The Impact

The end of oil is near.

To: The Impact Readers

Howdy 👋

How was your Memorial Day?

Great day to reflect and appreciate those that sacrificed their lives to give us the opportunity to be here today. I always appreciate the local parades and speeches.

This week in The Impact newsletter you all have come to love and enjoy we have some extremely fascinating articles ranging from the death of oil to uncovering a startup you most likely haven’t heard of – Umida AG, which is working on helping reduce the impacts of the drought California is facing.

Shoot me a note to let me know what you think!

– Swarnav S Pujari

In Your Inbox: The week that begins the Endgame for Oil; Umida AG and how they are reducing water loss using trenches; A company enabling sustainable fashion

📃 POLICY & FINANCE

A (key) week in the death of oil

By John Conor Ryan • is a physicist and business analyst, working on macro-economics of the end of fossil fuels.

The endgame for oil companies has become far more evident. (Image: Jonathan)
The endgame for oil companies has become far more evident. (Image: Jonathan)

Change happens gradually, and then suddenly. This week, the endgame for oil companies became a lot closer and a lot more evident, suddenly, discontinuously, a jump.

The world of energy is a vast part of the global economy: perhaps as much as $10,000 billion per year. That’s so much money that the giants that dominate it, particularly the oil behemoths, aren’t giving up easily. Their grasp on that money gusher just got rather less tight. In one week:

  • Two climate activists were voted on to Exxon’s board – a coup for a tiny investment advocacy firm.
  • 60% of shareholders voted to force Chevron to lower its emissions – in its processes and in the use of its products.
  • A Dutch court ruled Shell has to cut its products’ greenhouse gas emissions by 45% by 2030.

A momentous week, summarized

Much has been written on this already (see HERE for example), but let’s review and put into context to see why this is momentous.

  • Exxon-Mobil LINK and LINK came into the week as perhaps the oil giant with the most out-of-touch expectations – many years of INCREASED oil output. But that was sharply rebuked when a small activist fund, Engine No. 1 (see below) secured enough institutional support, particularly from BlackRock, to put at least two of its candidates on the giant’s board of directors. Shareholders also approved measures calling for annual analyses of climate impact.
  • Chevron LINK. Shareholders voted: 61% in favor of targets to reduce Scope 3 emissions (LINK HERE for definition – basically all downstream uncontrolled uses); 48% for a report on impacts of a 2050 net-zero scenario. There’s no way to look at these numbers and not see that shareholders understand what the executive leaders may not: oil is dying and Chevron doesn’t know what to do.
  • Shell: LINK and LINK The Anglo-Dutch oil giant received its order from a Dutch court (a panel of judges) in the outcome of a lawsuit filed by the Netherlands’ Friends of the Earth group; the group alleged that Shell violated human rights by undermining the Paris Accords. Shell, of course, is appealing and it’s hard not to think that the gain against Shell is the most fragile of the week’s trifecta. Money beats well-meaning judges.
  • Engine No. 1. Who? LINK and LINK from which: “an investment firm purpose-built to create long-term value by harnessing the power of capitalism. We believe a company’s performance is greatly enhanced by the investments it makes in workers, communities, and the environment. We believe that over time the interests of Main Street and Wall Street align, and we can engage as active owners to create value by focusing on this alignment.” The six-month-old firm doesn’t have a Wikipedia entry as of this writing.

The simple lesson from the week is: changing oil firms’ future by shareholder and investor demand seems to be a winning strategy. Expect more of these. A lot more.

Why the new beats the old, every time

The difference between newco and oldco valuations drives startups, equipped with promising new technologies and underpaid entrepreneurs, to rich valuations compared to incumbents. Computer companies. Hard disk drives. Software companies. Telecom. Netflix. Cars. (Tesla’s market capitalization is a singular, perhaps bizarre, example of this: the valuation of TSLA alone is similar to the combined valuation of all the world’s other car makers. LINK HERE)

Incumbents have only a brief, and early, window to make the transition to a new technology. After that, the narrative becomes one of decreasing asset values, lowering returns to investors, stagnating margins and revenues, declining belief in their ability to adapt, and a diminishing equity value and cash hoard with which to buy other firms. These feed a downward spiral that dooms slow-moving incumbents to economic extinction. Big investors will sell—and then even short—their positions to protect against deepening losses, making those losses more profound. Oil giants will, one by one, fall out of major stock indices (Fortune 100, Dow Jones index, FTSE100, etc.) and then index funds must shed their shares.

Losses beget losses.

That spiral is closer. That two of the world’s largest oil companies in one week received a significant push from institutional shareholders (and the firms that advise them) toward a future without their main product, oil, signals the beginning of the end of their business model—oil extraction—and that major investors will push to make that happen.

And, that will inevitably mean improving opportunities and valuations for new energy alternatives and their investors. Soon, and at scale. Established oil companies should seize the moment to take their diminished but not yet destroyed equity valuation to make at-scale investments in post-fossil-fuel solutions. They should, but—if history is any guide—most won’t.
They should heed the caution expressed in Ernest Hemingway’s “The Sun Also Rises”, whence originates the idea that opened this piece:

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”

Share on twitter
Share on linkedin
Share on facebook
Share on reddit

Sign up for The Impact and learn the perspectives behind the latest sustainability trends

🚀 STARTUPS & TECH

Getting California Out Of A Drought - By Using Trenches

By Jeff Macon • is the venture development manager for Fresno State's Water, Energy, and Technology (WET) Center.

Leveraging underground trenches to mitigate water loss due to evaporation. (Image: Lauren)
Leveraging underground trenches to mitigate water loss due to evaporation. (Image: Lauren)

Umida AG represents a system or a platform change for agricultural irrigation in California, similar to the switch from flood irrigation to drip irrigation that started decades ago.

Water for agriculture

Surface water evaporates and Umida AG’s underground trenches will try to mitigate evaporation. During the winter months, when there’s an abundance of water, the trenches will help recharge underground aquifers for future water use.

Carbon management

The underground trenches would allow roots to grow deeper into the ground—close to three feet—providing a larger profile in the soil to sequester carbon.

Umida AG founder Joseph Gallegos has a crazy idea to stick trenches in the soil of agricultural fields to help manage water and carbon in California. Through test trials at UC Riverside and at Fresno State’s Center for Irrigation Technology (CIT), he has teams burying horizontal trenches at up to three feet deep. Supposedly, this will help keep water where the roots are and will increase the amount of carbon sequestration that can happen in the deeper root zones that would be established.  

As California is in another damn drought and many of us are about to relocate to places blessed with more abundant water, Mr. Gallegos is working like a mad scientist to prove he can help. He believes strategically designed and placed trenches in the soil could eventually help get California farming to ‘net zero’ water farming where only natural rain, snowmelt, and pumped aquifers would be needed to irrigate the billions of dollars of annual farming output in the state.

As part of the solution, the Umida AG water trenches or pipes could be used to keep an appropriate amount of natural irrigation at root zones while filtering excess water down to natural aquifers where the water would be stored and later pumped to the surface for use.

Another potential benefit of these underground trenches would be allowing permanent crops such as almond and pistachio trees to get an optimal amount of ‘chill hours’ where the temperature of the tree is cool enough so it can rest. Just as we need sleep to refresh, permanent crops need chill hours. The underground trenches would keep the soil cooler with increased moisture and thereby increase the number of chill hours for the trees, an issue farmers are now having to contend with due to increased temperatures throughout the year.

Umida AG’s business development efforts may well be bolstered by California regulations relating to water management called the Sustainable Groundwater Management Act or SGMA (pronounced as ‘sigma’).

If Umida AG’s trials at California universities go well, environmental, social, and governance (ESG) investors who focus on agriculture may become interested as would those of us in California who are looking for water.

Share on twitter
Share on linkedin
Share on facebook
Share on reddit

🚀 STARTUPS & TECH

Mending the Fashion Supply Chain

By Daniel Kriozere • is a Business Analyst at Lawrence Livermore National Laboratory and aspiring investor & advisor to clean-tech startups.

Making it easy to discover and buy ethically and sustainably made clothing. (Image: Unsplash)
Making it easy to discover and buy ethically and sustainably made clothing. (Image: Unsplash)

The fashion industry is often cited as the second largest polluting of our planet today, and it’s often not just bad for the environment, but also for the garment workers who most often live in communities disproportionately affected by climate change. Yet consumers often don’t know where to begin shopping for more sustainable options or how to continue shopping that way because it’s so time consuming and greenwashing abounds. Because of this, the brands who are doing great work to mitigate impact on our environment struggle to grow. This week, Erin Houston, the CEO of wearwell, addresses how wearwell is addressing this issue.

What is the mission of wearwell? Can you describe what your company does, the impact, and how it differs from other competitors in the space?

Wearwell is an online membership service to shop for sustainable clothing. We make it easy to discover and buy clothing that pays garment workers fairly and uses environmentally sustainable materials. Through our service, wearwell members receive a monthly selection of ethically and sustainably made clothing curated just for them, delivered to them digitally through their inbox. We ship them only what they’ve chosen to purchase and they shop with us all over again next month.

We help brands that meet our specific criteria (for wages and environmental impact) to grow through direct revenue and introduction to more customers in their target market.

Beyond being the only company that’s focused on curating clothing for the conscious consumer, wearwell’s business model has a 75% less carbon footprint than subscription box services. Additionally, we can communicate clearly about the impact of each item and have built trust with our customers through our brand vetting process.

What does the ecosystem currently look like?

The ecosystem lacks a distribution channel for sustainable brands to reach new customers and grow. Most emerging brands rely on DTC channels for about 20% of their revenue and the rest through wholesaling to boutiques. Customers are seeking a way to discover emerging brands in one place, tailoring just for them. By combining curation with discoverability of ethical and sustainable brands, we’re filling an open space in the market that will further unlock growth for our brand partners.

What are the current trends in the sector? What does the future look like?

Since mid-2020, consumers are paying attention more than ever to how they choose to spend their money. Consumers are more mindful of social justice issues and how we need to care for the environment. As such, they are buying less overall, but spending more on individual items, in addition to asking questions about fair wages and materials. Getting the fashion industry to a sustainable place is going to take many, many solutions, including consumers buying more secondhand, circular business models, textile recycling technologies, and more. We’re one piece of the puzzle when someone wants to add something new to their wardrobe and we’re excited to see the technologies that grow up alongside us as more begin to invest in solutions.

Outlook

GenZ represents an enormous wave of consumers that view the role of business as involving community and stakeholders, especially when it comes to the environment. This includes circular business models – consumers will be mindful about what they are purchasing, from a production and post-consumption perspective, and producers will become more intentional and more accountable for the end of life of their products. Companies like wearwell will help bridge this gap for mindful consumers.

Share on twitter
Share on linkedin
Share on facebook
Share on reddit

📻 PODCAST UPDATES

Could This Be the Solution to Reaching 100% Renewable Energy? w/ LevelTen Energy

“We’re not building fast enough”

When it comes to hitting our ambitious renewable energy goals, be it by 2030 or 2050, the rate at which we are building isn’t fast enough. A lot of the reason for that is because of the number of parties involved in building and energizing a single solar or wind project. Ranging from securing the land, to filling for interconnection or even partnering with a bank or tax equity lender to help finance the project. This process has traditionally been slow mainly because it takes time to put together a deck on the project and circulate it manually to your network to find a buyer who can continue the next phase of development.

A renewable energy asset can change ownership 3-4 times.

Check out the full interview on YouTube and let us know what you think!

Subscribe || Advertise || Feedback || Privacy

Editors: Swarnav S Pujari, Daniel Kriozere Writers: Matthew Morris

If you aren’t absolutely thrilled with The Impact, reply and let us know why. Or you can unsubscribe from all updates by clicking 
here.

Copyright ©  The Impact 2021. All Rights Reserved || 19 Morris Ave, Bldg 128, Brooklyn NY 11205

Join Our Newsletter!

Receive analysis on emerging technologies, research and news in the clean-tech space.

If you don't love it, it's easy to unsubscribe!
The Impact Newsletter

Join Our Newsletter

Read by experts & Written by experts in the clean tech industry. Weekly analysis in a simple, but witty way. 

If you don't love it, it's easy to unsubscribe!