Fundie getting in early on the multi billion dollar carbon capture market

The long-standing climate crisis conversation has served a purpose in creating multiple off-shoot ideas and innovations aimed at reducing the environmental impacts of climate change. Technologies like carbon capture which can help counter the effects of high carbon emissions industries, such as cement and steel production.

Being one of the only verified technologies proven to be able to remove carbon dioxide (CO2) emission and greenhouse gases from the air, carbon capture has grown into a market valued at US$2.4 billion in 2022, projected to reach US$4.9 billion by 2027 and one that ESG-focused fundie Jai Mircahndani has on his radar.

Speaking on Reach Markets’ The Insider: Meet the Fund Manager in March 2023, Mr Mirchandani, who is the Founder and Portfolio Manager at ELM Responsible Investments, selected early-stage tech company Calix Ltd (ASX: CXL) as one of his favourite stocks. Watch the full The Insider: Meet the Fund Manager session.

Calix’s technology involves grinding minerals to between one hundredth and one thousandth of a millimetre and then flash heating them at up to 950 degrees centigrade, triggering a process that allows the direct separation of CO2. The tech’s applications extend to sustainable processing, advanced batteries, biotech and water treatment.

“By using Calix’s technology, a lot of heavy industries are able to capture the CO2, sequester them and treat the toxins separately,” Mr Mirchandani said. “Although the technology is relatively new, they continue to de-risk that and already have licence agreements with Heidelberg Materials.”

Heidelberg uses a cement and lime decarbonisation technology owned by Leilac, a 93% owned subsidiary of Calix. Overall, the cement industry is responsible for ~8% of emissions and Heidelberg is one of the world’s largest cement producers operating 149 cement plants across 5 continents. The company is committed to carbon neutrality.

“The agreement that they have with [Heidelberg] is a royalty that includes a royalty floor and cap. Calix will generate a revenue linked to the European carbon price,” Mr Mirchandani said. “We think that this is a great example of how a company is cleaning up a high emissions industry and generating revenues and returns in the process.”

According to the fundie, 1.4 billion tonnes of CO2 needs to be captured to reach Net Zero by 2050. An estimated US$275 trillion will need to be spent on to fund global energy transition by 2050 and ~90% of global gross domestic product are under Net Zero commitments to help achieve this goal – accounting for significant industry tailwinds.

Calix has a non-binding Memorandum of Understanding (MoU) with Heirloom, a startup with a goal of capturing 1 billion tonnes of CO2 by 2035 and backed by Bill Gates-led Breakthrough Energy Ventures, Microsoft and Carbon Direct.

Through the MoU, Calix has secured a royalty floor of US$3 per tonne of CO2 captured and variable royalty based on prevailing CO2 price less costs. The company also has ongoing agreements with cement and building materials manufacturers CEMEX, Adbri and Boral.

Click here to view more videos from  Jai Mirchandani’s The Insider: Meet the Fund Manager session.

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