Warehouse founder has invested in many early stage "sustainable" companies.

Sir Stephen Tindall says New Zealand businesses face an enormous task adapting to the climate-change imperatives that are now upon us.

"But it's not insurmountable provided we all pull together," Tindall says. "My personal view is that we're all going to be liable with what we do in terms of our impact on the environment."

The Warehouse founder, who has invested in many early stage "sustainable" companies through his K1W1 investment vehicle, reckons there are very few New Zealand companies which won't be impacted.

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And he has sounded a warning to directors to build climate change imperatives firmly into their thinking, their policies and into risk mitigation.

If a climate change matter affects a company's ability to trade, he says, and directors had not taken that risk on board and done something about it, their company could suffer.

"There might be vulnerable organisations that maybe have to start thinking about where their sites are in terms of low-lying areas that you know that they maybe hadn't factored in 10 years ago."

Tindall has canvassed the sectors that will need to effect transformative change through new technologies and processes to reduce their emissions profile and is particularly excited by the prospect of hydrogen.

"I'm looking to invest in anything that looks like hydrogen," he says.

Toyota's Mirai hydrogen car.
Toyota's Mirai hydrogen car.

"I'm in the first one in Taranaki, called Hiringa Energy, which is a wind-to-hydrogen play and the by-product will be ammonia for the fertiliser industry.

"But I think there's some even bigger, really big opportunities."

His research has shown Japan and Korea are looking at importing green hydrogen and Australia is already looking at the potential export opportunity.

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"They're looking at a massive wind farm in Western Australia and supplying green hydrogen to Japan.

They are also looking at hydrogen export projects in South Australia and Queensland," Tindall says.

"I'm aware of big demand from Korea and Japan and I think if we all work together on this it is actually achievable."

A sustainable electricity generation source is key.

Says Tindall: "There's a small one being developed down in Taupo out of geothermal. But then you've got wind, hydro and solar. I think the reason Korea's so interested is they don't get a lot of wind, and wind's actually a good cost-effective conversion."

Asked how sustainable finance comes into developing this opportunity Tindall replies, "clearly we need a few billion to do it properly and there are some big heavy hitters around the place.

"You've got ACC and NZ Super and clearly you've got the Government and then you've got other smaller players like me who are keen."

Other players like Infratil and the main electricity generators are also likely to show interest as demand from a hydrogen economy grows over the next 20 years.

The Government is charting the way towards a more renewable energy system with the launch of a national vision for hydrogen by Energy and Resources Minister Megan Woods in September.

"Reducing carbon emissions from our energy use is one of the key ways we can fight the long-term challenge of climate change," Woods said as she launched A Vision for Hydrogen in New Zealand — laying out out the role hydrogen can play in New Zealand's economy, and what we can do to accelerate its use.

Woods considers green hydrogen one of the potential tools that will help assist New Zealand to reduce global emissions. "With hydrogen, we have opportunities to create new jobs, convert heavy transport away from fossil fuels, enhance our security of electricity supply and even generate significant export revenue.

"For a country blessed with abundant renewable energy, the ability to convert our clean electricity into green hydrogen which can fetch a premium on global markets is a major economic opportunity."

Woods says there has already been international interest in hydrogen sourced from New Zealand, saying last year NZ signed a world-first memorandum of co-operation with Japan to encourage bilateral collaboration on hydrogen initiatives.

"We're already seeing significant investment in hydrogen locally, with projects like the joint venture between Ballance Agri-Nutrients and Hiringa Energy to produce commercial-scale green hydrogen in Taranaki and Tuaropaki Trust's partnership with Japanese multinational Obayashi Corporation to construct a pilot hydrogen production facility using geothermal electricity near Taupo.

She says the Government paper was part of a renewable energy strategy work programme which is also looking to address barriers to investment in new renewable energy as New Zealand works to reach 100 per cent renewable electricity by 2035 and to transition to a clean, green and carbon-neutral economy by 2050.

"This Green Paper discusses how hydrogen could fit into New Zealand's wider energy and transport system. The paper builds on existing work, identifying the possible applications, benefits and barriers to the uptake of hydrogen in our energy, transport and export sectors. It explores the role that hydrogen could play in different pathways to decarbonisation, and energy resilience."

Hiringa Energy co-founder Cathy Clennett has written to Transport Minister Phil Twyford proposing an opportunity to help meet the Government's transport and climate-change objectives through supporting the development of a national hydrogen supply chain (and associated refuelling network).

"We have an opportunity to lead the world in how we support the role hydrogen can play in decarbonising New Zealand's transport and industrial sectors," the Clennett letter says.

Hiringa says some of the settings and incentive structures, particularly in relation to the transport system, will need adjusting to deliver benefits for New Zealand. Among them: providing incentives for early adopters of fuel cell electric vehicles (FCEVs) during the initial stages of commercialisation; setting targets for fuel cell vehicles alongside other zero-emission solutions and establishing government procurement schemes for zero-emission vehicles where range, payload and utilisation are key performance drivers.

Tindall says having a national plan is key. He points to a five-country discussion on hydrogen that Prime Minister Jacinda Ardern was drawn into after announcing NZ would end oil and gas exploration after 2030.

"So there's an eagerness around the world for it to happen," he says. "If we did say, 'Well, look, this is a really big prize worth going for', I have heard that our refineries are very keen to get into green hydrogen. They produce a lot of hydrogen already which is used in their operation, but I know they're very keen to go green as well, which would be a great thing.

"So, I think there is a big opportunity by, say, 2040 for us to really cut down heavily on fossil fuels. You know we've already got it in terms of electricity, so we're up at about 82 per cent of renewables for electricity, but when you look at the reality of that I'm told only 40 per cent of our energy comes from electricity; the other 60 per cent comes from other things."

Tindall is enthusiastic about green hydrogen use within New Zealand pointing to ferries, buses, trucks, trains and tanker fleets as examples, as well as industrial heat.

"I was in Southland the other day and we passed that enormous dairy company at Edendale Mataura and honestly the size of the coal burner and some of the trucks I saw coming from the local coal mine means that we are still burning a lot of fossil fuels — more than probably the average Kiwi realises.
"The opportunity with hydrogen is to replace those and as we know, it's totally clean — you've only got water as an emission.

"I probably still see EVs for the smaller cars. But as you know, you're seeing Hyundai and Toyota at the moment promoting hydrogen cars on television during the Rugby World Cup."

Tindall is confident hydrogen use in transport does not present a safety threat. "There are strict international standards for hydrogen that are already used widely across the world and vehicles in particular meet the highest safety standards," he says.

"The good thing about it is, if you did have a problem, as hydrogen is the lightest molecule on earth, it just goes straight up in the air, so the main thing is to make sure it can vent."

Social issues and mass housing

Tindall reckons the most important aspect in building affordable housing is scale — and acquiring the land using scale at the right price.

"I've been working with an outfit called the New Zealand Housing Foundation for about 20 years, and they have shown quite conclusively that you can build affordable housing," he says."They're now up to 829 houses. And what they're doing is getting people who ordinarily wouldn't be able to afford to get into a house into them. It might be a rental. It might be a rent-to-buy. It might be joint equity — whichever one is the most attractive."

Tindall is investigating options to introduce to New Zealand the world's best practice when it comes to offsite manufacturing

"The people I've been talking to have visited about 26 offsite manufacturing companies around the world, and have found one in Scandinavia, which they say is by far the best. It's virtually completely robotic. And it changes the whole supply chain.

"They think they can prove they can get a 42 per cent reduction in build costs.

"We know we're about double the price of building houses than Queensland right now. So you know, there's a lot of cost we can take out."

Tindall says once he got his Warehouse business to a a reasonable size the company was able to build a massive distribution centre like they had seen in the United States.

"And we were able to get really major efficiencies going through automation, so bring the costs down, and therefore we could keep reducing our prices — and sort of that virtual circle happened as you reduced prices, you sell more, etc.

"Take other types of transformation, like for example, when 2Degrees came into the market. You know, would we have the prices we've got today for the digital cell phones' call charges? We might still have a cozy duopoly.

"I just think that the opportunity is really endless in housing. So those are my two biggies that I'm trying to work on at the moment."

'An investment in having calculated faith in people'

Investor Sir Stephen Tindall says integrity is key when it comes to making early stage investments through his K1W1 vehicle into sustainably-oriented companies.

"You pretty much have to rely on the integrity of the people," says Tindall. "So if you take LanzaTech, I was the first commercial investor and I did some research on Sean Simpson and I listened to him and I read up about it — and at the end of the day I guess it is an investment in having calculated faith in people."

That initial investment in LanzaTech, which is developing a system for producing ethanol from the carbon monoxide in waste flue gases, led on to new opportunities in other types of waste-to-value propositions.

"Out of LanzaTech there's been a couple of quite good ones we've invested", Tindall says, citing Avertana, which extracts titanium dioxide and aluminium out of steel mill slag.

Another investment is into Mint Innovation — "you mine e-waste and pull the gold out."

"We've just invested quite heavily in a water company that uses a chemical reaction to actually take the solids out of water. So, you're actually able to basically take the nasties out of water and return it to clear water from industrial processes.

"There are a number of them — and some of them are to do with deep science and some of them are to do with practical stuff."

K1W1 has built a substantial portfolio investing in some 20 companies developing products and processes in the sustainable and emissions mitigation space. Among the companies are Solar City, a solar energy services company which has developed a novel SolarZero product that allows home owners to have solar installed with no upfront cost and Wellington Drive Technologies which has developed a range of energy efficient electric motors for the commercial refrigeration industry. Then there is Sunfed Foods, which is producing meat substitutes from plant proteins, and Hot Lime Labs which is developing a CO2 capture system for biomass boilers to supply commercial greenhouse growers with low cost, renewable CO2 and Hiringa Energy which is developing a generation and infrastructure network dedicated to the supply of hydrogen in New Zealand.

Other companies in the K1W1 portfolio include Arc Active; Geo40; 3Rm, CoGo, AquaFortus, Hydroxsys, Lanaco, Wood Engineering Technology, HumbleBee, Ligar Polymers, Anzode Inc and EcoLogics.

"The good thing is if it's only your money, then you're not risking anybody else's and you can have a crack at these things," says Tindall. "So I'm a bit fortunate in that way. I think for people who are running funds on behalf of other people's money, it's a little harder."

Once the early stage companies are producing results, other larger investors may come on board.
" If you take LanzaTech — we've got bigger and bigger — the company is worth over a billion dollars now," said Tindall.

"We've had Mitsui and a number of other big companies come in as investors. In fact we've had a really big one out of Scandinavia come in last month for US$85 million (NZ$134m).

"You know, once people catch on they think this is a really good thing. And a lot of them are investing, not just because they think there's good financial returns, but they know you've got to invest in sustainability.

"LanzaTech's first commercial plant is actually in China. The second one's going to be in Ghent, Belgium; the third one's going to be in India. So, they are geographically spread. Because it's a good technology, it doesn't seem to be inhibited by politics."

Read the Sustainable Finance Report here.