Thematic Commentary – 31 October

Environmental Impact

Many European nations still subsidise gas, coal, and oil heating but could these funds be allocated in a way that achieves the same positive outcomes whilst minimising environmental impact. According to a new report by the European Environmental Bureau, shifting just half of the funds currently allocated to fossil fuel heating subsidies in Europe to incentivise heat pumps could accelerate the transition to renewable home heating methods by 2040. The report found that heat pumps are more cost-effective than fossil fuel boilers in most EU countries but can have prohibitive upfront costs for many households. The analysis estimates that transitioning all European households to heat pumps would cost €21.3 billion over 15 years, falling to €14 billion with the introduction of a €100 per tonne carbon tax. Heat pumps have emerged as a key component of Europe’s climate policy, with high efficiency and widespread adoption in countries like Norway, Sweden, and Finland. However, some countries such as the UK have slowed down their phase-out of fossil fuel heating due to concerns about the cost of living.³

Global Sustainable Infrastructure

Infrastructure investment is now being disrupted by technological, environmental and social change.

Conventional infrastructure risk categorisation systems are increasingly becoming obsolete, in a world where climate events (e.g. floods, hurricanes) threaten even historically ‘safe’ assets. Sectors like oil and gas now face energy transition risk and fully autonomous electric freight trucks pose a significant threat to traditional railways. Today, infrastructure investors must rethink what constitutes ‘safe’. Nowhere is this more evident than in historically ‘risky’ renewable infrastructure assets. 2023 milestones mark this change. Brookfield’s investment in UK-based Banks Renewables, backed by incentives from the $USD 369 billion Inflation Reduction Act, is expected to triple wind gigawatt capacity in the UK by 3x within 5 years. Acciona and Orsted’s collaboration on floating wind platforms, aiming to reduce cost and environmental impact through incorporation of new biomaterials, could signify a breakthrough in wind platform commercialisation. Meanwhile, EDP Renováveis is doubling its solar capacity in Asia Pacific in 2 years, with plans to triple this by 2026. This focus on environmental infrastructure should be a signal not just of where investment opportunities are, but also areas to steer clear of in the path to a more sustainable future.^{4 5 6}

Cybersecurity and Data Privacy

The cybersecurity market, projected to reach over $USD 650 billion by 2030, is being propelled by AI’s adeptness in detecting and averting cyber threats. This revolution in cybersecurity is underscored by recent reports from industry leaders like Palo Alto Networks and Cloudflare in their latest earnings calls.

Palo Alto Networks has achieved a 97% decrease in false positives and a 60% enhancement in threat interception, crediting AI for these advances.

Their CEO stated, “In the last 5 years, our Total Addressable Market (TAM) in cybersecurity has grown by approximately 14%, surpassing the IT market’s growth. With AI now a core tool, we’re capitalising on this by intensifying our technology investments.” Cloudflare reported an increase in the use of their R2 product, particularly among AI startups, signifying their growing preference for Cloudflare’s cost-efficient GPU usage for model training. These insights underline the pivotal role AI is playing in the evolution of cybersecurity offerings. We foresee that such technological advancements will allow cybersecurity firms to lower costs, make their products more affordable for the mass market, and consequently expand their TAM even beyond current scope, as many cybersecurity solutions are presently out of reach for this wider audience.^{9 10}

Digital Payment Economy

Italian luxury sports car manufacturer Ferrari will now accept cryptocurrency payments for its vehicles in the United States and plans to expand the initiative to Europe. This decision was made in response to requests from customers, both traditional and crypto-savvy investors. The move is significant as most large corporations have been hesitant to embrace cryptocurrencies due to their volatility and regulatory concerns. Ferrari’s Chief Marketing and Commercial Officer, Enrico Galliera, emphasized that the company remains committed to carbon neutrality by 2030, addressing environmental concerns associated with cryptocurrencies. BitPay, a prominent cryptocurrency payment processor, will facilitate the transactions initially in bitcoin, ether and stablecoin USDC. The company has a strong order portfolio and intends to use cryptocurrency acceptance to expand its total addressable market.¹¹