Building Better Futures
Consumer-Driven Investments in Clean Energy & the Circular Economy
When I joined the Builders Fund in fall 2020, we were mid-pandemic, facing a national racial reckoning, with wildfire smoke choking the air in San Francisco. While a bewildering time to start a new role, the immediacy of the problems facing the environment and human health motivated me.
I see climate change as the defining challenge of our lives, with its intersections across food systems, human health, and racial justice. Addressing this environmental and social crisis requires massive consumption and production shifts, disrupting existing systems and opening opportunities to accelerate preferred futures. Builders takes a consumption-driven approach to investing in recognition of consumers’ pivotal role contributing over 70% of overall economic activity as well as the potential of sustainable consumption shifts to meaningfully drive systems change.
Acknowledging the charged history of externalizing sustainability as an issue of “consumer choice” (for instance, the concept of “carbon footprint” shifting blame from fossil fuel producers to individuals), Builders approaches governance from the perspective of stakeholder accountability. We seek aligned management teams, activist cultures and scalable, profitable business models oriented towards building a sustainable, healthy, and inclusive future.
As the newest addition to the Builders investment team, I have been focusing on two climate-related sectors that may not historically have been considered consumer investments: clean energy and the circular economy.
Energy as an Emerging Consumer Product & Service
Prior to the 1990s, monopoly utilities controlled U.S. electricity services, with retail consumers largely passive recipients. Low-income BIPOC communities bear a disproportionately heavy energy burden, the brunt of pollution from dirty power generation, and the worst impacts of climate change. Between rising distributed generation and growing environmental justice movements, consumers are becoming more central actors in energy markets, shifting where and how energy is generated, how much is used (efficiency) and stored (resiliency). Events like the California public safety power shut-offs and the Texas power crisis have only heightened the awareness of the often poor customer experience around energy. Renewables increasingly offer an attractive economic value proposition to consumers, whether through cost savings on electricity bills or increased resilience to extreme weather and grid outages.
Reaching net zero emissions will require not only decarbonizing energy generation but also using less energy overall, especially in the built environment. According to the World Green Building Council, energy efficiency measures could save up to $450 billion in annual energy spending, with decarbonizing buildings estimated to have a potential 84 gigaton CO2 impact. The International Energy Agency projects that annual clean energy investment of $4 trillion is needed to reach net zero carbon emissions by 2050, and the recent Net-Zero America report asserts the technologies needed to decarbonize our economy already exist today. With renewables only 20% of the U.S. energy mix but the fastest growing segment of the power sector and proven cost-competitive technologies, now is the time for growth capital to accelerate the transition towards our clean energy future.
Builders has invested in distributed generation via PosiGen, a rooftop solar and energy efficiency company, as well as clean energy product company MPOWERD, which sells solar-powered lanterns into outdoor, personal, education, and international NGO verticals. I see further opportunity in consumer-oriented “behind-the-meter” distributed energy resources including generation, storage, and energy efficiency upgrades. Community solar and platforms revamping the electricity retail experience, whether by providing consumer choice or incentivizing demand response behavior, are complementary solutions ripe for growth capital. I am also tracking companies helping homeowners and businesses retrofit buildings with more efficient HVAC/heat pumps and energy efficient windows, lighting, and electric appliances. I am particularly interested in businesses focused on the human health and racial justice co-benefits of investing in clean energy.
Consumers Driving the Circular Economy
The current take/make/waste economy contributes about half of global greenhouse gas emissions, and similar to energy, consumers frequently lack choice when it comes to reuse and disposal. Fast-moving consumer goods companies are the single largest users of virgin plastics, and approximately 30% of food produced is wasted, with many municipalities lacking composting infrastructure. Landfilling and incineration create air and water pollutants, posing hazards to biodiversity and human health, which disproportionately impact low-income and BIPOC communities where 79% of municipal landfill and incineration sites are located.
Consumer awareness is driving change, and recycling technologies exist that promise to significantly reduce greenhouse gas emissions while creating new products and markets. For instance, replacing virgin with recycled plastic reduces greenhouse gas emissions by 67% for PET, 71% for HDPE and PP, and diverting food waste from landfill could yield methane abatement benefits of up to 87 gigatons CO2 equivalent. Currently only 8.6% of global supply chains are circular, and rewiring production and consumption systems towards the circular use of natural resources could result in economic benefits of up to $4.5 trillion through 2030.
Builders’ portfolio companies in sustainable food and agriculture have made significant strides in addressing food waste through their supply chains. In 2020, Urban Remedy diverted 4.8 million lbs of waste from landfill, MIXT diverted 99% of its waste, and Traditional Medicinals passed the 90% threshold for zero waste at its factory and is developing compostable overwraps, aiming to be in market by the end of 2021. To complement these existing investments, I am actively exploring opportunities in plastics, electronics, and organic waste recycling and product innovation, with a particular interest in companies that are building both circular economy infrastructure and activist brands that engage and educate consumers.
Transformation & Acceleration
Contrasting the state of the world today to my first days at Builders illustrates how times of disruption can also result in remarkable transformation. Since fall 2020, COVID vaccines have become widely available in the U.S., Kamala Harris became the first Black, South Asian, female Vice President, and there has been an acceleration of capital flows into sustainability. However, the deeply unequal racial impacts of the virus and economic recovery are apparent, the pandemic also saw a retrenchment into single-use plastics, and emissions are on the rise, with atmospheric CO2 reaching record levels.
The challenges remain but so do viable solutions. If you are seeking a partner to scale your growth stage, consumer-oriented business in clean energy or the circular economy, please be in touch. Let’s build a better future together.
