Smart money flows into clean energy

Goldman Sachs surveyed the ultra-wealthy on how they invest their money. The result was that the most popular topic among wealthy family offices at present is “clean energy”. More than 60% of these firms plan to allocate capital to this area next year.

According to the study, the ultra-wealthy also see information technology and healthcare as long-term growth themes. Given the developments expected, these sectors have the potential to weather economic cycles and increase value over the long term.

To serve these growth markets, companies need the right commodities: the US mining company KoBold Metals has secured $200 million for a project aimed at using AI to find critical battery commodities for electric vehicles, such as cobalt and lithium. One of the investors is Bill Gates’ Breakthrough Energy Ventures, a venture capital firm focused on climate-friendly technologies. The Norwegian energy company Equinor and the Japanese automaker Mitsubishi are also involved. Using AI to search for commodities is nothing new. China is also using artificial intelligence to create satellite images that can reveal potential deposits of rare earths.

To not only extract commodities but also process them, refineries are required. However, there are still far too few of them in Europe and the United States. Elon Musk is addressing this by building his own lithium refinery in Texas. To convert lithium ore into lithium dioxide suitable for use in batteries, Tesla is investing $375 million. The refinery is set to begin operations next year, with full production capacity to be reached by 2025.

Where money flows, demand follows. There is still significant catching up to do in the extraction—and especially the processing—of critical commodities such as rare earths. The resulting scarcity is likely to drive prices higher for a long time to come.