Why clean tech companies are critical for energy security
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Sarah Kapnick: AI is driving demand for energy, so new energy on the grid for AI. And part of this is an expectation that AI will provide us with the future of innovation and the future of the economy. And so energy security meeting that growing demand is economic security going forward. And so it requires thinking through how you are going to actually achieve that in the short term and long term.
Chuka Umunna: Hello, and welcome to J.P. Morgan's Making Sense. I'm Chuka Umunna, Global Head of Corporate Governance and Sustainable Solutions here in London, and it's a real pleasure to be your host today. Wow! We are living through what could be considered one of the most fascinating and frankly worrying though consequential periods in history. We're going to focus today in particular on the global energy landscape, the energy transition, the geopolitics shaping it, capital flows and technologies driving it. All of these are converging in ways that demand careful analysis and clear-eyed thinking. To help pick up these themes, unpack them, I'm joined by two wonderful colleagues who bring genuinely distinctive perspectives to this conversation. First, Dr. Sarah Kapnick. Sarah is our Global Head of Climate Advisory, and before joining us, she served as Chief Scientist at the National Oceanic and Atmospheric Administration, commonly known as NOAA, in the U.S., where she advised on climate science, weather forecasting, and environmental policy at the highest levels. She brings a deep scientific lens to these questions we'll be exploring today. Sarah, great to have you with us.
Sarah Kapnick: Thank you so much for having me here.
Chuka Umunna: And alongside Sarah, I'd like to introduce James Janoskey, JJ to us. He is our Global Co-Head of JPMorgan's Natural Resources Investment Banking Group and leads much of our investment banking work across the clean technology and energy transition space. He has unprecedented access to the companies, investors, and institutions at the forefront of building the energy system of the future. And James, I mean, look, I suppose you've had a front-row view of where capital is flowing and subsequently where the market is heading. It's great to have you here with us, too.
James Janoskey: Good to see you, Chuka. Glad to do this again this year, and Sarah, with you, too.
Chuka Umunna: Well, look, let's go big picture first and look at what's happening with the energy transition generally. But also, I mean, you've got to look at it in the context of geopolitics. But perhaps if we just focus on, I mean, there's a lot to cover. So let's just start off perhaps by focusing on the progress, the trajectory. And JJ, if I just perhaps come to you, what is your analysis of how this energy transition is moving in terms of the scale, the speed? How do you think the narrative has moved or changed over the last 12 months?
James Janoskey: Probably we look back more than 12 months just to put this in context. So if we go back five, six years, when COVID started, energy transition, ESG, net zero by 2050. And everyone was talking about 2030. Since that time, we've had COVID. We had the ongoing Ukraine conflict, which then changed things about energy security became more important. We had Liberation Day, which changed global trade. And now we have the Middle East conflict. One thing that's come out of that, though, is that energy is now about energy security, energy affordability, energy resiliency, with megatrends going on where the world needs more energy because of what's happening between electrification, AI, data centers. The important point with that as a backdrop, the energy transition is still happening. And it's accelerated, in fact, over the last several years. In 2025, $2.9 trillion was invested in global transition, low carbon, it's a record. So we see the trend every year, it's year over year, it's going. But it's important to think about this now as a very pragmatic debate from companies, investors, and even politicians about where does capital go? How do we do it in the right way? Where is there an economic reason? Or if the governments need to put capital and policies in place to jumpstart things that's happening. It feels more balanced now, but with momentum, we have a lot more to do. We should be investing between five and $7 trillion a year if we think about net zero for 2050. But at least things are moving in the right direction. So optimistic that this continues.
Chuka Umunna: I mean, you say actually, I mean, I think the debate has become more sophisticated, more healthy, and less polarized, if you like, because it's become more holistic. So your energy security is the other side of the coin to sustainability, but then also opens up the various other topics too. Whereas two years ago, it was kind of like, are you denying that this is an issue that needs to be dealt with? Or are you fundamentalist about it? But actually, it's in a better place now.
James Janoskey: It's been able for companies and for investors to have a bit more line of sight and clarity about what works, what doesn't work? Where should we be investing? Where do corporates have confidence? Where do boards have confidence? And there's some winners and there's some losers right now doesn't mean that's how it stays. But there's a bit of filtering out. But the key topics that come out of this because of that is just a more pragmatic, as you say, Chuka, but also just more focused approach about putting capital to work. And investors are still there to support the right stories that have the right type of return profile.
Sarah Kapnick: And I'll add to that, that a few years ago, people were making their goals of where they wanted to be. And they were putting those out without necessarily thinking through the technologies and the costs and all the ways that they would get there. And so I'm seeing a reset where companies and executives are really thinking through what can I do? What has the return on investment today? What has the return on investment over a five-year time horizon? And then making those plans for that spend over time to get to where they want to be. And so they're making these multi-year plans that are much more, as you said, pragmatic, but they actually have the roadmap to get there now.
Chuka Umunna: And what about, I mean, Sarah just coming to you from a government perspective, you talked about companies there, but thinking about how governments are looking at the energy security issue and how you cannot get away from the geopolitics, particularly when we look at, for example, the ongoing situation in the Middle East, the Iran conflict. If you were back at the White House, I mean, in many respects, it seems to me that in your previous role, that has become a role that is closer to the center of power, closer to the decision-making about geopolitics, none more so given recent events. What would you be saying to the President now about the intersection of these two issues, energy security and geopolitics?
Sarah Kapnick: What I would be saying in the U.S. or even actually for any government in Europe right now, I would be saying to have plans for how you are going to produce the power that you need to meet the challenges of today. So as we touched on earlier, AI is driving demand for energy, so new energy on the grid for AI. And part of this is an expectation that AI will provide us with the future of innovation and the future of the economy. And so energy security meeting that growing demand is economic security going forward. And so it requires thinking through how you are going to actually achieve that in the short term and long term. And then additionally, there are growing physical risks around the grid. There's a need to be thinking about extreme weather and climate change, which we see here in Europe in the planning that is happening, particularly in the Mediterranean region around wildfires. In Northern Europe, concerns about extreme flooding that we've seen in recent years. And so it's planning for those physical risks. And then because of conflict far away from Europe, it's also considering cybersecurity risks, because that is how you end up bringing conflict back onto shores. And so thinking through those physical risks, thinking through how to make that grid secure, how to be able to build it out is of the utmost importance right now and going forward to ensure economic security long term.
Chuka Umunna: And let's perhaps just swing in and focus on some of the key sectors and technologies here. And JJ, if I could just turn to you on nuclear, because of course, I mean, this has been the debate here in Europe, particularly about nuclear has swung from one extreme of let's just take this out of the system altogether to another extreme, which is we can't bring this back on stream fast enough. Is that a picture that you recognize? And how are clients approaching nuclear both from a corporate and investor standpoint?
James Janoskey: It's very fair. It was not in my backyard. Let's shut them down. Going back to the green agenda to the point now, as you say, with energy security, they need to be part of the mix. I would say generally nuclear is having a renaissance in the Western world. It was already present. China was already pushing forward on nuclear. But the West is definitely catching up. I would argue the U.S. with the current administration has made nuclear a big focus of energy security and advancing nuclear industry broadly in the U.S. That's all forms of nuclear. And as Sarah said, particularly now thinking about how you build a supply chain so you can be more self-sufficient. Europe, it has momentum and it has green shoots. It's important for the audience and just thinking about nuclear, there's three types of nuclear broadly. There's traditional nuclear, which are the big nuclear plants you've seen. SMRs, which are not a science project, but they're a scaling up an economic point because there is technology that exists. There are some SMRs being built, but how do you do it economically? And then more of a science project is fusion. Then what happens around fusion? And there's capital going to all three of those. We've seen larger dollar amounts go into the sector in North America. We're starting to see green shoots here. And we've also seen, importantly, France has made comments, Sweden's made comments, Germany, Slovakia, Romania, the U.K. government. So there are government support for it to revisit it and see if they can help accelerate it. So it'll definitely be part of the energy mix going forward. The question is how big and scalable will be in Europe still to be seen.
Chuka Umunna: And then, of course, the timing, because Europe needs alternative sources now.
James Janoskey: This is 10 years away for most of these to get scaled up and get built.
Sarah Kapnick: Yeah. And I'm excited about all the technologies around the SMR technologies, but also the micro-reactors that get smaller. There's more of a focus here in Europe than in other parts of the world around building those out for being able to create distributed grids, but also potentially for transportation, really ocean faring transportation, but also potentially space, that it's much more advanced here in terms of the technologies that are coming out. And so we'll see how those scale and then how they might support the future of ocean transportation, but also aerospace goals of Europe.
Chuka Umunna: And what about, I mean, just in terms of some of those other clean technologies that are emerging as winners and commercial scalable, what are the ones that you're most excited by, Sarah?
Sarah Kapnick: I'm really focused on grid resilience right now. As I was mentioning earlier, because of AI demand, because of physical risk, but also because of general modernization of the grid, much of the grid in Europe has been built decades ago. And so even absent any changes in needs of demand, there was a need for investment into the grid to up the technology, both for the hardware as well as for the software. And so globally, we see that there's a need of roughly 5.8 trillion over the next decade into grid resilience alone. And so I'm seeing a ton of these companies on the hardware side, but also on the software side, to make efficient use of the grid, of energy transfers, of efficiency within AI centers. There are tons of options in that space, and they're from the startups all the way to established companies. I'm also seeing a lot of interest in the new technologies for long duration energy storage, particularly new types of energy storage that are not lithium iron batteries. And we're seeing them in terms of metal batteries, where you're actually using different types of metals that actually can store, and they can store for much longer time periods, for more than a day, up to about four days. And I think that those technologies, as they scale, you can then start replacing gas plants with long duration storage capabilities to be able to build out the grid. And so those will be very much game changing in terms of how one manages the grid. And then another one that I'm thinking about right now, because of some of the disruptions that we're seeing in the Straits of Hormuz, as well as in terms of supply chains and development of fertilizer, is new technologies, thinking about agriculture, soil health, and efficient development and applications of fertilizer. Food security is an issue that is going to be growing in the coming years in terms of productivity of agriculture. We're already seeing in Europe, due to soil health, it's costing about 50 billion euros a year in terms of agricultural productivity. There's recent laws in December that have been passed to be able to monitor soil health across Europe better to ensure that they are improved and that productivity is increased. And so there's several technologies in terms of how one actually achieves that for broad application across Europe. And I think the spike and the unavailability of certain fertilizer products that we're seeing as a result of the conflict are going to make that thrust into the limelight again of food security and all of the inputs required for agriculture are incredibly important.
Chuka Umunna: And what about the capital markets response to all of this, J.J.? I mean, if we were sitting here a year ago and you looked at green economy stocks in the public markets, you would have kind of been hanging your head in bewilderment of what was going on. Whereas right now, if you look at the eco index of green economy stocks, you know, that index is outperforming the S&P 500, the Nasdaq handsomely. So it seems that there's certainly a different sentiment. And that's even post the advent of the recent events in the Middle East. But what is your sense of what's going on?
James Janoskey: We see it, because there's a more pragmatic and there's been a learning curve, and investors are more clear in their own mind about where they want to put capital today. So certain sectors, certain companies, certain technologies are able to access capital, and you see that those that are working are able to generate acceptable returns. And as you said about just the public stock market, but we see the private capital being there, infrastructure funds, private capital is definitely looking. So we're seeing more and more investors say, okay, I have capital raised. I want to put it to work in the transition. It's not as simple as just green only. It's how do I help transition, but I want to look at things that are a little bit more de-risked or more advanced. And so that's why there's certain technologies that are going to go faster. There are some that still need some scaling up capital that will come along later, and it won't be linear, but overall we're seeing investors back. And if we think about to the conference we're hosting is, you know, we have almost 30 companies private in Europe that are leading in the sector. Given everything that's going on, investors still want to talk to these companies and get to know them. So I think that's quite encouraging.
Sarah Kapnick: Based on what you said, I also want to add on, if oil prices remain elevated for a long period of time, it is going to put greater pressure on the development of SAF, on sustainable aviation fuel. And we're already starting to see discussion of that in the US and in parts of Asia, as people are seeing these elevated prices and thinking through how are we going to get there, because a lot of them become much more economical when oil is over $100 a barrel. Similarly, with the technologies that can succeed in these times, one of the interesting trends that I forgot to mention earlier, too, is the new technologies that create lower carbon steel, also because of CBAM, but also because of reindustrialization goals in Europe and North America. Some of these technologies for steel production, I think, have the ability to scale because they will be lower carbon, but also they may have flexibility of different types of feed stocks, depending on the technology. And so I'm watching all of those as well, because I think the right technologies will be able to scale well if they can go through the gauntlet, the different regulations on emissions and pollution and carbon, and that will allow to get to those goals of reindustrialization as well, to build the things that need to be built.
Chuka Umunna: You mentioned CBAM, the Climate Border Adjustment Mechanism, that obviously is rolling out across the EU at the moment. Do you think we're likely to see a US equivalent, albeit maybe with a different name?
Sarah Kapnick: There actually has been a Republican-led bill to enable bringing in all the data to quantify emissions in the United States. It actually was also snuck into the DOE appropriations bill, to be able to actually set up that office, to be able to develop that analysis. I think that as long as CBAM goes forward, there will be countermeasures across governments to be able to quantify what their emissions are. It's really so you can fight what the numbers are in Europe, if you think that your sector is doing better. But then also, it will be a strategic advantage if you can advance certain technologies that then beat out other countries or beat out other parts of the supply chain. And so it can be an enabling factor to innovation or to scaling specific technologies that can actually meet those requirements.
Chuka Umunna: Before we wrap, I really want to cover this issue of climate resilience. And if you like, adapting to the climate change that we have already seen, but also thinking about the climate risks that are still there and need to be dealt with. And Sarah if I come to you on this one, just a really crude question, I suppose, do you think the market is actually pricing in the climate adaptation that still needs to happen? And that is coming down the line when we see changing weather, more extreme weather events is clearly going to impact many assets?
Sarah Kapnick: In short, it currently is not fully priced in. We're only seeing it in edges of the market, you're seeing it with rising insurance costs. You're also seeing it in credit with specifically electricity utilities that have exposure to wildfire, but it is not broadly in the market today. You see it when you are quantifying municipal government spreads in coastal communities versus inland communities that have lower physical climate risks. And we know from sea level rise that many of those coastal communities, depending on the slope, may be inundated with water over the next 20 years for a third to half the year. And so it's not yet in. And there's a question for me of when does that shift happen that these things start to reprice? And will it take large events to do so? Or will it be gradual? Or will it be all at once, once you get enough awareness?
Chuka Umunna: Excellent. Well, look, Sarah, JJ, thank you so much for your time today and providing fantastic insights. It's so hard to do justice to all of the issues that these big themes tore up, but you've helped us tackle so many of them in a short space of time. And in many respects, I suppose the change in the debate is encapsulated neatly in JP Morgan's recently announced security and resiliency initiative, which is a $1.5 trillion 10 year plan to facilitate finance and invest in industries that are critical to national economic security and resiliency across the US, UK, and continental Europe, where we're not only looking at these issues through a sustainability and energy transition lens, but also through a energy security lens, too. Finally, I just wanted to say many thanks to all of you who've listened in. Hope you have found this discussion as insightful as I have. I'd encourage you to continue to follow the podcast for more market perspectives from a truly impressive lineup of guests. And stay tuned for more JP Morgan Cleantech Stars Conference insights.
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