Where Climate Diplomacy Keeps Failing, Technology Can Provide A Solution

In late November, overlooking the oil and gas fields in the Caspian Sea, COP29 delegates called time on their gathering for another year. Amid the theater of walkouts and last-minute deals, their task couldn’t be more pressing: The latest emissions gap report from the U.N. shows that at the global level, we are falling behind the commitments made in the Paris Agreement, and we are likely to fail to hit the 2030 target.

It’s high time we accepted the reality that climate diplomacy won’t succeed in getting us to net-zero. Instead, we need to focus on investing time, energy and resources into solutions that actually deliver a more sustainable economy.

Misguided politicians and climate fanatics can’t save our planet. On the contrary, they will set us back by discrediting a lot of the climate discussion. Forget the countless calls to adopt veganism or curb individual travel that pollute the climate narrative. However commendable they might sound, they won’t make a dent, nor are they realistic or practical.

It’s time to bring pragmatism to the table by unleashing technology where it matters, to enable a cleaner, more resilient and more productive economy.

This may be a bold claim in the wake of Northvolt’s failure, but the only way to move the needle going forward will be investing in innovation and science, and to be comfortable with failing forward. Human ingenuity holds the solution to every single one of our problems today, most of which are man-made.

From securing our energy supplies through renewable energy to decarbonizing our built environment, investing in tech is the only chance we have to mitigate the environmental issues that matter.

Rethinking real estate

No area needs attention more urgently than our built world. Real estate, as the world’s largest asset class, is responsible for almost 40% of global carbon emissions, and its emissions far exceed those of transport (including aviation). And the problem will only get worse, with population growth and urbanization expected to lead to $187 trillion of spending on the construction of new buildings from 2020-2050.

Put simply, we cannot transition — let alone thrive — as a society unless we invest in decarbonizing the built world, using tech that tackles both embodied carbon (during the building process) and operational carbon (when running a building).

Yet for all the talk about climate tech and impact, investors are still not seeing the opportunity that arises from this problem. Built world tech receives less than 5% of global venture dollars. That’s a comparable amount to clean mobility despite being responsible for multiples of the emissions.

Politicians who want to make a difference would do better to incentivize the world’s asset allocators to divert more funds into building the tech that can tackle climate change head on — and in particular prioritizing real estate and infrastructure, rather than quibbling over tokenistic sums of climate finance that might temporarily dupe public opinion but won’t achieve anything useful.

Financial incentives matter

In the famous words of Charlie Munger, “show me the incentive, and I’ll show you the outcome.”

For our economies to transition, we cannot bet on altruism. Instead, we must ensure there is a financial incentive to embrace change. And that is the beauty of built world climate solutions: they enable its stakeholders to become more profitable as they become more sustainable. Look no further for a tailwind and for a reason to do the right thing, even if it’s not for the right reason.

Our latest State of Built World Tech report shows that while investment is down from last year, the sector has outperformed fintech and the broader climate tech market. Some sectors even saw a strong uptick in investment over 12 months, such as grid tech (40%) and building operations robotics (almost 900%). However, sectors such as residential retrofits, which face inconsistent subsidies and regulations, saw falling funding (to no one’s surprise).

This is where policymakers should focus their attention. The Inflation Reduction Act and the European Green Deal have been helpful in providing incentives. We can’t let them wither in the face of political posturing. If anything, we need more ambitious initiatives.

Post-Northvolt, there will be negativity around the extent to which innovation can solve our problems. Particularly in Europe, a mindset change around ambition is needed. This is another reason to put our resources and efforts where it matters most, rather than waste time hoping for politicians or regulations to bring us forward.

In a world increasingly marked by geopolitical instability, polarization and rising social divides, it is easy to be consumed by the turbulence of the present. The threats of climate disaster, job loss to automation, war and societal fractures are real, and they fuel fear, unrest and a sense of helplessness. Yet, in this climate of uncertainty, we must believe that there is another path forward — one built on optimism, progress and the boundless possibilities of human ingenuity.

Let’s proactively build the future we want to live in.

Gregory Dewerpe is the founder and managing partner of Noa, Europe’s largest built world venture capital firm. He oversees the vision and strategy of the firm and manages partnerships with Noa’s portfolio companies and LPs. Dewerpe is a long-standing, prominent voice in tech and climate, particularly around decarbonization and the opportunity in the energy transition of the most polluting industry globally — real estate. Having worked and invested heavily in the real estate sector for more than a decade, he founded Noa (formerly known as A/O), on the back of a deep understanding of the industry’s shortcoming and the realization that the built world can be one of the most powerful vectors for change, ascertained from the specialist real estate investment and advisory firm he founded and developed, AMD Capital.

Illustration: Dom Guzman