holistic investment thesis

Strategy & Corporate Finance - Holistic Investment Thesis (HIT) Lead Integrator (On-site)

Industry: Packaged Goods

Job Family: Strategy & Planning

06 Oct 2022

United States

McKinsey & Company

WHO YOU'LL WORK WITH You will be based in the New York office. You will participate in the delivery of the holistic impact teardown to senior client team leaders such as partners & senior partners, along with our external clients. You will develop client-ready communications that highlight opportunities to drive holistic transformation discussions. You will coordinate with other module owners (Marketing & Sales, Strategy & Corporate Finance, McKinsey Transformations, People & Organizational Performance, Sustainability), synthesize findings, and develop full HIT document. You will help to systematize, improve, and radiate the approach for developing the holistic impact teardown. You will integrate 5 lenses of holistic impact into a single investment thesis for client with an emphasis on thesis. You will be expected to articulate the tangible actions the company should take to maximize shareholder value, specifically, operational actions that can hand-off to an executive with a PE owners mindset with a focus on impact, not niceties. You will collaborate with S&CF experts to ensure financial analyses are accurate and that operational levers are translated into financial impact and visa versa. You will lead quality control the analyses supporting the integrated thesis including underlying valuation model. WHAT YOU'LL DO Holistic Investment thesis (HIT) team is a firm strategic initiative co-led by Strategy & Corporate Finance (S&CF), McKinsey Transformations (MT) with contributions from Marketing & Sales (M&S), Sustainability, People & Organizational Performance, Operations and Digital and Analytics (DnA) practices. The HIT team aims to expand on firm introductory capabilities and analytic distinctiveness to add a short, clear and insightful articulation of what a client might do to drive holistic improvement in a company over an “investment horizon” of 2-4 years. You will develop the holistic impact thesis for clients and prospective clients across a wide range of industries by leveraging firm’s Holistic Impact framework that covers 5 elements, i.e. financial and operational elements (shareholder value creation), capabilities, health and the workforce, customers, and social and environmental impact. You will learn to shape CEO-ready narrative that frames a company’s holistic value creation agenda. You will apprentice with senior S&CF along with MT leaders on how to translate narrative and agendas into actions at the client. You will live coach on influencing client team leaders and clients to take action (not just talk). You will apprentice in shark-tank approach where HIT Lead Integrator fully owns the thesis generation, impact lever sizing, backup analyses and overall document. You will have high visibility to firm leadership sponsoring HIT as top-3 firm strategic initiatives. QUALIFICATIONS Bachelor’s degree or equivalent required Enough familiarity with corporate finance to quality control models and analyses Comfort articulating insights and implications from non-financial lenses Comfort with building storylines (thesis) that integrate multiple workstreams 5+ years of consulting or industry experience in corporate finance, strategy or private equity. Prior experience as a consultant in a professional services firm preferred Comfort with ambiguous, ever-changing situations Excel, PPTX, story-lining, and synthesis skills Ability to communicate effectively, both verbally and in writing, in English and local office language(s) Ability to work collaboratively in a team and create an inclusive environment with people at all levels of an organization

Similar jobs

Sr. Director, Commercial Strategy- USA

Simon-Kucher & Partners

Other jobs by McKinsey & Company

Associate – Implementation

Associate - Capital Excellence

• Consultant Account
• Employer Account

• Search Search Please fill out this field.

What Is an Investment Thesis?

• Understanding the Thesis

Special Considerations

• What's Included?

The Bottom Line

• Portfolio Management

Investment Thesis: An Argument in Support of Investing Decisions

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

The term investment thesis refers to a reasoned argument for a particular investment strategy, backed up by research and analysis. Investment theses are commonly prepared by (and for) individual investors and businesses. These formal written documents may be prepared by analysts or other financial professionals for presentation to their clients.

Key Takeaways

• An investment thesis is a written document that recommends a new investment, based on research and analysis of its potential for profit.
• Individual investors can use this technique to investigate and select investments that meet their goals.
• Financial professionals use the investment thesis to pitch their ideas.

Understanding the Investment Thesis

As noted above, an investment thesis is a written document that provides information about a potential investment. It is a research- and analysis-based proposal that is usually drafted by an investment or financial professional to provide insight into investments and to pitch investment ideas. In some cases, the investor will draft their own investment thesis, as is the case with venture capitalists and private equity firms.

This thesis can be used as a strategic decision-making tool. Investors and companies can use a thesis to decide whether or not to pursue a particular investment, such as a stock or acquiring another company. Or it can be used as a way to look back and analyze why a particular decision was made in the first place—and whether it was the right one. Putting things in writing can have a huge impact on the direction of a potential investment.

Let's say an investor purchases a stock based on the investment thesis that the stock is undervalued . The thesis states that the investor plans to hold the stock for three years, during which its price will rise to reflect its true worth. At that point, the stock will be sold at a profit. A year later, the stock market crashes, and the investor's pick crashes with it. The investor recalls the investment thesis, relies on the integrity of its conclusions, and continues to hold the stock.

That is a sound strategy unless some event that is totally unexpected and entirely absent from the investment thesis occurs. Examples of these might include the 2007-2008 financial crisis or the Brexit vote that forced the United Kingdom out of the European Union (EU) in 2016. These were highly unexpected events, and they might affect someone's investment thesis.

If you think your investment thesis holds up, stick with it through thick and thin.

An investment thesis is generally formally documented, but there are no universal standards for the contents. Some require fast action and are not elaborate compositions. When a thesis concerns a big trend, such as a global macro perspective, the investment thesis may be well documented and might even include a fair amount of promotional materials for presentation to potential investing partners.

Portfolio management is now a science-based discipline, not unlike engineering or medicine. As in those fields, breakthroughs in basic theory, technology, and market structures continuously translate into improvements in products and in professional practices. The investment thesis has been strengthened with qualitative and quantitative methods that are now widely accepted.

As with any thesis, an idea may surface but it is methodical research that takes it from an abstract concept to a recommendation for action. In the world of investments, the thesis serves as a game plan.

What's Included in an Investment Thesis?

Although there's no industry standard, there are usually some common components to this document. Remember, an investment thesis is generally a proposal that is based on research and analysis. As such, it is meant to be a guide about the viability of a particular investment.

Most investment theses include (but aren't limited to) the following information:

• The investment in question
• The investment goal(s)
• Viability of the investment, including any trends that support the investment
• Potential downsides and risks that may be associated with the investment
• Costs and potential returns as well as any losses that may result

Some theses also try to answer some key questions, including:

• Does the investment align with the intended goal(s)?
• What could go wrong?
• What do the financial statements say?
• What is the growth potential of this investment?

Putting everything in writing can help investors make more informed decisions. For instance, a company's management team can use a thesis to decide whether or not to pursue the acquisition of a rival. The thesis may highlight whether the target's vision aligns with the acquirer or it may identify opportunities for growth in the market.

Keep in mind that the complexity of an investment thesis depends on the type of investor involved and the nature of the investment. So the investment thesis for a corporation looking to acquire a rival may be more in-depth and complicated compared to that of an individual investor who wants to develop an investment portfolio.

Examples of an Investment Thesis

Portfolio managers and investment companies often post information about their investment theses on their websites. The following are just two examples.

Morgan Stanley

Morgan Stanley ( MS ) is one of the world's leading financial services firms. It offers investment management services, investment banking, securities, and wealth management services. According to the company, it has five steps that make up its investment process, including idea generation, quality assessment, valuation, risk management , and portfolio construction.

When it comes to developing its investment thesis, the company tries to answer three questions as part of its quality assessment step:

• "Is the company a disruptor or is it insulated from disruptive change? 
• Does the company demonstrate financial strength with high returns on invested capital, high margins, strong cash conversion, low capital intensity and low leverage? 
• Are there environmental or social externalities not borne by the company, or governance and accounting risks that may alter the investment thesis?"

Connetic Ventures

Connetic Adventures is a venture capital firm that invests in early-stage companies. The company uses data to develop its investment thesis, which is made up of three pillars. According to its blog, there were three pillars or principles that contributed to Connetic's venture capital investment strategy. These included diversification, value, and follow-on—each of which comes with a pro and con.

Why Is an Investment Thesis Important?

An investment thesis is a written proposal or research-based analysis of why investors or companies should pursue an investment. In some cases, it may also serve as a historical guide as to whether the investment was a good move or not. Whatever the reason, an investment thesis allows investors to make better, more informed decisions about whether to put their money into a specific investment. This written document provides insight into what the investment is, the goals of the investment, any associated costs, the potential for returns, as well as any possible risks and losses that may result.

Who Should Have an Investment Thesis?

An investment thesis is important for anyone who wants to invest their money. Individual investors can use a thesis to decide whether to purchase stock in a particular company and what strategy they should use, whether it's a buy-and-hold strategy or one where they only have the stock for a short period of time. A company can craft its own investment thesis to help weigh out whether an acquisition or growth strategy is worthwhile.

How Do You Create an Investment Thesis?

It's important to put your investment thesis in writing. Seeing your proposal in print can help you make a better decision. When you're writing your investment thesis, be sure to be clear and concise. Make sure you do your research and include any facts and figures that can help you make your decision. Be sure to include your goals, the potential for upside, and any risks that you may come across. Try to ask and answer some key questions, including whether the investment meets your investment goals and what could go wrong if you go ahead with the deal.

It's always important to have a plan, especially when it comes to investing. After all, you are putting your money at risk. Having an investment thesis can help you make more informed decisions about whether a potential investment is worth your while. Make sure you put your thesis in writing and answer some key questions about your goals, costs, and potential outcomes. Having a concrete proposal in place can spell the difference between earning returns and losing all your money. And that's if your thesis supports the investment in the first place.

Harvard Business School. " Writing a Credible Investment Thesis ."

Lanturn. " What is an Investment Thesis and 3 Tips to Make One ."

Morgan Stanley. " Global Opportunity ."

Medium. " The Data That Built Our Fund's Investment Thesis ."

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

Writing a Credible Investment Thesis

by David Harding and Sam Rovit

Every deal your company proposes to do—big or small, strategic or tactical—should start with a clear statement how that particular deal would create value for your company. We call this the investment thesis . The investment thesis is no more or less than a definitive statement, based on a clear understanding of how money is made in your business, that outlines how adding this particular business to your portfolio will make your company more valuable. Many of the best acquirers write out their investment theses in black and white. Joe Trustey, managing partner of private equity and venture capital firm Summit Partners, describes the tool in one short sentence: "It tells me why I would want to own this business." 10

Perhaps you're rolling your eyes and saying to yourself, "Well, of course our company uses an investment thesis!" But unless you're in the private equity business—which in our experience is more disciplined in crafting investment theses than are corporate buyers—the odds aren't with you. For example, our survey of 250 senior executives across all industries revealed that only 29 percent of acquiring executives started out with an investment thesis (defined in that survey as a "sound reason for buying a company") that stood the test of time. More than 40 percent had no investment thesis whatsoever (!). Of those who did, fully half discovered within three years of closing the deal that their thesis was wrong.

Studies conducted by other firms support the conclusion that most companies are terrifyingly unclear about why they spend their shareholders' capital on acquisitions. A 2002 Accenture study, for example, found that 83 percent of executives surveyed admitted they were unable to distinguish between the value levers of M&A deals. 11 In Booz Allen Hamilton's 1999 review of thirty-four frequent acquirers, which focused chiefly on integration, unsuccessful acquirers admitted that they fished in uncharted waters. 12 They ranked "learning about new (and potentially related) business areas" as a top reason for making an acquisition. (Surely companies should know whether a business area is related to their core before they decide to buy into it!) Successful acquirers, by contrast, were more likely to cite "leading or responding to industry restructuring" as a reason for making an acquisition, suggesting that these companies had at least thought through the strategic implications of their moves.

Not that tipping one's hat to strategy is a cure-all. In our work with companies that are thinking about doing a deal, we often hear that the acquisition is intended for "strategic" reasons. That's simply not good enough. A credible investment thesis should describe a concrete benefit, rather than a vaguely stated strategic value.

This point needs underscoring. Justifying a deal as being "strategic" ex post facto is, in most cases, an invitation to inferior returns. Given how frequently we have heard weak "strategic" justifications after a deal has closed, it's worth passing along a warning from Craig Tall, vice chair of corporate development and strategic planning at Washington Mutual. In recent years, Tall's bank has made acquisitions a key part of a stunningly successful growth record. "When I see an expensive deal," Tall told us, "and they say it was a 'strategic' deal, it's a code for me that somebody paid too much." 13

And although sometimes the best offense is a good defense, this axiom does not really stand in for a valid investment thesis. On more than a few occasions, we have been witness to deals that were initiated because an investment banker uttered the Eight Magic Words: If you don't buy it, your competitors will.

Well, so be it. If a potential acquisition is not compelling to you on its own merits, let it go. Let your competitors put their good money down, and prove that their investment theses are strong.

Let's look at a case in point: [Clear Channel Communications' leaders Lowry, Mark, and Randall] Mayses' decision to move from radios into outdoor advertising (billboards, to most of us). Based on our conversations with Randall Mays, we summarize their investment thesis for buying into the billboard business as follows:

Clear Channel's expansion into outdoor advertising leverages the company's core competencies in two ways: First, the local market sales force that is already in place to sell radio ads can now sell outdoor ads to many of the same buyers, and Clear Channel is uniquely positioned to sell both local and national advertisements. Second, similar to the radio industry twenty years ago, the outdoor advertising industry is fragmented and undercapitalized. Clear Channel has the capital needed to "roll up" a significant fraction of this industry, as well as the cash flow and management systems needed to reduce operating expenses across a consolidated business.

Note that in Clear Channel's investment thesis (at least as we've stated it), the benefits would be derived from three sources:

• Leveraging an existing sales force more extensively
• Using the balance sheet to roll up and fund an undercapitalized business
• Applying operating skills learned in the radio trade

Note also the emphasis on tangible and quantifiable results, which can be easily communicated and tested. All stakeholders, including investors, employees, debtors, and vendors, should understand why a deal will make their company stronger. Does the investment thesis make sense only to those who know the company best? If so, that's probably a bad sign. Is senior management arguing that a deal's inherent genius is too complex to be understood by all stakeholders, or simply asserting that the deal is "strategic"? These, too, are probably bad signs.

Most of the best acquirers we've studied try to get the thesis down on paper as soon as possible. Getting it down in black and white—wrapping specific words around the ideas—allows them to circulate the thesis internally and to generate reactions early and often.

The perils of the "transformational" deal . Some readers may be wondering whether there isn't a less tangible, but equally credible, rationale for an investment thesis: the transformational deal. Such transactions, which became popular in the exuberant '90s, aim to turn companies (and sometimes even whole industries) on their head and "transform" them. In effect, they change a company's basis of competition through a dramatic redeployment of assets.

The roster of companies that have favored transformational deals includes Vivendi Universal, AOL Time Warner (which changed its name back to Time Warner in October 2003), Enron, Williams, and others. Perhaps that list alone is enough to turn our readers off the concept of the transformational deal. (We admit it: We keep wanting to put that word transformational in quotes.) But let's dig a little deeper.

Sometimes what looks like a successful transformational deal is really a case of mistaken identity. In search of effective transformations, people sometimes cite the examples of DuPont—which after World War I used M&A to transform itself from a maker of explosives into a broad-based leader in the chemicals industry—and General Motors, which, through the consolidation of several car companies, transformed the auto industry. But when you actually dissect the moves of such industry winners, you find that they worked their way down the same learning curve as the best-practice companies in our global study. GM never attempted the transformational deal; instead, it rolled up smaller car companies until it had the scale to take on a Ford—and win. DuPont was similarly patient; it broadened its product scope into a range of chemistry-based industries, acquisition by acquisition.

In a more recent example, Rexam PLC has transformed itself from a broad-based conglomerate into a global leader in packaging by actively managing its portfolio and growing its core business. Beginning in the late '90s, Rexam shed diverse businesses in cyclical industries and grew scale in cans. First it acquired Europe's largest beverage-can manufacturer, Sweden's PLM, in 1999. Then it bought U.S.–based packager American National Can in 2000, making itself the largest beverage-can maker in the world. In other words, Rexam acquired with a clear investment thesis in mind: to grow scale in can making or broaden geographic scope. The collective impact of these many small steps was transformation. 14

But what of the literal transformational deal? You saw the preceding list of companies. Our advice is unequivocal: Stay out of this high-stakes game. Recent efforts to transform companies via the megadeal have failed or faltered. The glamour is blinding, which only makes the route more treacherous and the destination less clear. If you go this route, you are very likely to destroy value for your shareholders.

By definition, the transformational deal can't have a clear investment thesis, and evidence from the movement of stock prices immediately following deal announcements suggests that the market prefers deals that have a clear investment thesis. In "Deals That Create Value," for example, McKinsey scrutinized stock price movements before and after 231 corporate transactions over a five-year period. 15 The study concluded that the market prefers "expansionist" deals, in which a company "seeks to boost its market share by consolidating, by moving into new geographic regions, or by adding new distribution channels for existing products and services."

On average, McKinsey reported, deals of the "expansionist" variety earned a stock market premium in the days following their announcement. By contrast, "transformative" deals—whereby companies threw themselves bodily into a new line of business—destroyed an average of 5.3 percent of market value immediately after the deal's announcement. Translating these findings into our own terminology:

• Expansionist deals are more likely to have a clear investment thesis, while "transformative" deals often have no credible rationale.
• The market is likely to reward the former and punish the latter.

The dilution/accretion debate . One more side discussion that comes to bear on the investment thesis: Deal making is often driven by what we'll call the dilution/accretion debate . We will argue that this debate must be taken into account as you develop your investment thesis, but your thesis making should not be driven by this debate.

Simply put, a deal is dilutive if it causes the acquiring company to have lower earnings per share (EPS) than it had before the transaction. As they teach in Finance 101, this happens when the asset return on the purchased business is less than the cost of the debt or equity (e.g., through the issuance of new shares) needed to pay for the deal. Dilution can also occur when an asset is sold, because the earnings power of the business being sold is greater than the return on the alternative use of the proceeds (e.g., paying down debt, redeeming shares, or buying something else). An accretive deal, of course, has the opposite outcomes.

But that's only the first of two shoes that may drop. The second shoe is, How will Wall Street respond? Will investors punish the company (or reward it) for its dilutive ways?

Aware of this two-shoes-dropping phenomenon, many CEOs and CFOs use the litmus test of earnings accretion/dilution as the first hurdle that should be put in front of every proposed deal. One of these skilled acquirers is Citigroup's [former] CFO Todd Thomson, who told us:

It's an incredibly powerful discipline to put in place a rule of thumb that deals have to be accretive within some [specific] period of time. At Citigroup, my rule of thumb is it has to be accretive within the first twelve months, in terms of EPS, and it has to reach our capital rate of return, which is over 20 percent return within three to four years. And it has to make sense both financially and strategically, which means it has to have at least as fast a growth rate as we expect from our businesses in general, which is 10 to 15 percent a year. Now, not all of our deals meet that hurdle. But if I set that up to begin with, then if [a deal is] not going to meet that hurdle, people know they better make a heck of a compelling argument about why it doesn't have to be accretive in year one, or why it may take year four or five or six to be able to hit that return level. 16

Unfortunately, dilution is a problem that has to be wrestled with on a regular basis. As Mike Bertasso, the head of H. J. Heinz's Asia-Pacific businesses, told us, "If a business is accretive, it is probably low-growth and cheap for a reason. If it is dilutive, it's probably high-growth and attractive, and we can't afford it." 17 Even if you can't afford them, steering clear of dilutive deals seems sensible enough, on the face of it. Why would a company's leaders ever knowingly take steps that would decrease their EPS?

The answer, of course, is to invest for the future. As part of the research leading up to this book, Bain looked at a hundred deals that involved EPS accretion and dilution. All the deals were large enough and public enough to have had an effect on the buyer's stock price. The result was surprising: First-year accretion and dilution did not matter to shareholders. In other words, there was no statistical correlation between future stock performance and whether the company did an accretive or dilutive deal. If anything, the dilutive deals slightly outperformed. Why? Because dilutive deals are almost always involved in buying higher-growth assets, and therefore by their nature pass Thomson's test of a "heck of a compelling argument."

Reprinted with permission of Harvard Business School Press. Mastering the Merger: Four Critical Decisions That Make or Break the Deal , by David Harding and Sam Rovit. Copyright 2004 Bain & Company; All Rights Reserved.

[ Buy this book ]

David Harding (HBS MBA '84) is a director in Bain & Company's Boston office and is an expert in corporate strategy and organizational effectiveness.

Sam Rovit (HBS MBA '89) is a director in the Chicago office and leader of Bain & Company's Global Mergers and Acquisitions Practice.

10. Joe Trustey, telephone interview by David Harding, Bain & Company. Boston: 13 May 2003. Subsequent comments by Trustey are also from this interview.

11. Accenture, "Accenture Survey Shows Executives Are Cautiously Optimistic Regarding Future Mergers and Acquisitions," Accenture Press Release, 30 May 2002.

12. John R. Harbison, Albert J. Viscio, and Amy T. Asin, "Making Acquisitions Work: Capturing Value After the Deal," Booz Allen & Hamilton Series of View-points on Alliances, 1999.

13. Craig Tall, telephone interview by Catherine Lemire, Bain & Company. Toronto: 1 October 2002.

14. Rolf Börjesson, interview by Tom Shannon, Bain & Company. London: 2001.

15. Hans Bieshaar, Jeremy Knight, and Alexander van Wassenaer, "Deals That Create Value," McKinsey Quarterly 1 (2001).

16. Todd Thomson, speaking on "Strategic M&A in an Opportunistic Environment." (Presentation at Bain & Company's Getting Back to Offense conference, New York City, 20 June 2002.)

17. Mike Bertasso, correspondence with David Harding, 15 December 2003.

• Job Seekers

Investment Thesis: An Argument in Support of Investing Decisions

October 29, 2023 by Abi Tyas Tunggal

An investment thesis is a well-reasoned argument that supports a specific investment decision, playing a vital role in the strategic planning process for individual investors and businesses alike. It comprises detailed research and analysis to evaluate an investment's potential profitability. A good investment thesis serves multiple purposes, including helping in the decision-making process, providing a comprehensive framework for monitoring and assessment, and offering a structured approach to identifying potential opportunities.

There are different types of investment strategies, such as venture capital , private equity, and long-term value investments. The core of an investment thesis involves identifying key parameters for evaluating an investment, understanding the unique market dynamics and competitive landscape, and realizing how to create value through strategic planning. To ensure a comprehensive and detailed investment thesis, it is crucial to involve thorough research, considering emerging trends and opportunities, and incorporating industry case studies for better understanding. Ultimately, financial statements and valuation metrics play a significant role in determining a well-suited investment decision.

Key Takeaways

• An investment thesis is a well-reasoned, research-based argument supporting a specific investment decision
• There are several types of investment strategies, and a well-structured investment thesis addresses market dynamics and competition to create value
• Research, valuation metrics, and understanding emerging trends are crucial in crafting a compelling investment ideas

Defining an Investment Thesis

An investment thesis is a well-structured, logical argument that justifies a particular investment decision, based on thorough research and analysis. It is essential for investors, as well as financial professionals in the domains of investment banking, private equity, hedge funds, and venture capital funds . A confident and knowledgeable investor will build out clear investment criteria to successfully navigate the investment landscape.

The primary purpose of an investment thesis is to outline the reasons and expected outcomes of a proposed investment, often focusing on the potential for growth and profit. This document offers a roadmap for investors, guiding them through their decision-making process, and helping to ensure that they arrive at rational and informed conclusions. A comprehensive investment thesis should consider various aspects, such as market conditions, competitive landscape, and financial performance of the targeted asset or company.

A strong investment thesis is built on rigorous market research and analysis. This involves evaluating historical and current financial information, as well as scrutinizing industry trends and the overall economic environment. Skilled investors will also incorporate their expertise in the industry to better assess the merits of an investment opportunity. This level of thoroughness creates a confidently expressed thesis, allowing investors to remain steadfast in their investment decisions, even amid market volatility.

In summary, an investment thesis plays a pivotal role in the investing process. It presents a well-reasoned argument, grounded in extensive research and clear analysis, that supports an investment decision. Crafting a robust investment thesis is crucial for both individual and institutional investors as it provides a solid foundation for investment choices and ensures the alignment of investment strategies with long-term objectives.

Importance of Research in Crafting an Investment Thesis

Thorough research is a crucial aspect of creating a solid investment thesis. It allows investors to gather vital information and insights that will help guide their investment decisions. There are several elements to consider while conducting this research, with data analysis, understanding risks, and returns being essential components.

Data Analysis

Data analysis forms the backbone of any research conducted for crafting an investment thesis. It involves collecting, organizing, and interpreting various types of data, such as financial statements, market trends, and industry forecasts, to identify patterns and make informed predictions about a potential investment opportunity. A comprehensive data analysis can help investors make confident choices based on reliable information, which is essential for a successful investment strategy.

Some key data analysis techniques used in crafting an investment thesis include:

• Comparative analysis: Comparing the performance of different companies within the same industry to identify investment opportunities.
• Trend analysis: Monitoring historical data to determine patterns and potential future developments.
• Financial statement analysis: Examining the financial health of a company through its balance sheets, income statements, and cash flow statements.

Understanding Risks and Returns

One of the primary goals of research in developing an investment thesis is to assess the risk/reward profile of a potential investment. This involves evaluating the potential risks associated with the investment and weighing them against the expected returns. A sound investment thesis should demonstrate a clear understanding of these risks and offer a rationale for why the investment’s potential returns make it a worthwhile addition to a portfolio.

Some common risks to consider when crafting an investment thesis include:

• Market risk: The risk of an investment losing value due to fluctuations in the market.
• Credit risk: The risk that a company or issuer of a financial instrument may default on its obligations.
• Operational risk: The risk of losses arising from failed internal processes, systems, or personnel within a business.

Evaluating these risks requires investors to develop a deep understanding of the investment opportunity, its industry, and the factors that may impact its performance. A diligent and systematic approach to research can help investors identify potential risks and gains, leading to informed and confident decision-making in crafting a strong investment thesis.

Types of Investment Strategy

When it comes to crafting an investment thesis, selecting an appropriate investment strategy is crucial. In this section, we will discuss two popular strategies: Value Investing and Growth Investing.

Value Investing

Value investing is a strategy that focuses on identifying undervalued stocks or assets in the market. These investments typically have lower valuations, which are reflected in their price-to-earnings ratios or book values. The central idea behind value investing is that the market may sometimes undervalue a company or asset, presenting an opportunity for investors willing to do thorough research and analysis.

The process of value investing involves:

• Fundamental analysis : Evaluating a company's financial health, management, and competitive advantages
• Value metrics : Identifying various valuation metrics, such as price-to-earnings, price-to-book, and dividend yield
• Margin of safety : Discovering investment opportunities with a built-in cushion to reduce the risk of loss

Famous investors, such as Warren Buffett and Benjamin Graham, have implemented value investing strategies to achieve long-term success.

Growth Investing

On the other hand, growth investing centers on companies that are expected to grow at an above-average rate compared to their industry. Growth investors seek opportunities in businesses they believe will offer substantial capital appreciation through rapid expansion or market-share gains. They prioritize the potential for future profit over the stock's valuation.

Features of growth investing include:

• High expectations : Companies targeted by growth investors typically have a history of robust revenue and profit growth
• Momentum : Investors seek stocks with upward price momentum, as increasing demand for these stocks may drive prices even higher
• Risk tolerance : Growth stocks can be volatile, and investors must be prepared to weather price swings

Renowned growth investors like Peter Lynch and Phil Fisher have demonstrated the effectiveness of growth investing throughout their careers.

Both value and growth investing strategies have their unique advantages and require different levels of risk tolerance. Investors should carefully consider their investment thesis and select a strategy that aligns with their objectives and risk appetite.

Venture Capital and Private Equity Investment Theses

When considering investments in private companies, venture capital (VC) and private equity (PE) firms each have their own unique strategies encapsulated within their respective investment theses. These theses provide guidance on the focus of investments, the sectors or geographies of interest, and the stage of the target companies.

Learn more about the differences between private equity and venture capital .

Venture Capital Investment Thesis

A venture capital investment thesis outlines how a VC fund aims to make money for its investors, typically referred to as Limited Partners (LPs). This strategy identifies crucial factors such as the stage of companies the fund will invest in, commonly early-stage companies, the targeted geography, and specific sectors of focus.

The thesis may vary depending on a venture capitalist's unique specialization, with some firms concentrating on a specific vertical and stage, while others invest more broadly without a core thesis driving their decisions. The underlying objective of a VC investment thesis is to outline how the firm will achieve high returns on investment by supporting and nurturing the growth of portfolio companies.

Private Equity Investment Thesis

In contrast, a private equity investment thesis is an evidence-based case in support of a particular investment opportunity. It usually begins with a concise argument illustrating how the potential deal supports the fund's general investment strategy. The thesis then provides details that substantiate this preliminary conclusion.

Private equity firms often target more established companies compared to venture capital firms, focusing on businesses with a proven track record. The PE investment thesis may identify areas where operational improvements, strategic mergers, or better capital structures could enhance value, ultimately generating a good return for the firm and its investors.

Overall, both venture capital and private equity investment theses serve as critical frameworks guiding investment decisions. They not only help align these decisions with a firm's specialized strategy but also provide a basis for evaluating potential deals to ensure they contribute to the firm's goals and long-term value creation.

Key Parameters for Evaluating an Investment

When assessing the viability of an investment, it is essential to examine various key parameters to make informed decisions. By analyzing these factors, investors can gain a deeper understanding of a company's financial health and its potential for growth.

One vital metric to consider is earnings per share (EPS) , which represents the portion of a company's profit attributed to each outstanding share of its common stock. A higher EPS indicates higher earnings and suggests that the company may be a lucrative investment opportunity.

Another fundamental metric is the return on assets (ROA) , which measures the effectiveness of a company in using its assets to generate profit. The higher the ROA, the better the company is at utilizing its assets to generate earnings. Similarly, return on equity (ROE) is a measure of financial performance that calculates the proportion of net income generated by a company's equity. A higher ROE demonstrates the efficient usage of shareholders' investments.

Conducting a thorough analysis of the company's financial statements is crucial. This includes reviewing income statements, balance sheets, and cash flow statements. By doing so, investors can gain insights into the company's profitability, liquidity, and solvency.

Another important factor to consider is a company's cash position. Adequate cash reserves enable a company to meet its short-term obligations and invest in growth opportunities. On the other hand, a lack of cash can leave a company vulnerable to market fluctuations and financial stress.

It is also essential to evaluate a company's capital structure, which refers to the proportion of debt and equity financing it uses to fund its operations. A balanced capital structure ensures financial stability, while excessive debt may lead to financial distress.

Examining a company's debt level is crucial, as it can directly impact the company's financial flexibility and risk profile. A high level of debt can hinder a company's ability to grow and adapt to changes in the market, making it a less attractive investment option.

Assessing a company's assets and how they're managed plays a significant role in evaluating an investment opportunity. This includes tangible assets, such as property and equipment, and intangible assets, such as patents and trademarks. Effective asset management contributes to a company's ability to generate profit.

Finally, it is important to scrutinize a company's costs associated with its operations, such as production costs and overhead expenses. A company that efficiently manages its costs will likely generate higher profitability and provide better returns for investors.

Creating Value through Strategic Planning

Strategic planning plays a crucial role in creating value for investors and businesses. It serves as the foundation for effective decision-making and guides companies towards achieving their goals. Through strategic planning, management teams can identify and focus on core competencies that contribute to a company's competitive advantage.

One way to create value is to prioritize revenue growth. By identifying key growth drivers, such as product innovation or market expansion, companies can allocate resources accordingly to boost earnings. Such targeted investments in growth engines allow firms to capture a larger market share and drive long-term profitability.

Another aspect of strategic planning involves optimizing a company's holdings. By assessing the existing portfolio, management can decide whether to divest underperforming assets or make strategic acquisitions that align with their investment thesis. The right combinations and adjustments can significantly enhance a company's overall performance and shareholder value.

Risk management is also an essential aspect of strategic planning. Companies must assess potential risks and incorporate suitable mitigation measures in their plans. This ensures that organizations are prepared for unforeseen circumstances, which can safeguard profits and protect the company's assets.

Furthermore, creating value requires continuous improvement and adaptation to market trends. Companies should routinely reevaluate their strategies to identify both internal and external factors that may impact their current position. By setting clearly defined objectives and quantifiable financial targets, management teams can measure their progress effectively and adjust their strategic plans as needed.

In summary , creating value through strategic planning involves a combination of focusing on core competencies, prioritizing revenue growth, optimizing holdings, managing risk, and continuously reassessing the company's strategic direction. This holistic approach can help businesses enhance their profitability, strengthen their market position, and ultimately deliver strong value creation to investors.

Understanding the Market and Competition

Before developing an investment thesis, it is crucial to have a deep understanding of the market and its competition. The stock market is influenced by various factors such as economic supercycles, bear markets, and secular trends. Analyzing these elements will provide a solid foundation to recognize potential investment opportunities.

An economic supercycle is a long-term pattern that occurs over several decades, during which the economy undergoes periods of growth and contraction. Investors need to be aware of the current phase and how it may impact their investment decisions. For instance, during a growth period, certain industries tend to outperform, while others may underperform during a contraction phase.

In addition to analyzing these market conditions, investors must also pay heed to the competitive landscape of the sector in which they plan to invest. Examining the competitors within the industry enables one to identify companies with competitive advantages, which may lead to superior performance. These advantages can stem from factors such as lower costs, innovation, or a dominant market share.

A bear market occurs when the stock market experiences a prolonged decline, typically characterized by a decrease of 20% or more from recent highs. In such environments, it becomes even more crucial for investors to understand the competitive dynamics within an industry to identify resilient companies that can withstand market downturns.

A secular trend is a long-term movement in a particular direction that can last for several years or even decades. Identifying secular trends within industries is essential to spotting opportunities for long-term growth. For example, investors may capitalize on sectors benefiting from a shift towards clean energy usage or the increasing importance of artificial intelligence.

In summary, understanding the market and competition requires a deep analysis of the stock market, economic supercycles, bear markets, and secular trends. By researching industry trends, evaluating market opportunities, and assessing the strengths and weaknesses of competitors, investors can develop a robust investment thesis that increases the likelihood of achieving long-term returns.

Industry Case Studies

In the investment world, the importance of an investment thesis cannot be overstated. By examining various industry case studies, we can gain insight into how businesses make strategic investments to enhance their value. In this section, we'll discuss notable examples from companies such as DuPont, General Motors, Rexam PLC, and Clear Channel Communications.

DuPont is a leading science and innovation company with a focus on agriculture, advanced materials, and industrial biosciences. During its acquisition of Dow Chemical, DuPont developed a robust investment thesis to justify the merger. Their investment case relied on the belief that the combined entity would benefit from increased operational efficiencies, new market opportunities, and enhanced innovation capabilities. This approach provided a strong rationale for the deal, which has created a more competitive company in the global market.

General Motors (GM) , a multinational automobile manufacturer, crafted its investment thesis in response to evolving trends in the automotive industry, such as the increasing importance of emissions reduction, electrification, and autonomous technology. GM's investment case centered on embracing these trends, focusing on innovation, and expanding its product offerings through strategic M&A, investments, and partnerships. For example, GM has made significant investments in electric vehicles and autonomous driving technology, positioning the company for future growth in these areas.

Next, we have Rexam PLC , a former British packaging manufacturer that was a leading producer of beverage cans globally. When Ball Corporation sought to acquire Rexam, they developed an investment thesis based on the value derived from combining the two companies' strengths. This thesis outlined the strategic fit between both companies, synergies from combining production capabilities, and projected growth, particularly in developing markets. The successful acquisition helped Ball Corporation consolidate its position as a global leader in the packaging industry.

Lastly, Clear Channel Communications is a media company specializing in outdoor advertising. As the company sought to expand its presence in this sector, it created an investment thesis centered around leveraging its core competence in outdoor advertising and acquiring strategic assets. One example is Clear Channel's acquisition of crucial billboard locations to solidify its competitive edge in the outdoor advertising market. This targeted growth strategy has allowed Clear Channel to remain a dominant player in the industry.

In conclusion, these industry case studies demonstrate the value of a well-crafted investment thesis. Effective investment theses provide a roadmap for companies to pursue strategic acquisitions and investments that create long-term value, while also helping investors evaluate the viability of proposed deals. By understanding how companies like DuPont, General Motors, Rexam PLC, and Clear Channel Communications have strategically invested in the market, we can better appreciate the importance of a well-structured investment thesis.

Long-Term Investment Strategies

A long-term investment strategy refers to an approach where investors hold onto their investments for an extended period, typically more than one year. This type of strategy aims to achieve the investment goal by allowing assets to grow through market fluctuations and capitalizing on the power of compounding interest. Diversification and patience play pivotal roles in ensuring the success of a long-term investment strategy.

Portfolio managers often use various techniques and methods to craft long-term investment portfolios. Some of these techniques include targeting undervalued sectors or stocks, dividend reinvestment plans, dollar-cost averaging, and asset allocation. By employing these strategies, portfolio managers increase chances of achieving their clients' investment goals over time.

In order to develop long-term investment strategies, investors should first define their investment goal . This could include objectives such as saving for retirement, funding a child's college education, or purchasing a home. Clear investment goals help in designing an appropriate investment strategy, taking into account factors like the investor's risk tolerance, time horizon, and available capital.

One key aspect of a successful long-term strategy is diversification . Diversifying across asset classes and industries allows investors to spread risks and potentially achieve higher risk-adjusted returns. A well-diversified portfolio will typically consist of a mix of stocks, bonds, and other asset types, with variations in investment size, industry sector, and geographical location. This diversified approach minimizes the impact of underperforming investments on the overall portfolio.

Another crucial element in long-term investing is patience . Market fluctuations can be tempting for investors to react to their emotions and make impulsive decisions, which could derail a well-thought-out investment strategy. Maintaining a disciplined approach and sticking to one's investment plan, even during periods of market volatility, is paramount to achieving long-term success.

In conclusion, long-term investment strategies require investors to define clear goals, diversify their portfolio, and exercise patience in the face of market fluctuations. By adhering to these principles, investors and portfolio managers can steer a course towards achieving their investment objectives.

Emerging Trends and Opportunities

In recent years, various emerging trends have presented attractive opportunities for investors. Among these trends, renewable energy, megatrends, and the coffee shop market stand out as sectors with significant potential for growth.

Renewable energy has gained considerable attention and investment as a response to the global push for addressing climate change and reducing emissions. Solar, wind, and hydroelectric power are some of the most prominent technologies in this sector. With an increased interest in clean energy from both governments and consumers, companies in this space are poised to experience substantial growth.

Megatrends such as urbanization, aging populations, and technological advancements are also influencing investment opportunities. These large-scale shifts provide a backdrop for businesses to tap into new markets and adjust their strategies to capitalize on these changes. For instance, companies working in healthcare and biotechnology may benefit from catering to the needs of an aging population, while businesses focused on artificial intelligence (AI) and automation may find increased demand due to technological advancements.

The coffee shop market, too, presents investment opportunities. This industry has experienced robust growth in recent years as consumers increasingly seek out unique, high-quality coffee experiences. Independent and specialty coffee shops are at the forefront of this trend. Niche coffee shops that offer novel and authentic experiences have seen success by catering to the specialized preferences of today's consumers. As the demand for artisanal and premium beverages continues to rise, businesses operating in this space can expect to have ample opportunities for growth.

In conclusion, current emerging trends such as renewable energy, megatrends, and the coffee shop market offer a wealth of investment opportunities. As these sectors continue to develop and evolve, investors with well-informed investment theses stand to benefit from the potential rewards in these growing industries.

Role of Financial Statements and Valuation Metrics

Financial statements play a vital role in the investment thesis by providing crucial information about a company's financial health and performance. They consist of the balance sheet, income statement, and cash flow statement, which offer insights into the company's assets, liabilities, revenues, expenses, and cash flows. Investors use these statements to assess the company's past performance, current financial condition, and potential for future growth.

Valuation metrics, on the other hand, are vital yardsticks that investors use to compare different investment opportunities and make informed decisions. These metrics include price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, price-to-book (P/B) ratio, dividend yield, and return on equity (ROE), among others. By analyzing these ratios, investors can gauge a company's value relative to its peers and make better investment choices.

Analysts and investors scrutinize financial statements to identify growth trends, profitability, and financial stability. For instance, they may calculate the gross margin, operating margin, and net profit margin to determine the company's profitability across different stages of its operations. Additionally, they examine liquidity ratios, such as the current ratio and quick ratio, to assess the company's ability to meet its short-term obligations.

Valuation metrics provide a quantitative basis for comparing investment opportunities within the same industry or across different sectors. For example, a lower P/E ratio may indicate that a stock is undervalued, while a high P/E ratio might suggest overvaluation. Moreover, the P/B ratio can help investors determine if a stock is undervalued by comparing its market price to its book value.

Another key valuation metric is the dividend yield, which measures the annual dividend income per share relative to the stock's price. A higher dividend yield may attract income-oriented investors, while a lower yield might be more appealing to growth-focused investors. Furthermore, the ROE ratio, which measures a company's profitability in relation to its equity base, is an essential metric for evaluating the efficiency of management in creating shareholder value.

In conclusion, financial statements and valuation metrics are indispensable tools for investors to evaluate a company's financial health and investment attractiveness. By analyzing these data points, investors can make well-informed investment decisions that align with their risk tolerance and investment objectives.

Concluding Thoughts on Crafting a Compelling Investment Thesis

Crafting a compelling investment thesis is crucial for informed investing decisions, as it helps investors thoroughly analyze a potential opportunity. A well-researched investment thesis demonstrates the investor's conviction level and reinforces their confidence in the investment choice. This process involves a deep understanding of the business, its value drivers, and its potential growth trajectories.

A strong investment thesis should be definitive, clearly articulating the reasoning behind the opportunity and the expected returns. This allows investors to stay focused on their goals and maintain their conviction, even when the stock's price movement does not align with their expectations.

By adopting a confident, knowledgeable, and neutral tone, investors can effectively communicate their investment thesis to others. Clarity in presenting the investment case is essential for persuading potential partners or stakeholders to support the opportunity. Utilizing formatting tools such as tables and bullet points can aid in conveying essential information efficiently and ensuring the investment thesis is easy to understand.

In summary, crafting a compelling investment thesis enables investors to make well-informed decisions that align with their financial goals. By developing a thorough understanding of the investment opportunity and maintaining a strong conviction level, investors can better navigate the market and achieve long-term success.

Frequently Asked Questions

How do you develop a strong investment thesis.

A strong investment thesis begins with thorough research on the company or asset in question. This may include looking at the financials, competitive position, management team, industry trends, and future prospects. It's essential to critically analyze the available information, identify potential risks and rewards, and establish a clear rationale for the investment based on this analysis. Staying focused on the long-term outlook and maintaining a disciplined approach to the investment process can also contribute to developing a robust investment thesis.

What are the key elements to include in an investment thesis?

An investment thesis should include the following key elements:

• Overview of the company or asset: Provide a brief background of the company or asset, including its market, size, and competitive positioning.
• Investment rationale: Detail the reasons for investing, such as attractive valuation, strong revenue growth, or a unique business model.
• Risk assessment: Identify potential risks and how they could impact the investment returns.
• Expected return: Estimate the potential financial return based on the identified growth drivers or catalysts.
• Time horizon: Indicate the investment period, typically long-term, during which the thesis is expected to play out.
• Fund size: Specify the amount of invested capital that will be allocated to this particular investment, considering its impact on portfolio construction, liquidity, and potential returns within the overall portfolio strategy

How can one evaluate the success of an investment thesis?

Evaluating the success of an investment thesis involves tracking the progress of the company or asset against its initial expectations and underlying assumptions. This may involve measuring financial performance, analyzing key developments in the industry and the company's position within it, and monitoring potential changes in overall market conditions. It is helpful to revisit the investment thesis regularly to assess its validity and make adjustments as necessary.

What's the difference between an investment thesis for startups and publicly traded companies?

An investment thesis for a startup often focuses on the growth potential of a new or emerging market, considering the innovative products or services the startup offers in that market. Here, the focus may be more on the potential for long-term value creation, the management team's ability to execute on their vision, and market fit.

For publicly traded companies, the investment thesis may include analysis of current financial performance, valuation multiples, and overall market trends. Publicly traded companies have more historical data and financial performance information available, allowing investors to make more informed decisions based on these factors.

How does an investment thesis guide decision-making in private equity?

In private equity, the investment thesis helps guide the selection of companies to invest in, as well as the structuring of deals to acquire those companies. It provides a blueprint for how the private equity firm aims to create value, including plans for operational improvements, financial engineering, or growth strategies. This thesis serves as a basis for monitoring the progress of an investment and helps make decisions on the timing of potential exits.

How can real estate investment theses differ from other sectors?

Real estate investment theses may focus on factors such as location, property type, market dynamics, and demographic trends to identify attractive investment opportunities. The analysis may also take into account macroeconomic factors, such as interest rates and economic growth, which can influence real estate markets. Additionally, real estate investments may be structured as either direct property investments or through financial instruments like Real Estate Investment Trusts (REITs), affecting the underlying investment thesis.

What considerations should a first-time fund manager have when developing a fund's investment thesis?

For a first-time fund manager, crafting a compelling and robust fund's investment thesis is paramount for attracting investors. Given their lack of a track record, these managers need to lean heavily on the research, clarity, and vision articulated in their investment thesis. The thesis should detail how the fund aims to identify ideal investments, especially those in industries with high margins. It should also benchmark the strategies against industry standards to highlight the manager's acumen and awareness of market norms.

How is a stock pitch related to an investment thesis and what role does a target price play in it?

A stock pitch is essentially a condensed, persuasive form of an investment thesis, often presented to stakeholders to advocate for investing in a particular publicly-traded company. A key element of any stock pitch is the target price, which is an estimation of what the stock is worth based on projections and valuation models. This target price serves as a quantitative anchor for the investment thesis, giving stakeholders a specific metric against which to measure potential returns and risks.

A different high-growth story: The unique challenges of climate tech

Precisely because sustainability offers such a massive opportunity, it evokes the success achieved by technology companies over the past three decades. Yet while software may have eaten the world, its appetite for capital wasn’t voracious. Asset-heavy climate tech  solutions—such as green steel, the removal of carbon from the atmosphere, and new ways to produce and store renewable energy—are different. Unlike software or other asset-light businesses, these climate tech ventures require substantial capital at early stages in their life cycle and need more time to break even and scale up. And in contrast to existing solar and wind energy farms, they face greater commercial uncertainty, including the development and adoption decisions of other players across the value chain. Put another way, capital-intense climate tech ventures aren’t quite a fit for traditional venture capital (VC) (their businesses offer the promise of extraordinary growth and don’t yet have positive cash flow, but need more capital, sooner than VC firms typically provide), aren’t quite a match for private equity (PE) (which tends to invest in businesses that are already cash flow positive), and would appear to be too early in their business building to receive significant bank financing. Like other new ventures across sectors and over time, some will surely fail.

Yet encouragingly, several are beginning to access life-giving capital, and some have achieved remarkable, profitable performance. Although the challenges for scaling  asset-heavy sustainability solutions businesses are daunting, there are solutions that already work , or can work as a matter of engineering and physics. Climate tech also benefits from favorable regulatory tailwinds—themselves a response to urgent climate change . Private capital, too, can play a critical role in the green transition (Exhibit 1). In this article, we explore the unique challenges and opportunities of asset-heavy climate tech businesses—and how climate tech can realize its immense potential.

Recognizing the challenge

The first step to overcoming a challenge is to recognize it, in all of its complexity. Make no mistake: the challenges that climate tech businesses face are different—and frankly, harder—than the ones faced by high-tech companies over decades past. 1 For broader context on the multiple and sometimes competing challenges of the net-zero transition, see “ What would it take to scale critical climate technologies ,” McKinsey, December 1, 2023; “ An affordable, reliable, competitive path to net zero ,” McKinsey, November 30, 2023; and “ Solving the net-zero equation: Nine requirements for a more orderly transition ,” McKinsey October 27, 2021. That starts with capital intensity. The ticket size of major climate technologies in early-stage VC are five to six times higher than, for example, fintech or quantum computing. In particular, high-demand solutions for sustainable fuels, hydrogen, green power, and circularity have high capital needs well before production (Exhibit 2). Climate tech sectors such as carbon capture, use, and storage (CCUS) and electrification of transport have ticket sizes of more than $25 million at early VC stages. 2 McKinsey analysis based on PitchBook data.

It is currently estimated that up to 90 percent  of 2050 baseline man-made emissions could be abated with existing climate technologies. Ten percent of abatement potential comes from climate technologies that are already commercially mature; however, approximately 45 percent of required abatements will come from emerging technologies that have not yet been deployed at scale (such as floating wind turbines and e-fuels). 3 “ What would it take to scale critical climate change technologies ,” December 1, 2023. For example, sustainable airline fuels represent the only viable way to decarbonize emissions from airlines until at least 2050. 4 Laurence Delina and Kristiana Santos, “Soaring sustainably: Promoting the uptake of sustainable aviation fuels during and post-pandemic,” Energy Research & Social Science , July 2021, Volume 77. While the general process knowledge of producing sustainable fuels has existed for decades, McKinsey analysis shows that production is not expected to be deployed at scale until at least 2025, and it remains to be seen whether a price premium will be sustainable. Traditional project investors—accustomed to debt levels of about 80 percent—can shy away from these longer-term investments, given that projects such as solar and wind power already offer a steady income stream.

Even more critically, some capital-intensive climate technologies lack proven commercial models. Often, the physical product would be similar to or the same as the nondecarbonized product, apart from its net carbon emissions (for example, green steel and net-zero chemicals). The investment thesis, therefore, often comes down to relying upon a green premium to generate high returns. But the existence of a sustainable green premium in the future is not a given. In parallel, construction and operating costs must come down, even at higher price levels, to enable a sustainable commercial model.

Moreover, the break-even point is not immediately in view, which can create tension in financing discussions. Capital-intensive climate businesses usually require significantly more time to scale up physical assets in comparison to asset-light high-tech companies. For example, the average time from Series A to Series D for digital marketplaces is three years; climate technologies based on today’s knowledge will take about seven years to achieve scale. 5 McKinsey analysis based on Crunchbase data.

Solving the conundrum

While the challenges are formidable, the promise of capital-intensive climate tech, as a fundamental matter of finance and economics, offers grounds for optimism. Investors naturally seek out attractive risk-adjusted returns, just as businesses ineluctably strive to meet emerging demand. What’s more, substantial governmental assistance provides a powerful tailwind. A path forward will require capital-intensive climate tech to derisk the business case, get creative about financing (often by taking advantage of public incentives), and scale up operations more quickly.

Derisk the business case

Capital-intensive solutions are actual solutions—not theoretical ones; most technologies needed for net zero are already mature. There are some technology risks, of course, but making these challenges transparent is actually a positive step toward allaying investor concerns. Businesses can start by explaining that key risks are a matter of engineering, not physics; many net-zero solutions combine technologies where most or even all the individual steps have been proved in other applications. For example, a circular chemical company combined five different steps where all but one were proved at scale—and the new production step was already being demonstrated at one plant. Laying out the solution in clear steps rather than presenting it as a “black box” proved enormously helpful to investors.

Businesses can start by explaining that key risks are a matter of engineering, not physics; many net-zero solutions combine technologies where most or even all the individual steps have been proved in other applications.

Climate tech leaders can also show that new production processes are well-founded and based on engineering certification studies. Often, one or more of the new process steps can be assessed by impartial, respected third-party engineering firms and synthesized into a “bankability study” that addresses, for example, technology maturity, process robustness, cost, and required capital expenditures. These studies are especially effective with project debt financiers in the early-launch phases.

Of course, merely demystifying how solutions would work does not, by itself, equate to derisking; the business needs to bring the solutions to life. But we find that many new businesses can take operational steps quickly. This starts with securing a supply chain: new businesses need to line up suppliers of raw materials and other key components early and creatively. We’ve seen recent examples of companies that establish partnerships with key suppliers to secure a stable future supply chain—and share the risk. For example, one early-stage green-ammonia project developer negotiated a long-term baseload purchase price allocation from a renewable power source; the agreement included guarantees of origin for each project site.

Offtake agreements or similar arrangements are particularly important for derisking and to buttress the commercial model. Negotiations typically go through several steps, culminating in a bankable agreement, which includes timeline, product specifications, warranties, and final-pricing arrangements. Critically for financing, we’ve seen companies achieve offtake agreements well before a technology was market-tested. For example, a green-materials company started discussing offtakes with leading automotive CEOs early in the business planning phase, well before the first detailed design of the initial plant financing. Management presented latent demand in a transparent way, demonstrating that by 2030, for 30 percent of automotive OEMs, decarbonization would require the use of its specific product—which was less expensive and involved lower technology risk than alternative solutions. In addition, the company clearly laid out demand-and-supply growth on a competitor-by-competitor level, an exercise which highlighted the risk of a shortage between the 2025 to 2035 time period—bolstering the case for long-term contracts. In fact, the company was able to establish win–win offtake agreements well before the design of its first projects and delivery four years thereafter.

Beyond offtake agreements, new businesses can get moving early on a clear strategic plan beyond the typical, longer-term horizon. Consider, for example, the success that some players in the automotive industry scored in driving down the cost for electric vehicles (EVs) by moving from “luxury only” to “below average car cost” for some models. Players in both the battery space and energy sectors, for their part, have entered into joint venture agreements with customers to share equity risk and eliminate most—and even all—demand risk. These arrangements aren’t new: in 2012, for example, Intel took an equity ownership in Dutch semiconductor equipment manufacturer ASML to strengthen the company’s largest company relationships. 6 “Intel takes 15% stake in ASML, part of EUV, 450mm development push,” Semiconductor Digest , July 10, 2012.

Effective companies across capital-intensive climate tech also secure relationships with equipment providers; suppliers of materials and components; and engineering, procurement, and construction firms as soon as possible. For example, one automotive player is collaborating with Eastern European companies to ensure a supply of low-carbon metal parts. Understandably, investors and partners want to see demonstrable progress on timelines and recoil from delays and cost overruns. Because the stakes are high, even a bit of slippage could result in financial distress given the size of the required plans.

Yet boldness is essential. Winning requires capital-intensive companies to set and meet large, stretch-the-possible aspirations. A true disruptor lays out a clear ambition to build an industry-leading platform with multiple plants, products, and scaling. For example, Ørsted set an ambition in 2010 to shift its portfolio from 85 percent fossil fuels and 15 percent renewable energy to 99 percent power generation from renewable sources by 2025. Its comprehensive plan was to shift from being an integrated energy provider to a world leader in wind energy—and it worked. The company’s net income has flipped from negative to positive—ranging from approximately $1 billion to $3 billion from 2016 to 2022, even in the face of recent supply chain strains and rising interest rates—all while decreasing its emissions by about 90 percent.

Get creative with financing

While climate tech now faces steeper challenges than high tech—particularly the amounts of capital needed and the longer horizon to achieve scale—it also enjoys a unique tailwind: the tremendous regulatory push for sustainability. That can be a difference maker in accessing large amounts of capital.

As part of the 2022 US Inflation Reduction Act (IRA), more than $500 billion will be invested in climate technologies (not including significant additional regulatory support for EVs). 7 “How a half-trillion dollars is transforming climate technology,” MIT Technology Review , August 16, 2023. But IRA initiatives are not the only source of public support: the residential solar company Sunnova Energy International, for example, tapped US government partial loan guarantees of up to $3 billion to back financing for its rooftop solar systems. 8 “US commits to $3 billion loan guarantee for Sunnova to expand solar access,” Reuters, April 20, 2023. In the European Union, more than $2 trillion in equity investments, grant money, and policy support has been budgeted through funds dedicated to achieving the European Green Deal. 9 EU long-term budget (2021–2027), European Council–Council of the European Union, accessed January 2024. Players such as Solarcentury (acquired by Statkraft), Encavis, and the joint venture of Enbridge and EDF Renewables have allocated significant funds to design, build, and maintain asset-heavy solutions. 10 “Enbridge’s joint venture, and EDF Renewables, selected to develop France’s largest offshore wind farm,” PR Newswire, March 27, 2023. The European Investment Bank, for its part, supports battery maker Northvolt’s gigafactory for lithium-ion battery cells in Skellefteå, Sweden, with backing from the Investment Plan for Europe. 11 “European backing for Northvolt’s battery gigafactory in Sweden,” EU Monitor, May 15, 2019.

Corporate debt can start as early as the Series A round. New climate tech companies typically access debt through syndicated loans, where commercial and public lenders come together to enable successful debt financing and successful scaling of business. Public institutions are often first movers when lending to climate tech companies. Some commercial institutions are adjusting their lending profile to be more creative, as well. For example, European commercial banks issued conditional commitment letters for €3.3 billion senior debt for an investment in green steel. 12 “Leading European financial institutions support H2 Green Steel’s €3.5 billion debt financing,” PR Newswire, October 24, 2022. Nor are banks the only provider of debt financing: growth-lending facilities for venture and scale-up, alternative asset managers, and direct-lender specialists are providing debt financing for the net-zero transition. Given current challenges in equity capital markets, debt will likely remain an important source of capital over the coming one to two years as well as the long term.

In addition to accessing debt at the corporate level, we see companies use project financing as early as the Series B stage to fund projected cash flows. This type of financing—already standard for wind and solar energy generation—helps to protect the parent’s balance sheet, even when debt is consolidated on an accounting basis. While renewable energy still constitutes the largest share of transition project financing, project financing for other climate technologies—such as battery production, EV manufacturing plants, and hydrogen plants—has seen growth rates around 15 to 30 percent over the past years and now constitutes about 25 percent of total project financing volume. 13 McKinsey analysis based on data from Dealogic, Crunchbase, and PitchBook.

Several banks are rapidly ramping up their capabilities to fund climate projects in creative ways. In the case of one leading green-hydrogen production plant, for example, the project financing vehicle was made bankable through a large, indirect governmental shareholding in one of its holding companies and through a 30-year offtake agreement signed by a global hydrogen production company.

Climate tech businesses can also reduce capital costs in a meaningful way through credit guarantees, export credit guarantees, or government guarantees once orders are achieved or within reach. One of the world’s largest credit guarantee programs for climate technologies is run by the US Department of Energy (DOE); its Title XVII Innovative Energy Loan Guarantee Program has provided more than $25 billion in loan guarantees for largely renewable-energy facilities. 14 The program provides that the US government will guarantee repayment of 100 percent of the principal and interest on private loans for up to 80 percent of construction costs. Guaranteed loans can have terms up to 30 years. Importantly, the DOE acknowledges the inherent risk and accepts that some loans will fail, meaning that the guaranteed amount will have to be refunded to the guaranteed commercial bank. As of the end of 2022, only 3 percent of loans guaranteed by the DOE have run into repayment issues, and only a fraction of those have defaulted in full. See “Public credit guarantees: Unlocking private investments for climate technologies,” Tech for Net Zero Allianz, July 13, 2023. In Europe, where agencies such as EKN, the Swedish export credit agency, help make projects bankable by moving early to assume risk, one green-steel manufacturer received export agency credit guarantees for 10 to 15 percent of its €4.5 billion financing—which helped it, in turn, receive senior loans committed from a consortium led by project financing banks. In another example, the Swedish national debt office provided an 80 percent credit guarantee for a €300 million loan to a European oil refinery to increase the supply of renewable fuels. And at COP28 , the UAE announced the launch of Alterra, a $30 billion initiative to help fund climate solutions through which $25 billion will be applied to scale climate investments and $5 billion for risk mitigation. The investment vehicle has already committed $6.5 billion for global investments, including in the Global South. 15 See “What is Alterra, the UAE’s $30 billion green investment fund?,” Climate Home News, December 12, 2023; and “Explained: what is Alterra, the $30 billion fund launched at COP28,” Energy Connects, December 1, 2023.

Scale up faster

There’s no getting around it: scaling up capital-intensive plants, production pathways, and other asset-heavy operations takes time. But even marathons can be run quickly—and being fast comes with clear advantages. Suppliers that can provide certified working solutions to their industrial and consumer customers, for example, are more likely to become the industry standard or provide the must-have solution or product that other businesses come to rely upon.

There’s no getting around it: scaling up capital-intensive plants, production pathways, and other asset-heavy operations takes time. But even marathons can be run quickly—and being fast comes with clear advantages.

Novel approaches can enable companies to scale capital expenditure–intensive businesses much faster than before. For example, Northvolt was able to significantly cut costs through increased equipment productivity and lower energy requirements and material costs. The automotive industry’s drive toward affordable batteries for EVs is a demonstrable example of achieving cost improvements. The price of lithium-ion batteries decreased by more than 85 percent over the past decade, largely through megafactories that employed modular scale. Similar investments in hydrogen production have been forecasted to decrease the price of green hydrogen substantially by 2030, further driving the green transition. 16 See “ Global Energy Perspective 2023: Hydrogen outlook ,” McKinsey, January 10, 2024; “ The clean hydrogen opportunity for hydrocarbon-rich countries ,” McKinsey, November 23, 2022; and Bernd Heid, Christopher Martens, and Anna Orthofer, “ How hydrogen combustion engines can contribute to zero emissions ,” McKinsey, June 25, 2021.

In addition, modular plant design allows nearly identical operating units to be built in parallel as companies rapidly scale up their business. 17 See “ Modular construction: From projects to products ,” McKinsey, June 18, 2019; “ How smart platforms can crack the complexity challenge in project industries ,” McKinsey, October 10, 2019; and Jeff Hart, Niels Phaf, and Koen Vermeltfoort, “ Saving time and money on major projects ,” McKinsey, December 1, 2013. Companies are moving faster by taking an iterative approach, with releases of updated plants, modules, operational instructions, and training that can be refreshed across all facilities at the same time. By focusing on the minimum requirements to prioritize speed to market, rather than designing for every possible customer need, companies can move more rapidly. 18 See Sanjiv Ratan, William Baade, and David Wolfson, “The large hydrogen plant challenge,” Hydrocarbon Engineering , July 2005. For example, an industrial gas player minimized costs while maximizing speed to market through a standardized design of its hydrogen equipment and operation of its facilities. Standardizing hydrogen plants envisions them as modules or “trains” that can be easily connected to increase capacity or deployed to customers as individual units. As demand rises, an additional train is added easily. Because the design is standardized across all units, the process does not require significant engineering, design, or other cost outlays. To further ensure operational simplicity, all engineering work is completed in one location.

Capital-intensive projects don’t require that one stage be completed before another can start; design and scaling can work in parallel. In fact, optimizing for each step can be the exact wrong approach.

Capital-intensive projects don’t require that one stage be completed before another can start; design and scaling can work in parallel. 19 Mark Bakker and Zak Cutler, “ The plant as a product: Hyperscaling green capex ,” McKinsey, September 7, 2023. In fact, optimizing for each step can be the exact wrong approach. Instead, effective climate tech businesses often take a “ plant as product ” approach and work backward from what is possible. This can mean skipping the pilot and going straight to the smallest commercial scale. As they do so, they engage with partners, especially suppliers, that share the objective of a long-term relationship. Tesla is perhaps the most prominent example of leveraging its engineering, procurement, and construction approach to scale rapidly. But it is hardly unique. Vargas companies such as H2 Green Steel have a similar record of aggressive construction and scaling, and are becoming serial builders of new projects. While not all players can or want to launch multiple plants, it’s far more likely that “more and bigger” will be a differentiator. Unlike writing better code, it’s hard to be a fast follower in an asset-heavy business.

While the growth potential of climate tech is reminiscent of the spectacular rise of high tech over the past three decades, the key challenges to realizing that growth are vastly different. Getting enough capital, and enough time to build scale, will be particularly hard. But these challenges are solvable. In another decade, some companies will be capital-intensive climate tech leaders. Why not yours?

Michael Birshan is a senior partner in McKinsey’s London office, Lisa Leinert is an associate partner in the Zurich office, Tomas Nauclér  is a senior partner in the Stockholm office, and Werner Rehm  is a partner in the New Jersey office.

The authors wish to thank Fredrik Dahlqvist, Caitlin Hayward, Anton Jansson, Tim Koller, and Alexander van de Voorde for their contributions to this article.

This article was edited by David Schwartz, an executive editor in the Tel Aviv office.

Explore a career with us

Related articles.

What would it take to scale critical climate technologies?

Solving the net-zero equation: Nine requirements for a more orderly transition

Fueling the energy transition: Opportunities for financial institutions

Subscribe to AI in Action – your guide to AI adoption in business >

• March 10, 2024
• AI Case Studies

Case Study: McKinsey’s Holistic Approach to AI and Digital Transformation

The firm’s strategic focus on a comprehensive transformation encapsulated by its “Rewired” concept underscores its efforts to enact change across strategy, talent, operating model, technology, and data. QuantumBlack, AI by McKinsey, has been highlighted as a key differentiator, emphasizing the firm’s innovation in data science and AI. This recognition is further reinforced by McKinsey’s strategic collaborations and the creation of an open-source ecosystem, aimed at fostering sustainable and inclusive growth in technology.

Key Takeaways

• McKinsey’s holistic transformation approach emphasizes strategy, talent, operating model, technology, and data.
• QuantumBlack, AI by McKinsey, showcases the firm’s innovation in data science and AI.
• The firm’s AI collaborations enhance its offering, merging McKinsey’s strategic insights with cutting-edge technological capabilities.
• McKinsey’s open-source ecosystem initiative underlines its commitment to sustainable and inclusive growth through technology.

McKinsey’s approach to AI and digital transformation is anchored in a holistic strategy known as the “Rewired” concept, which focuses on driving comprehensive change across strategy, talent, operating model, technology, and data. By building long-term capabilities for innovation, adoption, and scaling of technology-led solutions, McKinsey emphasizes the importance of a multidimensional change that transcends mere technological upgrades to include cultural shifts towards digital integration.

Central to this strategy is the firm’s user-centric design thinking, ensuring that technological solutions are deeply aligned with end-user needs for practical and impactful adoption. Moreover, through QuantumBlack, AI by McKinsey, the firm showcases its commitment to leading in data science and AI, offering clients state-of-the-art analytical capabilities and insights. This integrated and adaptive approach enables McKinsey to deliver sustainable and inclusive AI impacts, setting a benchmark for digital transformation in the consulting industry.

Implementation

McKinsey’s approach to integrating artificial intelligence (AI) is showcased through its high-profile collaborations and proprietary developments, each aimed at enhancing the firm’s ability to deliver cutting-edge solutions to its clients. A prime example of this strategic execution is the partnership with Salesforce, announced in September 2023. This collaboration aims to accelerate the adoption of trusted generative AI across sales, marketing, commerce, and service sectors.

By combining Salesforce’s robust customer relationship management (CRM) technologies, including Einstein and Data Cloud, with McKinsey’s AI and data models, the partnership is designed to improve customer buying experiences, increase sales productivity, and personalize digital marketing campaigns. This blend of strategic insight and technological prowess underscores McKinsey’s commitment to leveraging AI for transformative growth and efficiency.

Another significant aspect of McKinsey’s AI implementation strategy is its collaboration with Cohere, initiated in July 2023. This partnership is focused on harnessing the power of enterprise AI platforms and state-of-the-art large language models (LLMs) to drive client business performance through tailored end-to-end solutions.

Led by QuantumBlack, AI by McKinsey, the initiative aims to integrate generative AI into operations, redefine business processes, train and upskill workforces, and tackle some of the current toughest challenges with bespoke AI solutions. This collaboration not only highlights McKinsey’s dedication to pushing the boundaries of AI innovation but also its foresight in recognizing and acting on the transformative potential of generative AI in the business world.

McKinsey’s commitment to AI and digital transformation extends beyond strategic partnerships to the development of its own open-source ecosystem, launched in September 2023. This initiative aims to democratize access to advanced AI and digital transformation tools, with notable releases such as Vizro, a component from the QuantumBlack Horizon suite designed to enhance data visualization from AI models, and CausalNex, a tool for constructing cause-and-effect models.

By making these tools publicly available, McKinsey not only fosters an environment of collaborative innovation but also strengthens its role as a leader in the sustainable and inclusive growth of technology. This open-source approach reflects a broader trend in the tech industry towards transparency, collaboration, and community-driven development, aligning McKinsey’s technological advancements with its strategic vision for a more connected and innovative future.

McKinsey’s AI initiatives have led to enhanced operational efficiencies, competitive advantages for clients, and contributions to a global productivity increase estimated at $4.4 trillion through generative AI applications. McKinsey & Company has solidified its position at the forefront of digital transformation, leveraging Artificial Intelligence (AI) to drive significant change across various sectors. Recognized as a Leader in Digital Transformation Services by Forrester in its Q4 2023 report, McKinsey’s approach and achievements in integrating AI into its offerings highlight its commitment to leading through innovation.

Challenges and Barriers

Despite its successes, McKinsey navigates challenges such as cultural and organizational resistance to new technologies and the complexities of integrating AI with existing tech stacks, while ensuring data privacy and security.

Future Outlook

Looking ahead, McKinsey is focused on expanding partnerships and developing its open-source ecosystem to support the creation of sustainable, resilient, and adaptive business models through AI-enabled transformations. McKinsey’s journey in AI integration highlights a strategic commitment to overcoming challenges and leading innovation in the digital transformation landscape.

Sources: McKinsey.com

Related Posts

Case Study: Redfin’s Innovative AI Tools

• April 27, 2024

Case Study: Compass Enhances Agent Productivity with AI

Case Study: JLL’s Implementation of JLL GPT™

More From Forbes

Unlocking longevity: a convergence of exponential technologies and circular economy principles.

• Share to Facebook
• Share to Twitter
• Share to Linkedin

Dr Guenther Dobrauz-Saldapenna is a Partner at venture capital house exelixis capital Ltd. and of family office Dobrauz-Saldapenna 1858 Ltd.

The quest for longevity transcends cultural and historical boundaries, reflecting humanity’s enduring fascination with life extension and vitality. As a venture capitalist, what drives me is the excitement of blending cutting-edge technology with society’s aspirations for progress. In this article, I will explore how, through integrating exponential technologies and circular economy principles, we can potentially reshape human well-being and longevity, environmental conservation, and socioeconomic systems. I believe these are important areas for venture capitalists who want to play a key role in shaping tomorrow’s world.

Definitions And Historical Context

Longevity, defined as the prolonged duration of life and maintenance of health and vitality, has been a subject of philosophical inquiry and scientific investigation throughout history. Notable thinkers such as Aristotle, who pondered the nature of aging, and Leonardo da Vinci, who envisioned mechanical contrivances for longevity, have early contributed to the discourse surrounding longevity, which continues today through modern thinkers such as Andrew J. Scott and Laura Carstensen.

In principle, the world’s population is living longer than ever before. Average global life expectancy has risen from 34 years in 1913 to 72 years in 2022 . The shocking news is that for the first time in human history, life expectancy in the Western world is declining, for reasons including unhealthy lifestyle choices and environmental pollution. This is why I believe in the importance of systematically investing in and scaling companies that are supporting a healthy, long life.

Exponential technologies refer to innovations that exhibit significant growth in capability and impact over time. These include artificial intelligence, nanotechnology, biotechnology and robotics, among others. Futurist Ray Kurzweil’s concept of the technological singularity, where technological progress accelerates to the point of surpassing human comprehension, is an example of the transformative potential of exponential technologies.

Sony Is Making A Truly Terrible Mistake With Helldivers 2 Update Sony Reverses Course

Google tests much needed google photos feature upgrade, ‘baby reindeer’: stephen king writes essay praising netflix stalker series.

Circular economy principles advocate for a regenerative approach to resource management, wherein materials are continually reused, recycled or repurposed to minimize waste and maximize resource efficiency. Influential thinkers such as Ellen MacArthur, whose foundation promotes circular economy initiatives, demonstrate the potential for leaders to redesign systems to emulate natural cycles and eliminate the concept of waste.

My investment thesis is based on merging the effects of the aforementioned three concepts: longevity, exponential technologies and circular economy. From my experience, the benefits resulting from this unique combination have the potential to go beyond the traditional venture capital way of thinking.

Key Concepts Of Exponential Technologies In Longevity

Exponential technologies encompass innovations such as artificial intelligence, genomics and biotechnology, while circular economy principles advocate for sustainable resource management via reducing waste to as close to zero as possible. Central to the convergence of longevity, exponential technologies and circular economy principles is the concept of personalized medicine , which tailors healthcare interventions to individuals’ genetic makeup, lifestyle factors and environmental influences, optimizing treatment efficacy and minimizing adverse effects. Pioneering researchers such as Dr. Leroy Hood, a proponent of systems biology and personalized healthcare, have championed this approach to revolutionize healthcare delivery .

Furthermore, the application of exponential technologies in regenerative medicine offers promising avenues for extending healthspan—the period of life free from disease and disability. Stem cell therapy, tissue engineering and organ regeneration techniques hold potential for repairing and replacing damaged tissues and organs, thereby mitigating the effects of aging and age-related diseases .

In my investments, I realized that circular economy principles can align well with promoting longevity by improving well-being and lessening environmental impacts. The idea of “circular health” can help us better understand the link between human health and ecological welfare, showing that actions benefitting one can also help the other.

Synergies And Opportunities

As mentioned, the blending of longevity, exponential technologies and circular economy principles can open doors for enhancing human well-being and environmental sustainability. Combining AI predictive analytics with circular economy approaches in healthcare can streamline resource use and supply chain management, cutting costs and environmental harm. For example, some companies are developing innovative textile materials that replace conventional materials with biodegradable and recyclable alternatives. The emergence of more and more “healthtech” startups focused on leveraging exponential technologies for preventive healthcare and wellness promotion show the potential for synergies between longevity and sustainability. I believe that more collaborations between healthcare innovators, environmentalists and policymakers can further amplify the impact of these initiatives, fostering holistic solutions that can help address societal challenges at the intersection of health and sustainability.

Challenges And Ethical Considerations

Despite the potential of convergence, the pursuit of longevity through exponential technologies and circular economy principles raises some ethical, social and environmental considerations. Addressing disparities in healthcare access and resource distribution is paramount to ensuring that the benefits of longevity are equitably shared across diverse populations.

Transitioning to a circular economy demands significant systemic shifts in production, consumption and waste management. Industries reliant on linear models often face challenges in balancing economic demands with environmental goals, supporting the drive for more circular practices. Additionally, I believe that global cooperation and forward-thinking strategies are important to tackling causes of environmental degradation like overconsumption and fossil fuel reliance.

The intersection of longevity, exponential technologies and circular economy principles can be a transformative approach to tackling societal issues and promoting human well-being. From personalized medicine to circular health systems, there is great potential, urging us to pave the way for a future where longevity and sustainability merge for everyone’s benefit. Ultimately, I strongly believe that the investment community has not only a responsibility to focus beyond returns but also a duty and unique opportunity to considerably create a positive impact on humanity and the planet.

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

• Editorial Standards
• Reprints & Permissions