Sadek Wahba, the founder and chairman of I Squared Capital, a global infrastructure management company that currently manages around $40 billion worth of investments in infrastructure projects in over 50 countries, said investing in infrastructure and climate-related technology is the future. The next few decades are critical for humanity to respond to climate change. They’re also going to see a massive trend of building and urbanization as millions of people move to cities.
Urbanization and Climate Challenges
Currently, 56% of the global population live in cities, according to the World Bank. That’s about 4.4 billion people. The population of city dwellers is expected to double by 2050, the World Bank says, at which point around 70% of people will live in cities, the World Bank says. The biggest growth in urbanization will happen in India, and more broadly speaking Asia, Wahba says. As people move, bigger and bigger cities need to be built to accommodate them. These cities require an enormous amount of infrastructure with a major impact on climate. Architectural think tank Architecture 2030 projects that 2.6 trillion square feet of new floor area will be added to buildings by 2060, the biggest wave of building growth in human history.
Decarbonization Challenges and Technological Innovation
As this massive growth happens, all kinds of new decarbonization challenges will arise. For example, the growth of electric vehicle sales has been increasing every year for the last decade, according to the IEA. EVs do not use gas, a fossil fuel product, which is a climate positive. However, the roads themselves coming from oil derivatives, which of course is polluting. The batteries for those electric vehicles are often made with lithium, which has to be mined, transported and processed. Each stage of that process poses an infrastructure climate problem. To decarbonize as the pace of urbanization accelerates will require that solutions are not only clean, but also cheaper. Developing countries with large portions of their populations facing food insecurity and hunger are not going to pay for more expensive climate-friendly solutions, Wahba says. That will require technological innovation.
Investing in Climate Mitigation Efforts
Global investment in energy transition technologies reached a record $1.3 trillion in 2022, but annual investments have to more than quadruple to more than $5 trillion if the world aims to stay on the pathway of minimizing global warming to 1.5 degrees Celsius, according to a March report from the International Renewable Energy Agency. Wahba says investors underestimate the size of the opportunity. “It’s not just producing wind and solar. It’s entire cities that will need to be developed and reformulated and thought again. And that can only happen with the use of technology.” Of course, some climate investments are risky, but there are safer investments that still have strong potential for investors. “The technology that allows you to charge, put electricity to your house and sell it on the grid, that technology exists,” Wahba says. “That technology can make 4x.”
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