This article was taken from the September issue of Wired UK magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online
Just before Sir Richard Branson delivered his bombshell, he seemed nervous. Perhaps he didn't know how some of the world's most influential people, gathered in New York for a meeting of former President Bill Clinton's foundation, would react.
Fiddling with his ring finger, Branson told the press conference they had inherited a beautiful planet. "It's really in our hands whether our children and their children inherit the same world," Branson continued. "We're very pleased today to be making a commitment to invest 100 per cent of all future proceeds of the Virgin Group from our transportation businesses into tackling global warming..." The applause interrupted him. "...for an estimated value of $3 billion over the next 10 years." Amid cheers, the dignitaries behind him, including Clinton and Al Gore, moved to shake his hand.
That was September 2006. This May, Wired travelled to Branson's Oxfordshire home to ask him about his green initiatives. "I was brought up with a social conscience," Branson says as he relaxes into an old chair in his den. "If you're involved with a business that's damaging the world, you can do one of two things. You can continue to harm the world, or you accept that you are playing a part in the problem and try to do something about it."
His conversion began in 2003, he says, when fuel prices started soaring and he began looking into ways to lower the price of oil. "I thought what we could do is build a refinery," says Branson, valued at £1.2 billion in this year's Sunday Times Rich List. Ted Turner pleaded with him not to do it. Turner sat him down with 20 scientists. "That was the first eye-opening session on global warming I'd had," Branson says.
Soon after, Al Gore had breakfast with Branson and gave him the presentation that would become An Inconvenient Truth. As a businessman of rare public standing, Gore told him, "if you could make some sort of gesture or do something, you might be able to convince other business leaders".
The idea came to Branson in the bath. "I suddenly thought, if we invest any proceeds from our dirty fuel business, that would be the sort of gesture that Al Gore and others sought," he says. "But we might also manage to get some breakthroughs." Days later, at the 2006 Clinton Global Initiative gathering, Branson shocked his peers with the strength of his newfound faith.
But perhaps they mistakenly assumed that Virgin's "proceeds" meant their transportation business's "profits". In fact, Branson meant the share dividends Virgin received from these operations. These are proportional to Virgin's stake in its transport businesses, and rely on the directors choosing to use profits in that way. In the three years since the pledge, the Virgin Group has received "proceeds" of around £110 million. Why so low? Out of Virgin's six main transportation businesses, only two are making any money.
Virgin America and Air Asia X, a budget long-haul airline based in Kuala Lumpur in which Virgin has a 20 per cent stake, are both in start-up mode. Virgin Blue, the low-cost Australian carrier, has been profitable but has been spending cash to expand into New Zealand. Brussels Airlines, formerly Virgin Express, is being taken over by Lufthansa.
Which leaves Virgin Atlantic and Virgin Trains, operating the West Coast line between London and Glasgow. Virgin has a 51 per cent ownership stake in both companies. Over 90 per cent of the Virgin Group's transport profits come from its Virgin Trains franchise, including some deferred dividend payments. Virgin Atlantic generated pre-tax profits of £70 million between 2006 and 2008, but the airline has returned only £8.1 million to the Virgin Group through its preference dividends, choosing instead to reinvest its profits.
As one senior figure at Virgin put it, "We're not exactly making $300 million a year." At this rate, it will be impossible to meet a figure of $3 billion for the decade, even if the economy hadn't cratered since his pledge. Branson says that misses the point. "In a sense, whether it's $2 billion, $3 billion or $4 billion is not particularly relevant," he says. (Since late 2006, Virgin says it has invested around $260 million in its environmental projects.) Nevertheless, Branson says, "The gesture was that anyone who flies on a Virgin plane or travels on a Virgin train would know that any profits Richard Branson takes out, he's going to invest in clean energy."
Still, given Virgin's emphasis on investments into biofuels, critics argue that these investments are not as philanthropic as they seem. Jody Boehnert, from the Camp for Climate Action, tells Wired: "It's obvious that fossil fuels are going to be a lot more expensive. Virgin is going to have to look for alternative fuels, so it's quite a logical business strategy." And with the Renewable Transport Fuel Obligation demanding that by 2010 fuel suppliers must ensure that 5 per cent of UK sales come from biofuels, such investments could prove lucrative for Virgin.
Branson's interest, though, seems to go beyond raw investment to the big idea. He says he is particularly excited by geo-engineering - fiddling with the make-up of the planet's atmosphere to fight climate change.
So he conceived the Virgin Earth Challenge, the "largest ever science and technology prize to be offered in history", as Branson put it during the launch in February 2007. The $25 million prize would reward a commercial method of extracting carbon dioxide from the atmosphere, as judged by Branson, Gore and scientists including James Lovelock.
The challenge, which is estimated to be costing Virgin $100,000 a year to run, is Branson's Plan B. "I realised there was a possibility that the problem was far worse than I first realised and we may already be too late," he says. "The Virgin Earth prize is a fallback insurance policy."
It could encourage a world-saving innovation. Yet some wonder if the prize is more an insurance policy for Branson's PR. One critic is Phil Thornhill, campaign coordinator at the Campaign Against Climate Change. "The more you dangle a carrot at these distant technological solutions, the more you avoid having to take hard decisions," he says. "Something positive could come of this, but that is the downside." Boehnert suggests that as such technology would be worth so much more than $25 million, the prize money on offer isn't much of an incentive to get involved, for all the positive PR that Virgin may get out of it. "It just seems like a lot of spin," she says."
In February 2008, Branson again faced the press, in front of a Virgin Atlantic Boeing 747-400 in a vast hangar at Heathrow. This time he looked much more comfortable, in a black flight jacket with "Virgin Biofuels Team" on the back.
The jet, tail number VS 811P, would soon reach 30,000 feet before touching down at Amsterdam's Schiphol airport just over an hour later. The plane would be fed a blend of jet kerosene and oils derived from Brazilian babassu nuts and coconuts from the Philippines - the world's first commercial airline flight using a biofuel.
Branson grinned as he and the pilot, Captain Geoff Andreasen, posed drinking from coconuts through straws. At one point, he even shocked his staff by drinking the biofuel to prove how "bio" it really was. It was actually the distilled form of the two crops, not the actual fuel in the tank, betraying for many the flight's PR function.
And it was only a proof-of-concept fuel that couldn't be mass produced. Still, it took Imperium Renewables two years of research with Virgin, Boeing and General Electric to reach this point. "These oils have the right sort of carbon chain to replicate jet fuel, among the most concentrated forms of energy in terms of megajoules," says Imperium's CEO, John Plaza. Branson hailed the flight as a breakthrough in greener air travel. Since his 2006 pledge, Virgin's biggest green investment by far has been in Virgin Fuels, a new subsidiary set up to invest in alternative fuels.
Virgin in 2006 invested around $130 million in two corn-ethanol investments through Virgin Fuels. One was Cilion, a Californian firm, and the other VBV, owner of ethanol plants in Indiana and Tennessee.
Branson still sits on the Steering Committee of the Energy Future Coalition, which lobbied the US government to introduce the Renewable Fuel Standard in 2005. This mandates the use of 15 billion gallons of corn ethanol per year from 2015.
Not all environmentalists see biofuels as a potential solution. As Jeremy Woods, a bioenergy lecturer at Imperial College London, puts it: "Biofuels could be a substantial component of the supply of energy to combat climate change - but there are quite a lot of caveats. The devil is in the details." Some argue that converting rainforest and farmland to grow agro-fuels may promote food scarcity and, if more forest is razed, could destroy a natural carbon dioxide extractor. Leo Murray, from campaign group Plane Stupid, warns that this could mean "cars and planes will be fed while people starve".
And according to Nobel Prize-wining chemist Paul Crutzen in 2007, the production of corn ethanol could actually raise greenhouse emissions.
Virgin's test flight used very little biofuel. Only 5 per cent of the fuel was the babassu nut and coconut mix. Even so, the journey to Amsterdam required the equivalent of 150,000 coconuts, Imperium said at the time. That flight consumed 22 tonnes of fuel, meaning it would have required 3 million coconuts to power it entirely.
Valdener Miranda, a member of Assema, an agriculture reform group that works with babassu nut breakers in Maranhao, Brazil, tells Wired that 22 tonnes of oil would require at least 44 tonnes of nuts. To make 100 tonnes of the oil, enough to go from London to Amsterdam and back, would need all the forest in the states of Maranhao, Piaui, Tocantins and Para - around 18 million hectares.
Such numbers lead Thornhill to call the flight a "deception". "It's designed to portray the aviation industry as potentially green and to undercut the argument that you have to make it smaller to reduce emissions," he says.
Virgin knew its test fuel wasn't sustainable; nor did it ever claim it would be. But the critics had made their point. "Every time I move into a new area, I really do feel like a university student," Branson says. "As the university course went on, we decided there were perhaps better ways of investing the money." So the company changed direction.
Now, if Branson is to be believed, only bankers and businessmen like Anup Jacob and Shai Weiss can save our planet.
Jacob and Weiss are founders of the Virgin Green Fund, which in July 2007 succeeded Virgin Fuels. An independent private equity fund, it aims to invest in clean technologies of all kinds. In the first round of fundraising, Virgin invested $100 million in the fund. It remains its largest shareholder.
Of Virgin Fuels' original investments, it sold its stake in VBV last May to its partner company, Irish renewable-energy firm NTR. Virgin retains a stake in corn-ethanol producer Cilion. Calls and emails to Cilion went unreturned.
Jacob's partner in London, Shai Weiss, heads Virgin Fuels. The 41-year-old Israeli had impressed Branson when he worked at NTL and helped oversee the merger with Telewest to what is now Virgin Media. In July 2006, four months before Branson's pledge in New York, he joined Virgin's head office to look after the VF investment.
Unlike Branson, who comes across as quite shy, Weiss stares at you with his piercing green eyes. "Our approach is, let's say, the old-school private-equity model," he says. "We like backing proven technologies and proven management teams."
What the fund is not about is the big new idea. "We have the technology to fix most of our problems today," Jacob says. "It may not be 100 per cent but it's at least 50 per cent. The question is, how do we get it to market?" The 35-year-old was born in Bangalore and moved to Saudi Arabia before ending up in Kansas. He worked at private-equity firm TPG for eight years in renewables before joining Virgin. "None of this works without a financial return," he says.
The Virgin Green Fund has made investments worth $150 million in renewable energies such as water, solar and wind. "Of 3,000 inquiries we looked at 250, thought about 100 and invested in nine," Weiss says.
The fund has two investments in solar power. California-based Solyndra makes photovoltaic panels for rooftops, and Odersun, a German company, specialises in building "integrated photovoltaics". "Imagine a skyscraper, but made from solar panels instead of glass," Jacob says. Weiss and Jacob are also investing in desalination. "People always ask us why we focus on small things," Jacob says. "Our view is that it's better to have a solar panel on your building rather than generating electricity in the desert and sending it to you over transmission cables."
Another investment is Israeli start-up Green Road. The company makes software that monitors how you drive. The fund claims it halves accidents and cuts fuel use by up to 10 per cent. The product is targeted at the fleet market: delivery companies such as FedEx. These two bankers argue that Green Road is potentially more useful than any other carbon-lowering scheme.
Some see such initiatives as token. Mike Childs, head of campaigns at Friends of the Earth, says: "It would have a small impact but would still be outweighed by the growth in car transport. The big game is shifting to electric cars, not making petrol or diesel cars slightly more efficient."
But Weiss and Jacob see these small ideas as vital. "We've had three oil shocks in the last 30 years and we keep hearing that we have to get off fossil fuels," Jacob says. "Environmentalists have been pushing it and, well, look at where we now." He pauses. "I appreciate the environmental argument, but history has shown us this is not sustainable. If our companies do what they say they're going to do, then there will be enormous gains."
In fact, Branson is counting on it. The Virgin Green Fund plans to grow to about $400 million within five years. "All you need is one breakthrough in this area and you hit an oil well, effectively," he says. "The investments by the Virgin Green Fund will start generating profits and, although I haven't said it before or haven't asked anybody at the Virgin Group, I'm very happy for those to be reinvested as well."
In other words, those will count towards the pledge. Branson turns to his press officer. "Can you let Stephen Murphy know I've said this?" he says, laughing. Stephen Murphy is CEO of the Virgin Group. "We've got to keep on coming up with these positive ideas," Branson says. "One or two environmental organisations are there to campaign, but in the end I think it's up to business people to use their entrepreneurial skills to tackle global warming."
Branson is most keen to talk up his fund's biofuels investment. That company is Gevo. Founded by three PhDs from the California Institute of Technology, it uses "agricultural waste" to make isobutanol, a relatively energy-efficient fuel. "If bio-butanol turns out to be the success we believe it will be," Branson says, "then one achieves making a big difference in the world and paying the bills. Which the only way it's going to work, long-term."
Yet large-scale isobutanol production is untested, and some think it may be harmful. Deepak Rughani of Biofuelwatch says: "You'd need GM microbes to break down woody tissues. If they escaped, they would eat their way through our forests."
Virgin is also keen to pursue biofuels based on algae, which could result in carbon savings of 80 per cent, according to the Carbon Trust. More importantly it may be the only viable source of alternative jet fuel. Jeremy Woods tells Wired: "Air travel has a quite specific and very high-quality demand on the fuel that it uses. Algae, almost by default, produce very high-quality oil."
Yet the practicalities are uncertain. "Yes, you can extract oil from algae," says Christopher Howe of Cambridge University's biochemistry department. "But it's not proven that you can grow them on a large enough scale in a way that is economically worthwhile and saves carbon in the long term. It may also be that you have to invest more energy in getting the biofuel out than the biofuel itself contributes." These algae would also have to overcome the energy-draining challenge of both growing and producing oil simultaneously. With such uncertainty, it is unclear how soon Virgin's planes will rely on completely clean fuel.
Since making his pledge, Branson has been attacked by the environmental movement on other fronts. A certain smugness didn't help. (Sample press release: "Today, Richard Branson has taken over a three-day fast for Darfur from actress Mia Farrow.") "This is a company that is hell-bent on unrestrained airport expansion, starting with a third runway at Heathrow which would almost double the number of flights," Greenpeace chief scientist Doug Parr said at the time of the test flight. (Greenpeace declined to comment on Branson, referring Wired to previous statements.) Besides Virgin's support for the now-approved third runway, critics refer to Virgin Galactic, Branson's space-tourism venture. It would be hard to find a less urgent reason to burn massive quantities of fuel, says Jody Boehnert. "To throw emissions into the upper atmosphere for space tourism makes you very much a part of making pollution. It's hypocritical."
To Branson, this misses the point. "The third runway won't be built before 2020," he says. "By then, I very much hope that all planes will be running on clean fuels." As for Virgin Galactic, "We've tried to make sure our spaceship company is not only the cleanest in the world, but also carbon neutral. And I hope by the time we launch, we'll be launching on completely clean fuels."
Thornhill calls Branson's hopes for a clean rocket launch "complete bullshit". "A big part of Branson's business has always been based on good PR," he says. "Here the PR is almost totally eclipsing the reality. And as for 100 per cent of planes using clean fuel by 2020, that sounds extremely unlikely. I think it is totally an excuse to keep aviation going." Woods tells Wired: "I doubt for a very long time you'd be targeting 100 per cent of aircraft travel from biofuels - you'd be saying a percentage of it. It might be 20 or 30 per cent by 2030 or 2050."
Ben Graziano of the Carbon Trust, set up by the UK government to help businesses reduce their carbon footprints, disagrees. "Given how the world is structured and how it works, we do need to accept where we are and where we need to go," he says. "Being pragmatic, we do need biofuels because the infrastructure is built up. If you want to fly for the foreseeable future, we'll need a biofuel of some description."
Nevertheless, Branson's critics are demanding results. And for all his efforts, he doesn't have much to show them after three years. His supporters say that's asking too much too soon. "Branson unabashedly expects both financial and PR gains from his clean-fuels strategy," says Marc Hodak of New York University's business school. "Mocking [Branson's efforts] as 'publicity stunts' is a rather petty complaint. If these investments do prove profitable, the market will spread their benefits more surely and quickly than all the cajoling by politicians, NGOs and corporate critics ever could."
It's still the big ideas that occupy Branson most. He is about to launch a Carbon War-Room, a board of experts who will consult with 15 "leaders" over key issues. It's partly a discussion forum, partly a "Dragons' Den" to fund green technologies. The idea is to "treat carbon as the enemy and to treat it like you treat a war situation," Branson says. "It will look at every single way to tackle carbon, not just conventional ways."
Yet critics' opinions are unchanged by Branson's arguments. Childs concludes that "he's trying to fit square pegs in round holes in trying to make his unsustainable businesses sustainable". And Murray's parting shot? "He's off his tits." But the more extreme the solutions, the more optimistic Branson appears to become. "One of the other ideas we're working on is flooding large areas in Africa and Asia with the sea-level water as it's rising," he says. In theory, these huge man-made lakes in desert regions could cool the Earth.
To Branson, the innovation that got us into this mess will now get us out of it. "I don't think there's another way," he says. Yes, with so many oil-driven enterprises under the Virgin umbrella, he may see business as well as PR benefits to backing alternatives. Yet whatever the motives, his ambition is clear. "We've got to succeed," Branson says. "And hopefully, we will."
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This article was originally published by WIRED UK
