This Changes Everything (39 page)

Which leaves us with Branson—his pledge, his prize, and his broader vision of voluntarily changing capitalism so that it is in keeping with the laws of “Gaia.” Almost a decade after Branson’s PowerPoint
epiphany, it seems like a good time to check in on the “win-win” crusade. It’s too much to expect Branson to have changed the way business is done in less than a decade, of course. But given the hype, it does seem fair to examine how his attempts to prove that industry can lead us away from climate catastrophe without heavy government intervention have progressed. Because given the dismal track
record of his fellow green billionaires on that front, it may be fair to conclude that if Branson can’t do it, no one can.

Let’s start with Branson’s “firm commitment” to spend $3 billion over a decade developing a miracle fuel. Despite press reports portraying the pledge as a gift, the original concept was more like straight-up vertical integration. And
integration is Branson’s hallmark: the first Virgin business was record sales, but Branson built his global brand by making sure that he not only owned the music stores, but the studio where the bands recorded, and the record label that represented them. Now he was applying the same logic to his airlines. Why pay Shell and Exxon to power Virgin planes and trains when Virgin could invent its own
transport fuel? If it worked, the gambit would not only turn Branson into an environmental hero but also make him a whole lot richer.

So the first tranche of money Branson diverted from his transportation divisions went to launch a new Virgin business, originally called Virgin Fuels and since replaced by a private equity firm called the Virgin Green Fund. In keeping with his pledge, Branson started
off by investing in various agrofuel businesses, including making a very large bet of roughly $130 mil
lion on corn ethanol.
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And Virgin has attached its name to several biofuel pilot projects—one to derive jet fuel from eucalyptus trees, another from fermented gas waste—though it has not gone in as an investor. (Instead it mainly offers PR support, and a pledge to purchase the fuel if it becomes
viable.) But by Branson’s own admission, the miracle fuel he was looking for “hasn’t been invented yet” and the biofuels sector has stalled, thanks in part to the influx of fracked oil and gas. In response to written interview questions, Branson conceded, “It’s increasingly clear that this is a question of creating the market conditions that would allow a diverse portfolio of different renewable
fuel producers, suppliers and customers to all work in the same way that conventional fuel supply chains work today. It’s one of the issues that the Carbon War Room’s renewable jet fuels operation is looking to solve.”
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Perhaps this is why Branson’s green investment initiative appears to have lost much of its early interest in alternative fuels. Today, the Virgin Green Fund continues to invest
in one biofuel company, but the rest of its investments are a grab bag of vaguely green-hued projects, from water desalination to energy-efficient lighting, to an in-car monitoring system to help drivers conserve gas. Evan Lovell, a partner in the Virgin Green Fund, acknowledged in an interview that the search for a breakthrough fuel has given way to a “much more incremental” approach, one with
fewer risks and more short-term return.
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Diversifying his holdings to get a piece of the green market is Branson’s prerogative, of course. But hundreds of venture capitalists have made the same hedge, as have all the major investment banks. It hardly would seem to merit the fanfare inspired by Branson’s original announcement. Especially because the investments themselves have been so unremarkable.
Jigar Shah, a Branson supporter who ran the Carbon War Room, is frank about this: “I don’t think that he’s made a lot of great investments in the climate change space. But the fact that he’s passionate about it is a good thing.”
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Then there is the small matter of dollar amounts. When Branson made his pledge, he said that he would “invest 100 percent of all future proceeds of the Virgin Group
from our transportation businesses into tackling global warming for an estimated value of $3 billion over the next 10 years.”
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That was 2006. If Branson is to make it to $3 billion by 2016, by this point, at least $2 billion should have been spent. He’s not even close.

In 2010—four years into the pledge—Branson told
The Economist
that he had so far only invested “two or three hundred million
dollars in clean energy,” blaming poor profits in the airline sector. In February 2014, he told
The Observer
that “we have invested hundreds of millions in clean technology projects.” Not much progress, in other words. And it may be even less: according to Virgin Green Fund partner Lovell, Virgin has still only contributed around $100 million (outsider investors had matched that), on top of the
original ethanol investment, which as of 2013, brings the total Branson investment to something around $230 million. (Lovell confirmed that “we are the primary vehicle” for Branson’s promise.) Add to that an undisclosed, but likely modest personal investment in an algae company called Solazyme, and we are still looking at well under $300 million dollars, seven years into the ten-year pledge that
is supposed to reach $3 billion. As of this writing, no major new investments had been announced.
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Branson refused to answer direct questions about how much he had spent, writing that “it’s very hard to quantify the total amount we’ve invested in relation to climate change across the Group,” and his labyrinthine holdings make it hard to come up with independent estimates. “I’m not very good
with figures,” the billionaire has said about another murky corner of Virgin’s empire, adding “I failed my elementary maths.” Part of the confusion stems from the fact that it’s unclear what should be counted toward the original $3 billion pledge. It began as a targeted quest for a miracle green fuel, then expanded to become a search for clean technologies generally, then, apparently, eco-anything.
Branson now says that he is counting “investments made by individual Virgin companies in sustainability measures, such as more efficient fleets” of planes. More recently, Branson’s fight against global warming has centered around various attempts to “green” his two private islands in the Caribbean, one of which serves as his deluxe family compound and the other a $60,000 a night hotel. Branson claims
the model he is setting will help nearby Caribbean nations to switch to renewable power themselves. Perhaps it will, but it’s all a long way from the pledge to transform capitalism back in 2006.
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The Virgin boss now plays down his original commitment, no longer referring to it as a “pledge” but rather a “gesture.” In 2009, he told
Wired
magazine, “In a sense, whether it’s $2 billion, $3 billion
or $4 billion is not particularly relevant.” Branson told me that when the deadline rolls around, “I suspect it will be less than $1 billion right now.” That too may prove an exaggeration: if the publicly available information is correct, he would have to more than triple the green energy investments he has made so far. When asked, Branson blamed the shortfall on everything from high oil prices
to the global financial crisis: “The world was quite different back in 2006. . . . In the last eight years our airlines have lost hundreds of millions of dollars.”
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Given these various explanations for falling short, it is worth taking a look at some of the things for which Richard Branson and Virgin
did
manage to find money in this key period. Like, for instance, a massive global push to put
more carbon-spewing planes in the skies adorned with stylized “V”s on their tails.

When Branson met with Al Gore he warned the former vice president that however alarmed he became about what he learned about climate change, he was about to launch a new air route to Dubai and wasn’t about to change that. That wasn’t the half of it. In 2007, just one year after seeing the climate light with Gore
and deciding, as he put it, that “my new goal in life is to work at reducing carbon emissions,” Branson launched his most ambitious venture in years: Virgin America, a brand-new airline competing in the U.S. domestic market. Even by the standards of a new venture, Virgin America’s growth rates in its first five years have been startling: from forty flights a day to five destinations in its first
year, it reached 177 flights a day to twenty-three destinations in 2013. And the airline has plans to add forty more planes to its fleet by the middle of the next decade. In 2010,
The Globe and Mail
reported that Virgin America was heading for “the most aggressive
expansion of any North American airline in an era when most domestic carriers have been retrenching.”
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Branson’s capacity to expand
so quickly has been boosted by rock-bottom seat sales, including offering tickets for just $60.
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With prices like that, Branson was not just poaching passengers from United and American, he was getting more people up in the air. The new airline, however, has been a hugely costly endeavor, generating hundreds of millions in losses. Bad news for the Green Fund, which needed Virgin’s transportation
businesses to do well in order to get topped up.

Branson hasn’t only been expanding his transportation businesses in the Americas. The number of people flying on various Virgin-branded Australian airlines increased by 27 percent in the five years following his climate pledge, from fifteen million passengers in 2007 to nineteen million in 2012. And in 2009, he launched a whole new long-haul airline,
V Australia. Then, in April 2013, Branson unveiled yet another ambitious new venture: Little Red, a domestic airline for the U.K., starting with twenty-six flights a day. In true Branson style, when he launched the new airline in Edinburgh, he dressed in a kilt and flashed his underwear to reporters, which he had emblazoned with the words “stiff competition.”
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But as with Virgin America, this
was not just about competing with rivals for existing fliers: Virgin was so keen on expanding the number of people who could use the most carbon-intensive form of transportation that it offered a celebratory seat sale for some flights that charged customers no fares at all, only taxes—which came to about half the price of a cab from central London to Heathrow during rush hour.
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So this is what
Branson has done on his climate change Road to Damascus: he went on an airplane-procurement spree. When Virgin’s various expansions are tallied up, around 160 hardworking planes have been added to its global fleet since Branson’s epiphany with Al Gore—quite possibly more than that. And the atmospheric consequences are entirely predict
able. In the years after his climate pledge, Virgin airlines’
greenhouse gas emissions soared by approximately 40 percent. Virgin Australia’s emissions jumped by 81 percent between 2006–2007 and 2012–2013, while Virgin America’s emissions shot up by 177 percent between 2008 and 2012. (The only bright spot in Branson’s emissions record was a dip at Virgin Atlantic between 2007 and 2010—but that likely was less the result of visionary climate policy than the
global economic downturn and the massive volcanic eruption in Iceland, which hit airlines indiscriminately.)
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Much of the sharp overall rise in Virgin’s emissions was due to the airlines’ rapid growth rate—but that wasn’t the only factor. A study by the International Council on Clean Transportation on the relative fuel efficiency of fifteen U.S. domestic airlines in 2010 found that Virgin America
clocked in at ninth place.
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This is quite a feat considering that, unlike its much older competitors, the brand-new airline could have built the best fuel efficiency practices into its operations from day one. Clearly Virgin chose not to.

And it’s not just airplanes. While he has been publicly waging his carbon war, Branson unveiled Virgin Racing to compete in Formula One (he claimed he had
entered the sport only because he saw opportunities to make it greener but quickly lost interest). He also invested heavily in Virgin Galactic, his own personal dream of launching the first commercial flights into space, for a mere $250,000 per passenger. Not only is leisure space travel a pointless waste of (planet-warming) energy, it is also yet another money pit: according to
Fortune
, by early
2013 Branson had spent “more than $200 million” on the vanity project, with much more in the works. That would be more than he appears to have spent on the search for a green fuel to power his planes.
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When asked about the status of his $3 billion climate pledge, Branson tends to plead poor, pointing to the losses posted by his transportation busi
nesses.
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But given the manic level of growth
in these sectors, it’s an excuse that rings hollow. Not only have his trains been doing quite well, but given the flurry of new routes and new airlines, there was clearly no shortage of surplus money to spend. It’s just that the Virgin Group decided to follow the basic imperative of capital: grow or die.

It’s also worth remembering that Branson was very clear when he announced the pledge that
if his transportation divisions were not profitable enough to meet the target, he would divert funds from other parts of the Virgin empire. And here we run into another kind of problem: Branson’s corporate modus operandi is somewhat nontraditional. He tends to pull in relatively modest profits (or even losses) while spending a great deal of money (his own, his partners’, and taxpayers’) building
up flashy extensions of the Virgin brand. Then, when a new company is established, he sells all or part of his stake for a hefty sum, and a lucrative brand licensing deal. This money isn’t posted as profits from those businesses, but it helps explain how Branson’s net worth rose from an estimated $2.8 billion in 2006, the year he met with Gore, to an estimated $5.1 billion in 2014. Musing on his passion
for environmentalism to John Vidal in
The Observer
, Branson said, “I find it interests me a lot more than making a few more bucks; it’s much more satisfactory.” And yet a few more bucks he has certainly made.
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