Take on

How can business help solve society’s biggest challenges?

Take on Tomorrow is back for Series 2: a new season of the award-winning podcast that examines the biggest problems facing society and the role business can—and should—play in solving them. Hosted by Ayesha Hazarika, a broadcaster and writer in London, and Lizzie O’Leary, a journalist in New York, this series breaks new ground, taking on timely topics like generative AI, nature positive business, and the skills-first approach to hiring. Plus, we’re taking the podcast on the road, recording episodes at key global events such as Climate Week NYC and the 2024 meeting of the World Economic Forum. Stay tuned for new episodes, dropping every two weeks.

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Latest episode: Take on Tomorrow @ COP28 in Dubai: Can technology help solve the climate crisis?

Recorded live in Dubai at the annual United Nations Climate Change Conference—better known as COP28—this special edition of Take on Tomorrow delves into the crucial role of technology in combating the climate crisis. What tools are making an immediate impact against climate change? How much room is there for new innovations? And, in light of a significant decrease in climate tech investment, what strategies can be used to reinvigorate much-needed financial backing? Tune in for an engaging exploration of the future of climate technology and its investment landscape.  

Lizzie O’Leary: Hello, and welcome to a special live recording of Take on Tomorrow. I’m Lizzie O’Leary, and I’m bringing you to COP28, the United Nations Climate Change Conference. This year, it’s in Dubai, where more than 70,000 delegates from business and government leaders to scientists and young people are expected to gather from around the world to discuss and agree ways to address the climate crisis. No small task. One place to start is to look at the tools already at our disposal—and innovations in the works in the form of climate technology. I’m joined now by Dr. Yahya Anouti, partner with Strategy& and PwC Middle East’s Sustainability Leader. Welcome.

Dr. Yahya Anouti: Hi, Lizzie.

Lizzie: And Patricia Keating, part of the ventures practice with PwC Middle East. Welcome.

Patricia Keating: Hi, Lizzie.

Lizzie: Yahya, I want to start with you. Technology, including climate tech, is already playing a critical role in mitigation and adaptation, but there’s a need for more financing to flow into that sector—something PwC found in a recent State of Climate Tech report. But climate tech investment has actually fallen quite significantly. Why do you think that is?

Yahya: Yeah, that’s true. So climate tech investments fell by around 40% between last year and this year. And this is the bad news. Yet, the good news is that investments in climate tech opportunities are still way more resilient than other areas of technology. So, overall investment in the tech space fell by over 50%. So, the decrease in climate tech–related investment has shown more resilience vis-à-vis others. The underlying factors for this are simply macroeconomic: the inflation, the interest rates we are seeing. So what’s happening at the macroeconomic level is the main underlying factor for these investments generally in tech and more specifically in climate tech.

Lizzie: I want to expand on that a little bit with Patricia. How much of the tech we really need to tackle the climate change crisis currently exists? And how much more space is there to innovate? Is this a scaling-up-and-deployment challenge, or do we need more big ideas?

Patricia: There’s a great quote from last year’s COP27. It was, “We’re on the highway to climate hell, with the foot on the accelerator.” It was the UN General said that at Sharm El Sheikh last year, and I think that really speaks to the fact that there is plenty of room for more innovation, scaling up the ones that we have and also finding new ideas to really help us with this existential crisis now. That’s the challenge that we took up, ourselves, last year at COP, and we launched our search for the PwC Middle East edition of the Net Zero Future50. That has been a yearlong passion project for us here at the firm, and we began a search for the 50 pioneering technologies across the region that are having an impact across eight climate sectors, which are actually the same climate sectors that are defined by the State of Climate Tech report—so energy and built environment and carbon capture. And we spent the last 12 months searching for those innovators that are active in the region. So, both homegrown but also international businesses that are here operating in the region, helping us address the climate challenges that face us. And so, we realized that we needed to have a really deep understanding of what is going on with pioneering technologies, what impact that they can have—whether that’s to deploy them into the ESG transformation projects that we’re working on and consulting, or helping those clients to build investment vehicles to acquire and invest them. And I think on the journey, we found some really surprising things which debunk the myth of, that there is a lack of it. And there’s definitely a spring of innovation here in the region, and, importantly, that we have a very unique position here to use and increase the impact of that journey that we’ve been on and, with the Future50, to actually build a platform for growth to help those scale-ups actually grow and accelerate in the region.

Lizzie: Are there a few examples, Patricia, that you could give me of the most promising innovations and technologies out there that could have the biggest potential impact?

Patricia: There’s quite a few. I could sit here all day. You know, we were blown away. We found over 500 innovators in the region that we had to then whittle down to our 50. But if I think about impact, energy for this region, from a GHG perspective, is 48% of our emissions, and that’s quite a bit of a significant increase compared to the global stats. When I look at what we found in energy in Saudi Arabia, there’s a company that’s actually accessing geothermal power by breaking into the rocks. And Saudi Arabia is primed for that in terms of the landscape, the terrain. If I think about waste, we have at least three companies here showcasing today at our Future50 showcase who are all doing brilliant things with plastics and waste. And we’ve got one company taking plastic and turning it into wood for kitchens and construction, another that’s turning it into compost, and another one that’s turning food waste into plastic. It’s absolutely incredible, a truly circular economy.

Lizzie: Yahya, could you speak from a global perspective about where the biggest areas of investment are currently?

Yahya: The numbers are showing us that most of the investments are getting channeled to the mobility and energy sectors. And I understand that mobility is one of the highest inefficiencies that we live through every day. It’s not only from a climate perspective but also other inefficiencies that we go through. Imagine the time you spend in the traffic to go home or where you are moving. Imagine spending that time with your family or doing more work, increasing economic contribution. So, there is so much money, 45%, and historically, in the last few years, around 50%, going into the mobility sector to tackle climate tech and also other adjacencies with that. The second one is energy. And actually, in order to meet the net-zero commitments and the aspirations, we have to rethink our energy systems. We have to shift into more renewable resources, and we have to transition into energy that is more renewable and more sustainable. Yet, we are shifting the attention to the other sectors that will require more attention, like industrials and the built environment.

Lizzie: That was one of the things I was struck by in the State of Climate Tech report. And I wonder if the technology that can make the biggest impact is only getting a small share of startup investment, what can be done to change that? What can climate tech startups do to bring investors on board, regardless of the bigger market forces?

Yahya: So, in numbers, the industrial sector contributes to around 34% of the total emissions. Yet, when we look at tech investments, less than 10% of the investments are channeled to that sector. This is a big mismatch. And this is a mismatch that is important to bridge, because not only it’s high in terms of the total contribution but also these are the sectors—if I look at steel manufacturing, aluminum manufacturing, cement—these are all legacy sectors. We call them hard-to-abate. They use fossil fuels and other types of energy in their processes that emit direct greenhouse gases. So we need to shift the attention to that, and the science is advancing on these hard-to-abate sectors, and the technology is advancing. But we need way more investments in that space.

Lizzie: Is that happening now in any meaningful way?

Yahya: We’re still very far. There is way more to be done also on the research and development side, not only on scaling up innovations. We still also need to invest, and, like, if I take steel manufacturing: today, the processes that we use are high emitters. We need to shift towards a green hydrogen base. The technology is still expensive. We have to bring down the cost of hydrogen over the coming decade or two in order to enable these technologies to be cost-competitive. Climate tech is very important, and we have to maintain sustainability as a primary pillar. But we also gotta think of the affordability. We don’t want to double on the price of an apartment that you want to purchase. Already inflation is hitting us. So we have to double down on these investments, create the economies of scale, to bring down the cost curve, to bring down the learning curve, in order to make these things sustainable, and affordable, and supply them in a secure way for our population.

Lizzie: You alluded to macroeconomic factors. And I wonder, when you’re thinking about the deployment of technology and climate tech, what kinds of policy measures from governments, you know, the governments at COP, do the most to get technology developed and deployed at scale?

Yahya: I’d like to cover this question on two sides. First, at the top level, at the macro side, and more at those who are on the ground. So, at the top level from governments—we need governments to put patient funding in research and development that is not “the return on investment is tomorrow.” This will take decades. Two, we are looking for policies that de-risk these investments through securing offtakes, through enabling these startups to sell their products to the private sector and to governments. So these guarantees. We are looking for funding to enable scale-ups, taking these startups to grow and get them on the growth path. And also, we’re looking for regulations that accelerate the products from design to market. In some instances, like, if I talk about bio-based chemicals, in some jurisdictions in Europe, it would take up to seven years to get a new regulation underway. So that’s at the macro level, at the top level. But if I look at the delivery—having dealt with many of the startups that Trish just covered—they are looking for the micro-ecosystem around them. They are looking to sell their products to a company next to them, to someone who would be taking the offtake, enabling them to grow their market and take their products into commercialization. So, creating these micro-ecosystems between airline companies, between those who produce synthetic fuels and so on, to the hydrogen producers, enabling them in this micro-ecosystem.

Lizzie: I’m curious why, and both of you could answer this, climate tech is such an important thing to talk about in the Middle East, in this region, and also during this COP.

Yahya: Three simple reasons. First, in the Middle East, we have been known for exporting hydrocarbon products. But what many people don’t know is that we are endowed with the most affordable, most competitive renewable energy. If I look at solar energy, the levelized cost of producing a megawatt hour of renewable energy is half of the global average. So imagine the competitive advantage that this region has from a renewable energy cost. With that, imagine what green manufacturing we can enable here in the region and enable the transition towards a more sustainable future. That’s one. Two, we have this fund. This is a region that is set to spend over US$2 trillion in infrastructure and real estate. So there is so much of spend going on in the region given the path of development we are on. And three, we have bold and agile leadership that announced net-zero commitments. COP28 is just a few miles away from where I’m sitting. So this is just a testament for how this region is willing to take on the lead and to drive the world into a more sustainable future.

Patricia: Absolutely agree with all of those. And, Yahya will always take it from the big picture. From the startups’ perspective, you know, I had a really interesting conversation with one of the climate techs in our climate tech insights. And we talked about the fact that there’s this focus about taking hydrocarbons out of the value chain. But it’s, like, it’s in everything. Even if we stopped using oil today, it’s in our clothes, it’s in this chair. Stopping using oil for energy is not the only solution, and you need so many different interventions going at every stage of every industry to actually truly address that. So it has to be on the top of everybody’s agenda, no matter what industry you’re in, and no matter what your role is.

Lizzie: Further on to that, Patricia, there is also the argument that climate tech investment makes good business sense. This is what you do. There are plenty of opportunities for innovative companies coming up with good ideas as we work to tackle climate change. What do you see as the opportunities for investors?

Patricia: So, we actually took some time as part of the State of Climate Tech to interview some of the climate investors across the world. We specifically focused on ones that are leading the charge here in the region. And what we learned from them is a couple of things. One, that climate tech investment has a bit of a branding issue. There is a perception that it is a little bit CSR [corporate social responsibility]. But when we spoke to them, they gave us some incredible examples of climate unicorns that they’ve invested in, some really fast-growing scale-ups that, as you said, makes absolute business sense for investors. We are on the cusp of probably a climate boom in terms of, this is where the biggest growth is going to be. And investors who are not looking at this as an asset class, you know, will miss a trick. The second thing that we learned was, there’s a lack of awareness at the institutional or sovereign wealth level and the government level, because those VCs that are trying to build those climate funds are in the room competing with all the other funds who are promising, you know, 10x returns for the next fintech, or whatever it might be. So there is an investment here in the region for a climate and fellowship for those institutional investors who are the policymakers and decision-makers around climate to actually educate themselves in terms of why it’s important to ring-fence money to invest in those areas.

Lizzie: I have a final question for both of you. What excites you the most about the climate tech space in this moment in time? It could be a micro answer, a macro answer, something philosophical—take it away.

Patricia: The energy of the founders and the passion that they have is incredible. But specifically the women, the amount of women that are in this conversation here in the region. We were absolutely staggered to find that almost two-thirds of the Middle East climate founders are actually women-led or have women in their leading and founding teams. So for us, that’s also speaking to so many other values that we have here as a firm, and also in terms of helping to address so many other challenges in that kind of ESG story. So those are the two things. I don’t know if I’ve stolen yours, have I? [Laughs]

Yahya: [Laughs] Sure. And the beauty of that is that half of the founders are below 40 years old. So you can imagine the level of energy that is put in there. And I think, for me personally, it’s creating a sense of purpose that, I want to do something that I’m proud of, that my kids are proud of. And I’m believing in the work we’re doing. We’re shaping a new path for economic growth, whether here in the region or globally. So it gives a higher sense of purpose.

Lizzie: Well, Dr. Yahya Anouti and Patricia Keating, thank you both so much for joining us on Take on Tomorrow.

Patricia: Thank you.

Yahya: Thank you, Lizzie.

Lizzie: That’s it for this episode of Take on Tomorrow, recorded live at COP28 in Dubai. Join us next time. We’ll be looking at how the workforce will be transformed by generative AI. We’ll be talking to Jerry Kaplan, Silicon Valley veteran and author, who has seen his share of major technology advancements and disruptions and has some predictions about how this newest one might look.

Guest: This will be like domesticating animals was over the history of humanity. We’ve created something extremely powerful, and, yes, your horse can kick you and kill you, or you can ride it. And, all of a sudden, you don’t have to use your own feet if you need to go a long distance.

Lizzie: Take on Tomorrow is brought to you by PwC’s strategy and business. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.

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Matthew Wetmore

Matthew Wetmore

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