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Clean machines: Investing in the disruptive technologies to reach net zero
15 min zu lesen 10 Apr. 25
To limit the increase in global temperatures to well below 2°C above pre-industrial levels, disruption is needed on an industrial scale in a world where history, the wealth effect and population growth all point towards increased energy demand. With energy accounting for nearly three-quarters of global greenhouse gas emissions, it’s imperative that investors understand and mobilise capital towards the key technologies that will enable carbon intensive subsectors to decarbonise within the remaining window of opportunity. Romil Patel speaks to Mario Eisenegger, ESG Bond Manager, to identify what these technologies are – and the routes to facilitate industrial decarbonisation via the fixed income market.
This illustration shows Neste’s Rotterdam refinery located in The Netherlands, and is an adaptation of the original image provided courtesy of Neste.
Time is of the essence – 2014 to 2023 was estimated to be the warmest 10-year period on record at around 1.2°C above the average between 1850 and 19001. Last year was the hottest recorded and the first where surface temperatures exceeded 1.5°C above pre-industrial levels2, but last year was also a different age.
If 2024 was the year of democracy as billions of people around the world cast their ballot, then 2025 – and beyond – is where we see seismic shifts in policies from new administrations, as well as the implications that cascade onto the domestic as well as the global stage.
"As a sector, energy accounts for 73.2% of global greenhouse gas emissions."
Within hours of his inauguration, a promise to “drill, baby, drill” and a swipe of a Sharpie, US President Donald Trump signed a flurry of executive orders, from pulling the country out of the Paris Agreement – again – to declaring a “national energy emergency” to ramp up oil and gas output at a time when the US had “produced more crude oil than any nation at any time, for the past six years in a row3.” Meanwhile on the West Coast, more than 300 wildfires were devastating California, burning more than 57,500 acres and destroying more than 16,000 structures4 at the time of writing.
As a sector, energy accounts for 73.2% of global greenhouse gas (GHG) emissions. This comprises energy use in industry (24.2%) to produce anything from iron and steel to chemicals, transport (16.2%) and energy use in buildings (17.5%).
Despite its potentially larger production of fossil fuels, the US is still grappling with the risk of a power shortage across vast parts of the country amid a proliferation of data centres and a booming power-hungry artificial intelligence (AI) industry. From a cost perspective, renewables are at a point where they can compete with fossil fuels – and look set to continue their advance globally as the fastest growing energy sources, albeit with resistance.
“The fixed income market offers avenues for investing in decarbonisation through green project financing bonds, or bonds issued by companies that provide solutions with a clear mission to deliver enabling technologies as part of their core strategy."
For example, in February 2025 Swiss citizens overwhelmingly refused a proposal to bring the country's economy in line with the planetary boundaries, which are nine critical thresholds essential for maintaining Earth’s stability. Nearly 70% of voters rejected the environmental proposal.
“This demonstrates how difficult it is to fight climate change in real terms by forcing societies to reduce consumption and make other radical changes to their lives,” observes Mario Eisenegger, Manager of the Sustainable Solutions Bond Strategy, who was born and raised in Switzerland.
“As consumption is expected to grow as a result of population growth and the wealth effect, the key variable in decarbonising the global economy is GHG emission efficiency for which we need new technologies to drastically reduce GHG emissions per output while meeting demand.
“The fixed income market offers avenues for investing in decarbonisation through green project financing bonds, or bonds issued by companies that provide solutions with a clear mission to deliver enabling technologies as part of their core strategy. Providing funding to these energy projects and leading companies via a targeted investment style presents the most direct and effective way to support the transition to net zero in public debt markets.
“Given the existence of these enabling technologies, we are now in a crucial phase of catalysing and directing private capital towards investments that facilitate a low-carbon economy in order to limit the rise in global temperatures,” adds Eisenegger.
“As active bond investors, understanding industry dynamics with the help of our in-house research teams allows us to comprehend the key technologies that enable sectors to achieve net zero emissions and ensure that our clients’ assets are allocated effectively,” notes Eisenegger.
Indeed, as the International Energy Agency (IEA) states, “the key actions to bend the emissions curve sharply downwards by 2030 are well understood – we have the technologies and measures available today5.” So, what are they – and how can investors play a critical role in catalysing decarbonisation?
Cementing carbon capture
At present, there aren’t any widespread low-carbon substitutes for cement in construction6. The industry must, therefore, develop and deploy a range of new emissions reduction technologies to produce the same or greater volumes of cement while aiming for carbon neutrality by 2050.
In the short-term, efficiency measures, circularity measures, clinker substitution with supplementary cementitious materials (SCMs) and decarbonising the kiln heating process (energy-related cement emissions arise from fossil fuel used in kiln heating) may contribute to a 25% emissions reduction, according to the World Economic Forum’s7 (WEF) net zero industry tracker report. Therefore, carbon capture, utilisation and storage (CCUS) technologies could be instrumental to achieve net zero emissions in the cement sector by 2050.
Indeed, “scaling in-plant CCUS from less than 1% to 90% by the 2040s to capture the CO2 emitted during the clinker production process is critical to achieve near-zero-emissions”, the WEF report states.
"The net zero emissions scenario envisages an increase in the capacity of CCS (Carbon Capture and Storage) to 170 million tons in 2030."
According to the IEA, “the net zero emissions scenario envisages an increase in the capacity of CCS (carbon capture and storage) to 170 million tons in 20308.” Despite this, there is still a long way to go – CCUS continually makes up less than 0.5% of global investment in clean energy and efficient technologies, the IEA notes9.
The first industrial-scale CCUS projects are being launched across the cement industry. In 2024, Heidelberg Materials constructed the world’s first industrial-scale CCS facility – the Brevik cement plant in Norway, which is capable of capturing 400 kilotons of CO2 emissions per year.
“Heidelberg’s Brevik plant will deliver the world’s first carbon-captured net zero cement and concrete, with management expecting to be able to sell this product in the first half of this year,” says Eisenegger.
“We participated in the latest green bond deal to support the company’s build out of carbon capture technologies which directly mitigate climate change. While we expect some cyclical headwinds and negative price/cost spread to reduce future earnings, we expect the balance sheet to remain strong (net leverage 1.2x),” he adds. “Credit risk is currently very similar within the sector, while Heidelberg bonds have traded marginally wider. Therefore, we continue to see Heidelberg bonds compensating us relatively well for the underlying risk.”
Driving down transport emissions
Road transport is at the beginning of its most significant technological transformation in a century, with electrification, autonomous driving, clean hydrogen, and bioenergy at the forefront of the decarbonisation challenge.
In contrast to power generation, the transportation sector largely occupies the ‘high-cost’ area of the decarbonisation cost curve, responsible for approximately 20% global anthropogenic CO2 emissions, according to a Goldman Sachs report10.
The velocity of decarbonisation is not uniform across various forms of transportation ie electrification is far more prevalent across rail and light-duty vehicles due to the rising prominence of batteries. In contrast, aviation and shipping are trailing in terms of decarbonisation due to an underdevelopment or their early-stage nature as viable alternatives at present, such as sustainable aviation fuels (SAFs), clean hydrogen and ammonia. Wider implementation of these substitutes is only expected after 2030.
Aviation: A new runway
Aviation’s share in anthropogenic global warming weighs in at approximately 4% to date11. The International Air Transport Association (IATA) envisions SAF contributing up to 65% of industry decarbonisation by 205012.
The importance of this technology is being recognised – and global authorities have it firmly in their regulatory sights as a vital enabler in decarbonising the aviation industry. As of 1 January 2025, the European Union’s (EU) SAF initiative (ReFuelEU Aviation) requires 2% of all fuel uplifted at EU airports to be SAF. This will increase to 6% by 2030, 20% by 2035 and 70% by 205013.
According to energy pioneer Neste, the company’s production capability of approximately 1.5 million tons of SAF per annum could meet the entire mandate between now and 2029 – but “all available SAF volumes will be needed for the industry to reduce its emissions to reach the industry's net-zero target14.”
Meanwhile, the UK’s SAF Mandate also took effect in 2025 at 2% of total UK jet fuel demand, rising in line to 10% in 2030 and 22% in 2040, with the government underlining its vital role in decarbonising the aviation industry. “The SAF Mandate could deliver up to 6.3 megatons of carbon savings per year by 204015,” the UK government’s website states.
While the market is growing, challenges remain. A paper published last year analysing SAFs reported that “the feasibility of SAF production still depends on feedstock availability, cost-effectiveness, and route selection. Overall, technological advancements and gradual cost reductions, coupled with policy drivers, will be key factors in promoting the widespread application and commercialisation of SAF16.” While SAF plays a crucial role as a key enabling technology, it is likely that SAF on its own can only achieve limited fuel substitution and other alternatives are needed to decarbonise aviation to a larger extent, eg electrification of short haul flights.
“In the case of Neste, fixed income investors can use green bonds as a financing instrument to support the capacity expansion of SAF, while staying clear from their oil and gas activity,” says Eisenegger. “This is thanks to the predefined project eligibility criteria which states how the proceeds of green bonds can be deployed by the issuer.
“The Rotterdam refinery expansion is expected to expand renewable product capacity by 1.3 million tonnes per annum (mtpa) by 2026 while the Singapore refinery expansion will have an optionality to produce up to 1mtpa of SAF,” he adds. “As bond valuations started to price in risks of a credit rating downgrade due to cyclical margins pressure, we have taken the opportunity to build a position in Neste via green bonds to benefit from an increasingly attractive financial risk-reward.”
"The EU now requires 2% of all fuel uplifted at EU airports to be SAF. This will increase to 6% by 2030, 20% by 2035 and 70% by 2050."
Despite the promise of SAF, there is clearly still a long runway ahead to fall in line with the net zero emissions scenario, according to the IEA, which notes that “the use of SAF would need to increase more than twice as fast as in the NZE17 scenario, reaching about 4 exajoules (EJ) by 2030 and accounting for about 25% of the aviation fuel market18.”
Decarbonising buildings
Direct carbon emissions from buildings, both residential and commercial, account for a significant portion of total global CO2 emissions, primarily due to the use of fossil fuels for space and water heating.
Buildings operations account for “30% of global final energy consumption and 26% of global energy-related emissions (8% being direct emissions in buildings and 18% indirect emissions from the production of electricity and heat used in buildings)19”, according to the IEA.
Over the next three decades, the global building floor area is expected to skyrocket by 75% with emerging markets accounting for approximately 80% of the demand, the IEA stated. A transformative energy shift away from fossil fuels to cleaner alternatives is therefore essential for buildings, whose operations contribute heavily to global emissions.
Transferring energy
Heat pumps (HPs) are critical for achieving net zero targets. Unlike conventional heating systems that generate heat by burning fossil fuels or through electric resistance, a heat pump “extracts heat from a source, such as the surrounding air, geothermal energy stored in the ground, or nearby sources of water or waste heat from a factory. It then amplifies and transfers the heat to where it is needed. Because most of the heat is transferred rather than generated, heat pumps are far more efficient than conventional heating technologies such as boilers or electric heaters and can be cheaper to run20,” the IEA notes.
Additionally, this source is produced at a much higher rate of efficiency – to the tune of 300% to 400%21. This means that HPs – which run on electricity from the grid – produce three to four times as much energy in the form of heat in comparison to what they’re consuming in electricity.
So far, policy plans by governments around the world indicate an increased use in heat pumps, which will have a clear impact on the use of oil, gas and coal for heating. According to the IEA, HPs can potentially remove at least 500 million tons of global carbon dioxide emissions in 203022.
"2024 was the hottest year on record – and the first where Earth’s surface temperatures exceeded 1.5°C above pre-industrial levels."
“Johnson Controls International (JCI) offers one of the largest portfolios of heating, ventilation and air conditioning (HVAC) equipment and controls in the world, and we believe that the company has favourable structural end-market exposure and reliable financial policies that include both a firm investment grade commitment and a disciplined capital allocation policy amongst other attributes,” says Eisenegger.
“We own green bonds of JCI. The financing provided via these green bonds has helped avoid 1,200,000 metric tons of CO2e23 through eco-efficient and/or circular economy adapted projects, production technologies and processes such as the installation of heat pumps.”
Retro challenges
Invented in the 1850s and used in homes from the mid-20th century onwards, heat pumps are not a new invention, and their wider adoption still rests on overcoming hurdles. These range from high installation costs to potentially huge retrofits to larger buildings requiring better insulation and heating distribution.
Despite the benefits that HPs offer to help limit the rise in global temperatures, they also face a significant challenge in terms of electricity supply with concerns that they could face a surge in demand for electricity, particularly in colder climates.
“In the long-term, the decarbonisation of heat through electrification needs to be coupled with the successful decarbonisation of the electricity grid, which makes it more challenging,” a study by researchers in the Energy and Power Group at the University of Oxford’s Department of Engineering Science notes24. “Depending on the heating technologies deployed and the degree of consumer behavioural change, a significant increase in peak power demand might be observed.”
According to Claire Halloran, co-author of the report25, “if just 10% of British households switched to heat pumps it could increase peak electricity demand by 4% to 5%. This increase is nearly twice the power capacity of Hornsea 2, the largest offshore wind farm in Britain.”
Electrifying success
As with heat pumps, many enabling technologies are reliant on modernising and expanding the grid system, and when it comes to the success of net zero technologies, most roads lead back to electrification.
The widespread adoption of electrification is widely recognised as a crucial element in the energy transition. This is primarily due to the significant energy efficiency gains that can be achieved through electrification of economic activities. When generating electricity directly from renewable sources, efficiency can be two to three times higher compared to using fossil fuels. This is because the thermal conversion process of fossil fuels wastes the majority of the energy contained in hydrocarbons.
“Electrification is an inevitability,” says Eisenegger. “Electrification through reliable and carbon-neutral power infrastructure, with a smart power grid system serving as the backbone for its widespread adoption, is perhaps the crucially enabling role to limit the increase in global temperatures to well below 2°C above pre-industrial levels.”
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast and they should not be considered as a recommendation to purchase or sell any particular security.
1 World Meteorological Organization (WMO), ‘Climate change indicators reached record levels in 2023: WMO’, (WMO.int), March 2024.
2 Associated Press (AP), ‘Earth breaks yearly heat record and lurches past dangerous warming threshold’, (apnews.com), January 2025.
3 US Energy Information Administration (EIA), ‘United States produces more crude oil than any country, ever’, (eia.gov), March 2024.
4 California Department of Forestry and Fire Protection, ‘Current emergency incidents’, (fire.ca.gov), as of February 2025.
5 International Energy Agency (IEA), ‘The evolution of energy efficiency policy to support clean energy transitions’, (iea.org), December 2023.
6 Barclays, ‘Decarbonising cement series – part one’, [report], November 2024.
7 World Economic Forum (WEF), ‘Net-zero industry tracker 2023 edition’, (weforum.org), November 2023.
8 IEA, ‘Energy system: Tracking cement’, (IEA.org), July 2023.
9 IEA, ‘Energy technology perspectives 2020 – special report on carbon capture, utilisation and storage ’, (IEA.org), 2020.
10 Goldman Sachs, ‘Carbonomics: The GS net zero carbon scenarios – a reality check’, [report], October 2024.
11 IOP Publishing, M Klöwer, M R Allen, D S Lee, S R Proud, L Gallagher and A Skowron, ‘Quantifying aviation’s contribution to global warming’, (iopscience.iop.org), November 2021.
12 International Air Transport Association (IATA), ‘Net zero 2050: Sustainable aviation fuels’, (iata.org), December 2024.
13 US International Trade Administration, ‘European Union aerospace and defense sustainable aviation fuel regulation’, (trade.gov), August 2024.
14 Neste, ‘ReFuelEU: What is it and how will it impact the aviation industry?’, (neste.com), January 2025.
15 UK Government, ‘Sustainable aviation fuel (SAF) Mandate’, (gov.uk), December 2024.
16 Bofan Wang, Zhao Jia Ting, Ming Zhao, ‘Sustainable aviation fuels: Key opportunities and challenges in lowering carbon emissions for aviation industry,’ Carbon Capture Science & Technology, Volume 13, (sciencedirect.com) 2024.
17 Net Zero Emissions by 2050 scenario.
18 IEA, ‘Net zero roadmap: A global pathway to keep the 1.5°C goal in reach (revised version), November 2024 update’, (IEA.org), November 2024.
19 IEA, ‘Tracking buildings’, (IEA.org), July 2023.
20 IEA, ‘How a heat pump works’, (IEA.org), December 2022.
21 MIT Technology Review, ‘Everything you need to know about the wild world of heat pumps’, (technologyreview.com), February 2023.
22 IEA, ‘The future of heat pumps’, (IEA.org), December 2022.
23 Johnson Controls, ‘2021 Green bond report’, (johnsoncontrols.com), September 2021.
24 Jesus Lizana, Claire E. Halloran, Scot Wheeler, Nabil Amghar, Renaldi Renaldi, Markus Killendahl, Luis A. Perez-Maqueda, Malcolm McCulloch, Ricardo Chacartegui, ‘A national data-based energy modelling to identify optimal heat storage capacity to support heating electrification’, Energy, Volume 262, Part A, (sciencedirect.com), 2023.
25 Department of Engineering Science, University of Oxford, ‘How heat pumps can keep homes warm without frying the power grid’, (eng.ox.ac.uk), February 2023.