In 2024, the pace and magnitude of change became more extraordinary. The interplay of climate transition, geopolitical dynamics, and technological advancement continues to reshape the investment landscape at an unprecedented rate. Successfully navigating these transformative forces requires both adaptability and disciplined risk management. And amid the complexity, we find compelling evidence of human ingenuity and progress that creates meaningful investment opportunities. Let us examine how these transformational forces are reshaping our world, and what they mean for long-term investors.
The Climate Crisis: Getting Worse Before it Gets Better
2024 was a Record Smasher. 2023 had just shattered all global temperature records, with the hottest average temperatures in at least 125,000 years (but likely much longer), and the trend continued this year:
- 2024 is expected to be confirmed as the hottest year ever measured
- Global fossil fuels use and greenhouse gas emissions will reach an all-time high in 2024. Ridiculously, even coal use will reach an all-time high in 2024. Understand what this means: as a civilization we are now continuing to grow the emissions that are the direct cause of one of the greatest risks to our collective economic wellbeing. We are doing this in full awareness of the consequences, and so far, not seeming to care. In the words of the United Nations Secretary General, “we seem powerless to act together.”
- The EU’s climate program recorded that the year spanning June 2023 to May 2024 was, planetwide, 1.63 degrees C warmer than the preindustrial average (see image), meaning the ambitions of the Paris Accords are essentially moot.
While it is true Earth has been hotter before, it has likely never warmed this rapidly; the current rate of temperature change exceeds anything in the studied geological record, creating unprecedented levels of environmental flux and uncertainty, and yes, that means economic and societal risk as well.
The U.S. and Global Economies: as Volatile as the Climate
First, a note on economic predictions and uncertainty: The global economy is complex and difficult to predict accurately, so this discussion highlights potential trends and challenges for 2025. The global economy is an enormously complex system that consists of billions of interacting people, tens of millions of companies, and approximately 190 governments, which together represents a level of complexity that is unsolvable with current tools. One would do well to remember that the outcome of even a very small human complex system, like a sports contest, is notoriously hard to predict, by both fans and experts, and even a nonhuman complex system like the weather can only be reliably predicted for a few days ahead, and sometimes not too accurately even for tomorrow. To think that anyone can reliably predict a global economy for a full year ahead is delusional. Still, we can get a sense for trends and areas of momentum by reviewing what we do know:
- Global Inflation and Economic Disruptions: In 2024, global inflation decreased without crashing the economy, but significant disruptions are expected in 2025. Among the many possibilities, the ones we can most reliable foresee are the continuation of trade wars, potential austerity, massive demographic changes and an energy revolution.
- Trade and Economic Policies: The reelection of Donald Trump could lead to increased tariffs and a slowdown in international trade, and domestic U.S. inflation. The reelection of Donald Trump could supercharge the already existing trend of deglobalization, also known as fragmentation, which is characterized by tariffs, sanctions and industrial policy, all of which contributes to a slowdown in international trade. However, so far Trump has been quite sensitive to public opinion and keeping the stock market high; both will likely take a big hit if he introduces giant spending cuts and high tariffs, so we can’t really assume we know what will actually occur.
- Elon Musk’s role in government efficiency will be a wild card and could impact U.S. government spending among other things.
- Government Debt and Financial Repression: High government debt and interest rates may lead to continued austerity or financial repression in countries like Egypt, France, Italy, the UK, Canada, Japan, and Brazil, and may be implemented in larger economies including the U.S.
- Global Aging and Productivity: An aging global population and slowing productivity are expected to continue, with innovation potentially becoming more challenging as a result, although these effects are likely to be offset or partially offset by AI and cheap renewable energies. The trend of population decline has been understood for a long time, but in 2025 it will become especially relevant for Europe, Japan and China
- Demographic Changes: Europe’s population is predicted to increase in 2025, but challenges include an aging workforce and the need to support more elderly and children. Generally, the largest European economies are in an “ultra-low fertility club:” “The government projected in 2018 that overall social-security costs, including pension payments, will increase by nearly 60% between 2025 and 2040. Policymakers refer to this as the “2025 problem.””
- Japan’s Economic Challenges: Japan will face difficulties as many baby boomers turn 75, increasing healthcare demands.
- In 2025, China will start raising its retirement age, offsetting the decline of its working population, but this is a temporary solution to the declining population issue.
- The total fertility rate has fallen below the population replacement level of 2.1% per woman in the United States. The Census Bureau projects that birth rates will decline from 10.8 births per 1,000 people in 2023 (1.08%) to 8.5 per 1,000 in 2100 (0.85%). Subsequently, the U.S. population is projected to decline in the second half of the century. The U.S. population reduction will have significant economic and social implications, including:
- A decline in the worker-to-retiree ratio
- Unsustainable Social Security, Medicare, and Medicaid provisions
- Risks to economic and social stability
- Green Energy Revolution: The adoption of solar panels, batteries, and electric vehicles is expected to continue growing, driven by technological advancements and economic factors.
- Energy as a technology, and no longer a commodity: advancements in solar, battery storage, and artificial intelligence are transforming energy systems, shifting energy from being a finite resource to a rapidly evolving technology. We stand at a transformative moment in the energy sector. While energy has historically been a finite commodity subject to market manipulation and geopolitical forces, a fundamental shift is reshaping this centuries-old paradigm. Therefore, our strategic focus extends beyond the widely-discussed transition to zero-emissions systems. We recognize that energy is evolving from a commodity-based model to a technology-driven future. This represents a crucial distinction for investors: unlike traditional fossil fuels, renewable energy technologies demonstrate consistent improvement and cost reduction over time, similar to other technologies like semiconductors.
This transformation in energy generation creates compelling opportunities for long-term value creation and sustainable growth. From this vantage at the end of 2024, we can see a clear path to zero marginal cost energy, which in turn will confer competitive advantages on the economies and regions who make the most extensive use of it. - Solar Power and Economic Impact: Solar power is projected to dominate the global energy mix, with significant implications for global economic order and productivity. Solar panel adoption across the globe continued its exponential growth in 2024, mainly due to huge investments in China.
- China’s Role in Solar and Storage Industry: China dominates solar module production, influencing global solar capacity and economic dynamics.
- The cost of batteries continued falling in 2024, again, mostly thanks to large R&D investments in China, and there were seemingly weekly announcements about continued investment in better and better batteries. The average cost of a lithium-ion battery pack for EVs fell below $100 per kWh in 2024, a more than 90% decline from 2008, when the average cost was $1,355 per kWh. This trend shows no signs of slowing and will be crucial to sustain the solar revolution, and to sustain global electric vehicle adoption, which continued to increase despite a narrative shift to the contrary.
These trends will continue in 2025. Battery technology is rapidly getting better, and with large scale investments in 2024 and planned for 2025, it is almost inevitable that they will get better and cheaper in 2025, driving more adoption. Similar solar and EV trends will also continue due to simple economics: people buy what is cheapest and most convenient. Once a certain threshold is reached, when a new technology is cheaper than its established alternative, global adoption can and usually does take off. China has already reached this point for solar panels, batteries, and electric vehicles, and rapid adoption is driving continued investment in these technologies and the infrastructure needed to support them (like charging stations). Once batteries and EVs become most competitive in the rest of the world, history suggests they will take over more markets, as they are already doing inside China and elsewhere.
- Energy as a technology, and no longer a commodity: advancements in solar, battery storage, and artificial intelligence are transforming energy systems, shifting energy from being a finite resource to a rapidly evolving technology. We stand at a transformative moment in the energy sector. While energy has historically been a finite commodity subject to market manipulation and geopolitical forces, a fundamental shift is reshaping this centuries-old paradigm. Therefore, our strategic focus extends beyond the widely-discussed transition to zero-emissions systems. We recognize that energy is evolving from a commodity-based model to a technology-driven future. This represents a crucial distinction for investors: unlike traditional fossil fuels, renewable energy technologies demonstrate consistent improvement and cost reduction over time, similar to other technologies like semiconductors.
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- In the U.S. the momentum towards all-electric is clear, even though it’s the major market with the slowest rate of EV adoption so far. Beginning about the time of the start of the COVID-19 pandemic, electric vehicle sales in the U.S. have grown 474%, since Q3 2019, while gas-powered vehicle sales have declined 15% during the same period.
AI, Robotics, and Automation
The rise of AI and automation is revolutionizing industries by turbocharging productivity, directly empowering Green Alpha’s first pillar of the Next EconomyTM. When AI meets automation, it creates a powerful multiplier effect: robots execute physical tasks with precision while AI systems optimize processes in real-time. Leading companies have transformed their operations through this technological synergy, expanding market reach while reducing costs. Yet this shift brings important challenges – as routine jobs evolve or disappear, we must ensure automation’s benefits reach all levels of society.
Just as the automobile revolution transformed transportation beyond what horse-drawn carriage operators could fathom, AI and automation will reshape our economy in ways we can’t yet imagine. While some current jobs will evolve or fade, history shows that technological leaps create entirely new industries and opportunities. The printing press didn’t just replace scribes – it birthed publishing empires and sparked an information revolution. Rather than fear this transformation, we can embrace it as the next chapter in humanity’s story of progress and adaptation.
Robotics and AI will ultimately have the effect of making physical goods into zero marginal cost items, joining renewable energies and software. This synergy of zero marginal cost production factors will be overwhelmingly advantageous to any nation, company, or other organization that applies it early and aggressively.
About the existential risk (the so-called p(doom)) represented by very advanced AI, we should be realistic about AI’s ability ultimately to outshine us, but also about the fact that for now, it is our hands on the controls of our creation.
Human beings are the curators of Earth because (probably) uniquely among animals we have a high degree of neuroplasticity. We can iterate, we’re resourceful, we figure things out. In a time of increasingly complex AI, we should be asking ourselves, ‘how will a creature with more neuroplasticity still, with more awareness still, view humanity?’ What happens when AI reaches a level of sentience our brains don’t have access to? And what if that sentience gap between humans and the machine is as wide as the gap between humans and our dogs? Between humans and insects? When that day arrives, we’ll be glad we designed our creations to view us benevolently.
The Biotech Revolution
We have opted to use the word ‘revolution’ over ‘transition,’, because biotech has truly entered the phase where it can begin to rewrite a lot of the economic foundations of our society. The economic and individual benefits of biotech are becoming clear, and include, but will by no means be limited to:
- Healthcare outcome improvements and cost reductions through preventive medicine, targeted therapies, and automated diagnostics, as well as healthcare savings from personalized medicine and early disease intervention
- Agricultural productivity gains via engineered crops, precision farming, bio-synthetic fertilizers, and ultimately ending our dependence of petrochemical-based fertilizers, herbicides and pesticides
- Manufacturing efficiency through bio-based processes, reduced waste, and automated production
- Reduced dependence on petrochemical supply chains through bio-based replacements, improving energy security and price stability. Think of biofibers instead of petro-fibers like polyester.
- Lower environmental costs by replacing persistent microplastics with bioprotein fibers in textiles, packaging, and consumer goods
- New materials market growth – bio-based plastics, engineered proteins, bio-based chemicals
- Job creation in biotech R&D, manufacturing, and supporting industries
- Circular economy enablement through biodegradable products and waste conversion
- Export opportunities in engineered organisms, bio-based materials, and production technologies
Green Alpha Investments views this revolution as resting on four key realms of innovation that are severally and jointly advancing rapidly at present:
- Multi-omics integration, including DNA sequencing, gene editing (CRISPR), transcriptomics (RNA expression analysis), proteomics (protein structure/function), metabolomics (small molecule analysis), and microbiomics, or microbial community studies.
- AI/ML Applications: Protein structure prediction (AlphaFold), drug discovery and optimization, clinical trial design, disease diagnosis/prognosis, bioprocess optimization, and synthetic biology design. Deepmind’s AlphaFold 3 in particular represents a major step forward in science’s ability to understand and predict the complex interactions of biomolecules with huge implications for fields like drug discovery, disease understanding, and enzyme design.
- Key Technologies: next-gen sequencing, single-cell analysis, spatial biology, synthetic biology tools, lab automation/robotics, microfluidics, and bioreactors
- Data Infrastructure: cloud computing, bioinformatics pipelines, data standardization, knowledge databases, federated learning systems
These components interconnect, creating platforms for biological engineering, therapeutic development, and scientific discovery. Each has new and emerging leaders that present interesting investment opportunities. Co-discoverer of CRISPR gene editing, Jennifer Doudna, provided this useful summary at TED.
Conclusion
As we enter 2025, the climate crisis and rapid innovation present both unprecedented challenges and opportunities. For investors, this demands extraordinary market agility. While the climate crisis looms large, Green Alpha sees this moment not as cause for despair, but as a call to action. By backing the world’s most promising innovations as they scale and capture market share, we can help shape a future worth inhabiting.
Yet this transformation extends beyond technology alone. While technical innovation moves at lightning speed, human and institutional adaptation follows a more gradual, uneven path. The complex work of integrating these advances into society often proves more challenging than the innovations themselves. Progress comes in waves—periods of breakthrough followed by necessary intervals of adjustment and integration. This is the nature of transformative change. Our success in navigating this pivotal moment depends not just on the technologies we develop, but on our collective ability to harness them toward building a sustainable and prosperous future.
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