces Bill Gates as a luminary figure known for co-founding Microsoft and for his philanthropic efforts through the Bill and Melinda Gates Foundation. Gates is also the founder of Breakthrough Energy, which aims to reach net-zero emissions by 2050 through various means.

Cleantech as a Unique Investment Challenge:

When asked about what sets cleantech investments apart from his other ventures, Bill Gates identifies several key challenges. The ‘physical economy,’ which includes sectors like paper, plastic, steel, and cement, has been optimized over centuries. As such, it receives significantly less attention in terms of research and development (R&D) compared to fields like software, finance, or medicine.

Lack of Attention to Core Industries:

Gates observes that traditional industries like cement and steel have been largely ignored by the ‘hot shots’ of innovation. Instead, the focus has been on sectors considered to be more dynamic or lucrative.

The Constraint of Greenhouse Gas Emissions:

The necessity to eliminate greenhouse gas emissions introduces a major constraint to these already well-optimized industries. This calls for a complete reinvention and significant resource allocation to rethinking production methods that have remained mostly unchanged for a long time.

Importance of Reliability and Scale:

Gates points out that the scale and reliability required for industries like steel and cement are considerable, making the problem even more complex. While efforts have been made to tackle easier challenges, such as passenger cars and renewable generation, Gates emphasizes that addressing these larger, more established sectors is crucial for achieving net-zero emissions.

Another Cleantech Boom:

Bill Gates discusses the current cleantech boom, comparing it with the previous one that burst a decade ago. The earlier boom involved a relatively small amount of capital (no more than 10 billion) and led to poor returns. Lessons were learned about the necessity of patience, working with large corporations, and the difficult economics of cleantech.

Current Trends:

Gates outlines the significant capital currently being deployed in cleantech. Breakthrough Energy Ventures (BEV), which he mentions, has had success in finding good ideas and developing them. However, as projects progress, the scale of capital required becomes large, sometimes requiring up to a billion dollars for pilot projects.

Breakthrough Energy Ventures (BEV):

BEV was formed in the wake of the Paris Climate Accord, committing to climate mitigation technologies. It has already raised two billion-dollar funds and has a deep focus and understanding of the technology landscape. BEV is unique in providing value-added services like team building, incubation, and coalescing nascent companies.

Time and Speed:

Gates emphasizes that we have approximately 10 years to innovate and prove new technologies through pilot projects. Beyond that, these technologies must be adopted within the next 20 years. BEV aims to accelerate this timeline and has already had success in securing co-funding.

Catalyst Program:

BEV’s Catalyst initiative aims to solve the “Valley of Death” problem—a stage where a lot of capital is needed but is often unavailable. This program involves securing governmental support and tax credits to bridge the financial gaps and make cleantech ventures more feasible.

Investment Focus:

He notes that investment must focus on hard-to-abate sectors like direct air capture, hydrogen, steel, and aviation fuel. While investments in sectors like solar, where the “green premium” is close to zero, are valuable, what is crucial right now is investments in these harder sectors, which could require billions or tens of billions.

Venture Capital and Returns:

Gates acknowledges that venture capitalists usually expect quick returns, but the urgency of the climate crisis requires a new model. The “catalyst effort” aims to accelerate the learning curve to move the cost curve quickly, enabling quicker returns on investments.

Capital Types and Future Outlook:

Gates mentions that a variety of capital types, from early-stage venture funding to large investment pools, are necessary. There’s a particular need to be creative with the “middle piece,” where large amounts of capital are needed to move from pilot projects to full-scale operations.

Government’s Role in Climate Policy:

Bill Gates addresses the balancing act that politicians face when considering regulations for climate change. He acknowledges that while governments may opt for regulations such as banning gasoline cars or mandating green construction, they also have to manage the societal backlash. This is particularly true when jobs are lost or when the costs of such policies disproportionately affect certain communities.

The Importance of Innovation:

Gates emphasizes the need for innovation to ease the societal burden of transitioning to greener technologies. He introduces the idea of tracking the progress in reducing “green premiums” as a key metric. This would help to identify which areas are making progress and where resources should be shifted.

The Scope of the Problem:

He notes that tackling climate change cannot be done in a serial manner—focusing first on one sector like passenger cars and then moving to another. The problem is broader, and solutions need to address a wide array of sectors, including industries which currently contribute more to emissions than transport or electricity generation.

Investment Philosophy in Climate Tech:

When asked about his own investments, Gates explains that his approach isn’t solely driven by financial returns. He is willing to take risks and has learned from failed ventures. His primary metric for success is the world’s progress toward zero emissions.

Advice for Climate Tech Investors:

For those looking to invest in climate technologies, Gates advises focusing on high-risk areas that have the potential for large-scale impact. Lower-risk investments, like financing solar fields, offer limited returns. The space is analogous to the early days of IT, but with higher capital requirements and a greater need for government policies.

The Potential for Big Wins:

Gates believes that while the sector is risky, the rewards can be huge for those who choose wisely. Companies that pioneer successful green technologies could become the next Microsoft, Google, or Amazon of the climate tech sector. However, due diligence is crucial, especially for technologies requiring heavy upfront investments.

Optimism in Agricultural Climate Tech:

Bill Gates expresses his enthusiasm for innovations in the agriculture sector, which he views as a rapidly evolving area in the fight against climate change. He notes that although the scale of these innovations compared to mainstream agriculture is still small, progress is evident with falling costs and improving quality.

Multi-Faceted Approaches in Tough Sectors:

Gates also mentions that even in traditionally challenging sectors, like clean hydrogen, direct air capture, and steel, multiple approaches are being tried. He notes that many solutions in the steel industry, for example, depend on achieving inexpensive clean hydrogen.

Capital Availability and Entrepreneurial Spirit:

Gates observes that right now, access to capital for these technologies is strong. This enables a variety of solutions to be tested and advanced, covering the breadth of problems the world faces in relation to climate change.

Fellows Program for Early-Stage Ideas:

In recognition of the importance of nurturing early-stage ideas, Gates refers to a program called Fellows. This program is designed for people with innovative concepts that are not yet ready for venture capital funding. Despite restricting the program to only the most challenging sectors, they received an overwhelming number of high-quality applications, indicating strong interest and commitment in the field.