2023 is more than halfway over, which makes it a good time to look back at the key events and trends in innovation in the year so far. To identify these trends, we considered Lux client interest, our analysts’ views on which technologies were the hottest and most promising, innovation data including funding patenting and papers, and an anthropological analysis of consumer views. We surfaced seven key trends for 2023 to date:
- Generative AI: The hype around generative AI has been absolutely impossible to miss this year, with ChatGPT headlining a wave of generative AI approaches that can produce text, images, audio, video, and more. Evangelists claim that AI will alternatively usher in utopia or bring about human extinction, but it’s not even clear that AI can continue to improve at its current pace, given data constraints and processing limitations. However, the technology, even in its current state and with readily foreseeable improvements, will be impactful, with coding applications and marketing as near-term use-cases. The hype has also reached consumers who are excited about AI’s potential but want companies to use it in an ethical way.
- Inflation and economic uncertainty: Probably the single economic story for innovators in 2023 was the spectacular collapse of Silicon Valley Bank amid rising interest rates. While inflation has begun to show signs of cooling, the impact of higher rates has reduced funding for many of the most speculative areas of tech innovation. In addition, Silicon Valley Bank provided many services such as venture debt and loans, which have not yet been replaced. While the broader economy remains robust, 2023 is on pace to be a much slower year in terms of innovation funding (at least outside of generative AI). Public funding is doing much to fill the gap for sustainable innovations but has done little to assuage consumer concerns about the financial system — a long simmering set of fears that has helped propel technologies like cryptocurrency.
- “Woke capital” and anti-ESG backlash: The last few years have seen exorbitant claims about the supposed benefits of environmental, social, and governance (ESG) investing, and now there is an increasingly strong anti-ESG backlash. It’s been most notable in the U.S. where anti-ESG laws had been percolating at the state level, but there has been pushback on sustainability-minded policy in France and the Netherlands as well. Despite the frothy rhetoric, anti-ESG sentiment remains a fringe position: Consumers are broadly supportive of ESG efforts, though they want results. At the end of the day, both ESG and anti-ESG investment aren’t that impactful; there’s no clear definition of what either of these things are, and there’s plenty of financing available for all kinds of projects at this point. However, if anti-ESG sentiment moves from finance to more material restrictions — like the proposed Texas anti-renewables bill — it could meaningfully impact the energy transition.
- Nuclear energy resurgence: Nuclear energy is the black sheep of the energy transition. Despite deep, irrational commitment to antinuclear policies from many environmental groups and governments, a combination of factors has conspired to disrupt the public’s perception of nuclear energy. The war in Ukraine, high-profile innovations around fusion, a new wave of startups, and increased clarity on the risks of climate change all have the public re-evaluating their view of nuclear. There’s a lot of opportunity for nuclear innovation, but a lot of risk: A big story could easily flip public perception back into a deeply negative stance.
- Battery supply chain innovation: Supportive public policy like the Inflation Reduction Act in the U.S. has pushed the battery supply chain to the top of the innovation priority list, with the Department of Energy’s USD 9 billion grant to Blue Oval SK a leading recent example. While the focus may be on gigafactories, there’s also a huge amount of innovation happening in metal supply, battery recycling, and supporting technologies like thermal management. This area will increasingly be a geopolitical battleground: The U.S. and China headline, but other nations like Indonesia, which control important resources, will make impacts felt as well.
- Policymaking impacting the chemicals industry: Year 2023 has been big for policy in the chemicals industry with increasing crackdowns on materials of concern like PFAS, UN action on plastic waste and pollution, and growing government support for the bioeconomy. Key decisions are still to come: The UN will put out its initial draft of a global regulatory framework in November; in the U.S., the Federal Trade Commission will update its Green Guides this year; and in the EU, key decisions on hot button issues like mass balancing will come down soon. Public perception is still decidedly against the chemicals industry; despite the best efforts of industry lobbying groups, this negative public sentiment has been a far better predictor of policy outcomes over the last year or two than proposals from the chemicals industry.
- Broadening search for clean label ingredients: Clean label has been a hot topic for the last couple of years, but 2023 saw a broadening definition of clean label, which now includes animal-free products across a wide variety of industries: food, healthcare, and even consumer goods like apparel. Here, consumer desires come to the forefront, but their contradictory demands have proven challenging: They want ingredients that are simple and local and easy to understand — but animal-free solutions often require advanced approaches like synthetic biology. Companies building supply chains for emerging technologies like mycelium, animal-free dairy, and fermentation will need to find ways to position these approaches to meet consumer expectations.
Throughout all these trends, a few themes emerge. First, public policy is taking a larger role than ever in shaping the processes and outcomes of sustainable innovation. Second, consumers want transparency across all of these different technologies and emerging business issues. Third, despite some concerns about the economy, it’s actually still a really good time to innovate in sustainable technologies because consumers and governments are ready to take decisive steps and try new things.