Dirk Münch, a former investment banker and until recently CEO of Persistent Energy, has just joined South Pole as Director of Impact Funds & Ventures. We asked him about his motivation to join South Pole and where more action for climate investments is needed.
Dirk, tell us about yourself - what gets you up and excited in the morning?
To be honest, it's my love of sport that gets me out of bed. The time between 5 am and 7 am is the perfect time for training with the family still fast asleep and no other duties waiting, a time when I feel free to follow my personal passion for endurance sport. Once I have cycled my heart out I am ready for family and business… and this is often where the exciting part starts.
With your impressive background in finance and impact investing, what was your motivation to join South Pole?
I have worked for almost 20 years in finance as a financial analyst and trader on Wall Street and for a decade as a venture investor in emerging markets. To address climate change was always my personal mission and using finance for good my personal strategy. I joined South Pole with the idea to combine my background in finance with South Pole's expertise in climate policy and carbon markets for even more impact. Beyond that, I believe that the success of South Pole rests on a culture of true passion for the planet and ultimately the people on it. I am very excited to be a part of South Pole's journey.
Carbon markets have been very heterogeneous in the past, with prices fluctuating with political cycles. Why should investors and asset managers take a closer look at carbon now?
Carbon will become one of the largest commodities in the world. If we want to hold warming to 1.5°C we will have to capture and store nearly as many tonnes of carbon as we trade in crude oil today. Prices will fluctuate and policies will change, but climate change and the need for sustained climate action will persist. This fact alone is the fundamental reason why carbon markets and even prices will continue to grow, considering that carbon markets are one of the best tools we have.
Prices will fluctuate and policies will change, but climate change and the need for sustained climate action will persist. This fact alone is the fundamental reason why carbon markets and even prices will continue to grow, considering that carbon markets are one of the best tools we have.
Your core know-how is to build new companies that promote new technologies and solutions. Is this really what we need to get to net zero carbon? Is it not enough to just roll out existing technologies and solutions at scale?
I believe that we need both. Of course we need to scale existing solutions and technologies to reduce emissions. But we also need to capture and store carbon. This will require an entirely new portfolio of technologies. I firmly believe that given the possible returns - both in terms of impact and financial - that innovation is bound to happen. We can not and should not try to stop this entrepreneurial process. Just the opposite. I believe that if we want to maintain a healthy planet for following generations, we have to encourage innovation at every step of the way.
Touching on the last question, this is exactly why carbon markets work so well. As companies commit to offsetting their emissions, they are essentially creating an internal price on carbon. As that price gets higher, they will choose instead to invest in technologies and solutions that allow them to reduce more emissions within their own value chains to begin with. At the same time, and this is something that we can already see, the investments that companies make in carbon credits provide crucial financing for projects that wouldn't have been undertaken otherwise. As the price of carbon goes up, we're seeing more and more types of projects becoming viable, including those that develop and take advantage of really transformative technology.
There are many venture capital funds out there, with some focusing on climate and trying to develop these transformative technologies. Is there a need for more of the same venture capital?
No, we don't need another "conventional" venture capital fund that invests in 10 initiatives and hopes for one unicorn. We need smart capital that is invested with insight, expertise, and an entrepreneurial spirit to develop the companies and projects we need to reach net zero.
The reality is that there is perhaps even too much capital around for technology-driven start-ups. Outside of technology-driven start-ups there is a dramatic shortage of capital and smart investors. Rather than more venture capital we need more risk tolerant-capital that is invested with context-specific expertise. This type of investing can ultimately have more positive impact while also producing better returns than one in ten lucky unicorns.
To close, let me to ask what your vision is for this new chapter. What will we build together at South Pole over the next few years?
I hope that we will continue to grow a happy team where people are valued as individuals and can realize their full potential. We will of course also be a company that generates fair returns for its investors and makes the world a better place at the same time. In my group, we will develop a range of investment vehicles that are designed to enable profitable investments in projects and companies that will produce significant impact in terms of fighting climate change and achieving sustainable development.
Interested in learning more about the evolution of carbon markets or South Pole's plans for climate funds and ventures? Get in touch with us!