The US Republicans’ assault on environmental, social and governance investing is starting to have significant consequences for international fund managers. On Tuesday, Florida passed a resolution banning its pension fund managers from considering ESG.
Our colleague Chris Flood and I report this morning about Federated Hermes, which is a top donor to a conservative group of state treasurers, some of whom are actively attacking ESG investing. With a long history in ESG, Federated Hermes is now under heavy scrutiny from some of its Dutch pension clients. As ESG becomes increasingly torn apart along party lines, asset managers are being forced to choose sides.
For today’s newsletter, Simon has a report from his trip to Boston to investigate fusion power’s potential. This visit will be featured in a forthcoming Moral Money film on the race to bring fusion to market, part of a series coming early next year.
And I wrote about the French transport minister’s attack on private jet travel. Can a mix of sustainable aviation fuel, taxes and carbon offsets help mitigate private jet travel emissions? (Patrick Temple-West)
Hotly funded fusion start-ups dare to dream
On a sunny Massachusetts morning last week, I stepped on to a construction site that — if one start-up’s plans are to be believed — could usher in the age of fusion energy, just three years from now.
Fusion is the process that powers the sun: hydrogen atoms smash into each other to form helium, giving off huge amounts of heat in the process. Scientists have built dozens of fusion machines on Earth — but no one has yet managed to create a nuclear fusion reaction that gives off more energy than it takes in.
At a former military base an hour’s drive from Boston, a five-year-old start-up called Commonwealth Fusion Systems is aiming to be the first to achieve that feat, with a doughnut-shaped “tokamak” reactor that will hold hydrogen plasma at about 100mn degrees Celsius. It says its experimental plant will achieve “net energy gain” some time in 2025 — providing a prototype for commercial fusion stations that could start powering homes and industry from the 2030s.
CFS chief executive Bob Mumgaard says this would be a game-changer in the struggle to tackle the twin problems of climate change and energy poverty. Fusion promises an age of clean and abundant power, without the carbon emissions of fossil fuels, the hazardous radioactive waste of nuclear fission plants, and the intermittency of wind and solar.
But CFS is hardly the first team to promise a fusion breakthrough. Various teams have been pursuing net energy gain for decades — notably Iter, a vast international initiative in the south of France that has become the world’s most expensive scientific project. What’s different this time?
Private sector investors have started to throw serious money at this field, Mumgaard says, as attention has shifted from social media start-ups towards “hardware-based companies”, especially ones that could drive the clean energy transition. CFS raised a monster $1.8bn last November from a range of venture capital funds as well as strategic investors such as the oil companies Eni and Equinor.
One of CFS’s most important early backers was Breakthrough Energy Ventures, a fund set up by Bill Gates and backed by several other billionaires, including Amazon’s Jeff Bezos and SoftBank’s Masayoshi Son. “There was never really anything that stopped [progress on fusion] except money,” Phil Larochelle, who led Breakthrough’s investment in CFS, told me.
The surge of money into this sector has been driving the growth of about two dozen other fusion start-ups from Oxfordshire to British Columbia, meaning CFS faces stiff competition to be first to market. One prominent rival is California-based TAE Technologies, which this summer raised $250mn from investors including Google and Chevron.
TAE’s chief executive Michl Binderbauer told me that, in addition to the new wave of money, this field is reaping huge benefits from artificial intelligence and machine learning software that’s dramatically accelerated modelling and design processes.
And while fusion might seem to be benefiting from a frenzy of investor attention, Larochelle — a physicist who did his doctoral work at Switzerland’s Cern nuclear research centre — said the sudden flow of cash was driven by serious scientific progress.
“There’s a possibility that fusion will be by far the cheapest energy source,” he told me. “I think that fusion might be one of the biggest prizes ever.” (Simon Mundy)
Flygskam goes French, but will the Riviera’s wealthy care?
It was a word of the year for the FT in 2019: flygskam, or “flight shame”, was popularised by activist Greta Thunberg as a way to compel people to rethink their air travel. Thunberg sailed the Atlantic to get to the UN general assembly that year.
Now, flygskam has gone French (how would it translate? Honte de voler perhaps?). French transport minister Clément Beaune told Le Parisien newspaper this weekend: “I think we should act to regulate flights by private jets.” While there might be urgent business trips, private jet flights could not be taken “just for the comfort of individuals”, he said.
But any progress towards regulation will be challenging. Beaune is fighting a booming trend.
Hong Kongers desperate to leave the city’s zero-Covid policy were chartering private jets for their pets. Flights cost about HK$200,000 ($25,665) for each owner with their pet, companies and individuals say. The summer enclave of East Hampton, New York, is mired in a courtroom battle over its attempt to shut its airport amid complaints about noisy private aircraft shuttling in rich Manhattanites.
It is no secret that private jets contribute more pollution to the environment per person onboard than standard passenger jets, but there are ways to mitigate emissions, said Justin Crabbe, chief executive of Jettly, a jet charter company that operates in France.
Sustainable aviation fuel can cut emissions in jet engines by 80 per cent. But cleaner jet fuel is expensive, and limited for now. Microsoft, Visa and Salesforce are among the companies that have committed to using more sustainable aviation fuel in their corporate jet travel, Crabbe told Moral Money.
On government taxes, Crabbe said lawmakers should consider a tax per mile flown, based on the class or model of the aircraft.
“I would only implement a tax if it was made clear to the public that the tax is to be used to directly offset the carbon emissions for that flight, not just generate additional revenue for governments,” he said. Structuring a tax so that the public sees it is benefiting the environment — and isn’t just another levy — “is extremely important,” he said.
Private jet travel is easy to shame, but it is not going away. And demonising it could backfire in France, said Doug Gollan, editor-in-chief of a private jet new service.
“The entire economy of the French Riviera is based on attracting the wealthy who come, many on private jets, and spend a lot of money,” he said. “There are other nice places to go.” (Patrick Temple-West)
Emmanuel Faber, no stranger to Moral Money readers, has written in the Financial Times to highlight the work of the International Sustainability Standards Board (ISSB), which he leads. With the consultation period on the ISSB’s first two proposed sustainability disclosure standards having just closed, Faber writes: “The rich feedback we have already received will allow us to create a set of standards that can enable capital markets to be a true ally of global efforts to deliver a just climate transition.”
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