Generation Investment Management STR 2025

And ’tis a kind of good deed to say well: And yet words are no deeds.

Shakespeare, Henry VIII

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Dear Reader,

We are living through a period of retrenchment.

Business people we thought were sincerely committed to the sustainability transition are backing out of promises they made only a few years ago. Politicians are waffling. Countries that have written emissions cuts into law are starting to wonder if their targets can be met.

Worst of all, of course: the new presidential administration in Washington has engineered a complete about-face in the climate commitments of the United States. The American government is going after renewable energy, slashing tax breaks and threatening to block the basic permits needed to build new projects. It is even attempting to shut down projects whose construction is nearly complete. It is bullying other countries to abandon their climate goals. This situation is especially tragic given that America is responsible for more historical emissions than any other country, by far. Since World War II, the United States — with the world’s largest economy and advanced scientific and technical capabilities — has been essential to solving humanity’s largest problems. Yet on the climate crisis, the country that ought to be doing the most is now doing the least.

We are disappointed by these developments, but not especially surprised. The climate and energy transition is the hardest collective task humanity has ever tried to pull off. It was never going to happen without backlash and entrenched political opposition. The fossil fuel industry has many politicians willing to serve its interests. Ordinary citizens are concerned, understandably, about the potential costs of the transition, and the oil companies are doing their best to exacerbate those fears.

Bleak as the situation may seem right now, we refuse to surrender to the politics of fear and cynicism. Make no mistake: we will come out of this period having sustained damage to the cause of a cleaner future. But come out of it we will. The opponents of the energy transition can slow it down, but we do not believe they can stop it.

In this report, you will learn why we think so. The progress of solar energy is astonishing. The improvements in batteries are so dizzying that sweeping technological change is becoming possible. Electric cars are only the most visible result. Entire American and Australian states are getting significant amounts of power from batteries that stored sunshine earlier in the day. Just a decade ago, batteries simply did not exist on this scale.

In short, we are on the road to a better future. It is a bumpy, winding road, and lately we have discovered potholes we did not know were there — big ones. But in so many ways, we are still going in the right direction.

As we offer readers the ninth edition of our firm’s flagship publication, The Sustainability Trends Report, we want to point to one organisational change: we have combined the chapters on buildings and industry into a single chapter.

While we are firmly convinced that society is still moving in the right direction overall, we know that so much depends on how quickly we can get to that cleaner future. Please join us in hoping that this dark time will prove to be short-lived.

Al Gore, Chairman

David Blood, Senior Partner

01 Year in Focus

The new American president has already signed into law a bill that undoes much of the climate legacy of his predecessor, and he is pressuring other countries to abandon their own climate commitments. The American reversal raises a critical question for the rest of the world: does ambitious global climate action require the Americans, or can it survive without them? We may find out as soon as November, at the big global climate conference in Brazil.

02 Power

Solar power is fast becoming the breakout star of the energy transition, with power generation from solar panels growing 28 percent last year. Coupled with batteries, solar power is proving able to supply ever-growing slices of power demand, and is finally beginning to take off even in some of the poorest countries. However, electricity demand has suddenly started to rise at a brisk pace, so we are not yet driving fossil fuels out of the power grid at a global scale.

03 Transportation

Electric cars are now growing on a much larger base than in the past, and the rate of growth is slowing — but the transition continues. Cars with plugs are forecast to represent 25 percent of all cars sold in the world this year, with China in the lead at an electric market share closer to 60 percent. We are starting to see movement in heavy transportation, with sales of electric lorries doubling in a year from a small base.

04 Buildings & Industry

The promise that vast amounts of ‘green hydrogen’ would help clean up the world’s industry is evaporating in failed projects. The costs of producing hydrogen through clean methods remain stubbornly high and it is not clear how much they can be brought down. But interest is rising in one of hydrogen’s derivatives, ammonia, as a possible route to large-scale industrial cleanup. Progress in cleaning up the world’s buildings, and getting fossil fuels out of them, remains halting, but heat pumps running on clean electricity remain an important way forward.

05 People, Land & Food

Despite some progress in rolling back world hunger, the food system continues to show worrying signs of instability and stress. Wild price gyrations in some commodities may be signalling the growing effects of climate change. The food system is a primary cause of the global extinction crisis, so putting more land under plough to solve shortages is not an option — instead, we must find ways to produce food more efficiently while returning millions of hectares to wild nature.

06 Financing the Transition

Public finance is under severe strain as governments in the developed world cope with war, populist political revolts and other problems. Rich countries’ climate finance pledges often fall short, deepening mistrust with developing nations. However, reform of development banks, smarter risk-sharing tools and falling clean energy costs are helping unlock greater flows of private finance. Clean energy investment already outpaces fossil fuels two-to-one, and the momentum is clear, even if not yet fast enough.

07 Looking Ahead

The chance to restore the world’s momentum on climate change will come in November, when governments are due to make new national pledges under the Paris Agreement on Climate Change. Brazil is hosting the meetings, and its president is devoting himself to securing a meaningful outcome. This is the big test of whether the Paris Agreement can survive the decision by the United States to walk away.

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