A cornerstone of the ARIA GLobal Impact Income Fund’s investment process is to identify themes that have significant ‘environmental impact’ by their potential to remove CO2 from the atmosphere. We continually search for new ideas and breakthroughs that will do just that, but the below identifies 10 themes which are particularly exciting and feature in the portfolio.
The process of identifying such oportunites is to consider the Technological Readiness of certain themes, and then their ‘Carbon Offset Curves’. These curves consider the total potential tonnes that a given technology can remove from the environment, but critically at what expense. (The cost of the tonne removed below is referred to as the CO2 Abatement Cost – all measured per tonne.)
TECHNOLOGICAL READINESS LEVELS
The Fund’ portfolio also generates attractive income streams. In doing so, many of the companies are likely to be more mature – in that respect, even though the scoring below ranges from 0 – 9, most investee companies by definition sit between the 7-9 level when considered by their TRL metric.
TECHNOLOGY READINESS LEVELS (TRLS)
Within the investment process, each theme in is own right is considered from the perspective of ‘how ready’ it is to make a material impact in the transition to net zero. The portfolio is heavily weighted towards those more mature, commercialised technologies that’s to say TRL’s 8 and 9.
| TRL | Stage | Sub-Stage | Produced | Key Tests |
| 0 | Concept | Idea | Nothing | Very little work has taken place yet |
| 1 | Concept | Research | Nothing | “Basic scientific principles are tested Research begins into the opportunity” |
| 2 | Concept | Formulation | Nothing | “A concept is formulated Practical applications are suggested” |
| 3 | Design | Design | A lab | “Analytical studies have been conducted Design work commences for components” |
| 4 | Design | Components | Components | “Components have been designed Lab-scale components have been tested Lab-scale components can integrate” |
| 5 | Development | Prototype | Prototype | “A lab-scale prototype is being built. Components are tested Testing is under simulated conditions” |
| 6 | Development | Pilot | Advanced Prototype | “A more advanced prototype is built It is tested under operating conditions” |
| 7 | Development | Validation | Demonstration Plant | “An advanced prototype is built. It is tested under operating conditions It is stress-tested to improve robustness” |
| 8 | Production | Commercialisation | Final product | “Extensive testing and demonstration Technology is proven A final product has been designed” |
| 9 | Production | Mature | Orders | The technology is in operation |
Source: Academic Studies, TSE, Rob West
UNDERSTANDING ‘CARBON ECONOMICS’ – CO2 OFFSET COST CURVE
Whilst a technology may already be commercialised, we need to determine at how economically it can mitigate carbon in the environment. In that respect we then consider the total potential Co2 that a given theme may remove from the environment, but critically cross referenced against what cost. For example, batteries have the ability to make a major contribution to the energy transition, the cost per ton of carbon removed is very expensive, just as hydrogen powered projects are.
We’re constantly looking for new themes which have the potential to feature in the Fund – the following table shows just how we seek to target very surgical exposures that mean our investment makes a genuine contribution towards achieving the world’s net zero aims. Investing in lesser carbon intensive companies is not enough we seek out companies that are genuinely ‘moving the dial’.
| Theme | Detail | Process | Theme | Technological Readiness | Benefitting | Downside for? |
| Mass Timber | Cross laminated timber allows 15-85% lower CO2 in construction at zero incremental cost. | Demand | Decarbonisation | 9 | Forestry industry, CLT producers | Conventional concrete, cement and steel |
| Biochar | Miracle material sequesters 3kg of CO2 per kg of material, while paying for itself in lower water intensity and 10% higher crop yields in ag. | Demand | Decarbonisation | 9 | Farming industry, CO2 credit availability | Biofuels and biomass power that compete for same biomass |
| Silicon Carbide | Semi-conductor material, which improves the efficiency of inverters, power electornics and electric vehicles by 1-10% | Demand | Decarbonisation | 9 | Power electronic capital goods, semi-conductors | Conventional energy industry? |
| Clean Methanol | Blue methanol and bio-methanol are logistically simple, 65-75% lower CO2 than oil products and make 10% IRRs at $3/gallon | Oil | Decarbonisation | 8 | Gas industry, bio-methanol industry, decarbonization | Green hydrogen, higher-cost transition technologies |
| Plastic Pyrolysis | Thermal cracking to turn waste plastics back into oil, feedstock and waxes. Strong economics and growth outlook. | Petrochemicals | Plastics | 7 | Investors, consumers, pyrolysers, ESG | Petrochemical incumbents, oil demand |
| Small-Scale LNG (Galileo) | Novel, modular small-scale LNG technology, capable of $10/mcf LNG down to 4kTpa plant sizes | Gas | LNG | 8 | Investors, environment, shipping industry | Fuel oil, simple refiners, incumbent LNG Services |
| Ocean carbon | Seaweed cultivation can sequester 3GTpa at $20-140/ton CO2 prices, in the ocean a 45x larger carbon sink than the atmosphere | Renewables | Decarbonisation | 8 | Marine industries generating own carbon offsets | Higher cost transition technologies, hydrogen |
| Eco-Labelling | Two-thirds confess no visibility on the CO2-intensity of their purchasing decisions; offering it can stoke 8% efficiency gains | Demand | Efficiency | 8 | Lower-carbon producers | Higher-carbon producers, energy demand, hydrogen |
| Bio-plastics | Around 1.8MTpa of bio-plastics are produced today, across 17 categories. Bio-degradable and bio-based are 2x more expensive. | Petrochemicals | Biofuels | 7 | Some bioplastics, chemicals Majors | Minimal impact on conventional industry |
| Hydrogen Cars | We estimate c90c/mile costs for hydrogen cars (c85% more than US, 45% more than Europe), and sensitivity to impurities | Gas | Hydrogen | 8 | Gas industry, fossil-fuel decarbonisation | Hydrogen cars |
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