Thematic Commentary – 31 January

Circular Economy Enablers

Solutions embracing artificial intelligence (AI) are playing a pivotal role in facilitating the transition to a circular economy. Take California-based robotics firm Urban Machine; this innovative startup utilises advanced AI and robotics to salvage construction-grade lumber from demolition projects, which would otherwise find its way into landfills. Its process extracts metal fasteners like nails, screws, and staples from the salvaged wood, ensuring its usability and quality. This significantly reduces the labour and cost associated with traditional wood reclamation methods. Moreover, the company’s AI capabilities accurately assess the quantity and quality of recovered wood at each site. Urban Machine offers its AI-enabled metal-extracting robot for rental to developers, contractors, and demolition companies, enabling them to repurpose wood waste on-site and minimise landfill contributions. Through disruptive innovation, Urban Machine is actively contributing to the circular economy by closing the loop on wood waste and promoting sustainable construction practices.¹

Environmental Impact

According to the IMF, carbon-intensive fossil fuel subsidies in the US totalled a whopping $USD 757 billion in 2022.

Recently, the Biden-Harris Administration has proposed measures to reduce fossil fuel subsidies as part of the FY 2024 budget. One avenue is implementing changes to tax preferences which could lead to substantial savings, estimated at nearly $USD 96.9 billion over the next decade. Additionally, the Inflation Reduction Act allocates $USD 1.6 billion to mitigate methane emissions, reflecting a concerted effort to address environmental concerns associated with fossil fuel production. Furthermore, legislative proposals such as the End Oil and Gas Tax Subsidies Act signify a growing consensus in Congress towards reforming the existing subsidy framework. This proposed legislation seeks to revoke tax breaks for the fossil fuel sector, aligning with broader goals of transitioning towards renewable energy sources. All these initiatives underscore a paradigm shift towards sustainable energy policies, signalling a departure from traditional support for fossil fuel industries. As the world grapples with the need to mitigate climate change, reducing subsidies to fossil fuels emerges as a crucial step in promoting cleaner energy alternatives which should drive significant growth in green transition companies.²

Global Sustainable Infrastructure

In January, US private equity firm General Atlantic announced its acquisition of the UK-based infrastructure investor Actis, expanding its assets under management to approximately $USD 96 billion.

Actis will become General Atlantic’s sustainable infrastructure arm, with a specific focus on energy transition, digital transition, and supply chain transformation. Traditional infrastructure allocations, in any case, offer limited exposure to these growth areas, but we believe they are fundamental aspects of the sustainable infrastructure transition. This sentiment was shared by General Atlantic’s CEO, Bill Ford, who noted significant opportunities in energy transition, particularly in regions like the ‘Global South’. The acquisition of Actis exemplifies the increasing momentum and investor confidence in the expansion of sustainable infrastructure ventures worldwide.³

Sustainable Future of Food

At the COP28 U.N. Climate Change Conference last year, which focused significantly on sustainable agriculture and food systems, Karen Ross, Secretary of the California Department of Food and Agriculture (“CDFA”), highlighted the climate crisis’s impact on California’s farmers and proposed solutions. Emphasising the urgency of transitioning to sustainable food practices, Ross addressed challenges such as water shortages, invasive species, and extreme weather events, stating, “We’re living our future now.” The CDFA aims to support farmers by investing in climate-smart agriculture, including groundwater recharging and practices like cover cropping and composting. Meanwhile, Fresh Del Monte, an innovative sustainable food company, is actively contributing to these efforts. By dedicating 30% of its privately owned land to conservation efforts, it has been experimenting with regenerative agriculture methods such as composting and cover cropping. This initiative not only improves biodiversity but also reduces emissions, with a reported 26% decrease in 2022. Fresh Del Monte aims to scale these practices to all farms by 2030. Its commitment illustrates leadership in sustainable agriculture and alignment with the sustainable agriculture objectives of COP28.^{4 5}