CONTRIBUTORS
Matthew Moberg
Portfolio Manager,
Franklin Equity Group
United States
In this Innovation Insights, we highlight five advancements we found interesting this quarter. These breakthroughs are protecting our bodies from heart disease, our homes from grid blackouts, and our digital information from quantum hackers. We believe that innovation is everywhere. As new technologies and products intersect every facet of our lives, the economic impact of innovation will continue to be as profound as it is pervasive.
Deep-sea metal mining can power the energy transformation
Exhibit 1: Polymetallic nodules on the seabed contain valuable industrial metals
Image courtesy of NOAA Office of Ocean Exploration and Research
The seafloor is littered with riches critical for powering the modern world. Every million years, a few millimeters of metal deposited on the ocean floor builds up fist-sized “polymetallic nodules” containing manganese, nickel and cobalt—essential ingredients for batteries.1 By dredging the muddy floor, these nodules can be collected. Mining, whether by land or sea, raises environmental concerns; however, collecting deep-sea nodules could be 90% less carbon-intensive than land mining.2 The International Seabed Authority has issued permits; as regulatory hurdles are removed, we anticipate innovation in underwater robotics and autonomous subsea vehicles will lower the technological barriers to extracting these seafloor resources.
Why it matters: The energy transformation requires unprecedented amounts of metals to support battery manufacturing for energy storage and electric vehicles (EVs). Meeting the supply demands with ethical sourcing of key materials drives innovation to the depths of the ocean.
Weight-loss drugs deliver outsized results
New drugs treating obesity are moving forward in the market, with the latest experimental drug (retatrutide) helping patients lose an average of 24% body weight over 48 weeks.3 Weekly injections expose the brain to different hormone levels causing patients to lose the craving for food and consume fewer calories. The latest trials on one compound found a 20% decrease in the risk of heart disease and stroke in obese patients.4 These positive health effects open the door to more insurance coverage and increased adoption for these drugs.
Why it matters: About 42% of American adults are obese, which is associated with a wide range of serious medical complications including diabetes, liver disease and heart disease.3 We are seeing discoveries that address one health condition (obesity) showing knock-on effects for other conditions—in this case, the leading cause of death (heart disease.)
In a blackout, EVs shine through the darkness
EVs are providing essential home backup power during storms, rolling blackouts and peak demand days.5 Some EV battery packs are around 100 kWh–over 7x larger than a standard home AC battery system. One EV can power a home, consuming 29 kWh of daily electricity,6 for over 80 hours! Bidirectional charging for vehicle-to-home (V2H) today is limited, but eventually vehicle-to-grid (V2G) technology can enable “virtual power plants” of EV fleets to help meet demand during peak hours.7
Why it matters: As intermittent power sources add stress and complexity to the electric grid, EVs can act as a balancing force for stability—especially in emergency situations. As innovation in batteries and power electronics evolves hand in hand with EV adoption, versatile energy technologies will play a critical role in powering our lives.
New encryption protects against quantum computer hacking
Researchers released a new encryption algorithm that is resistant to quantum computer attacks.8 The FIDO2 “Fast Identity Online” industry standard authentication has become the most secure website login without relying on passwords. However, biometric identity data, such as Face ID and Touch ID, is stored in databases protected with traditional RSA encryption. While RSA encryption relies on math problems that are hard to solve, a quantum computer could crack the code in eight hours. The new hybrid approach, combining a battle-tested algorithm with a standardized quantum-resistant algorithm,9 can start securing public keys before an eventual quantum computer attack on private information.
Why it matters: From private banking data to personal medical information, our digital security boils down to encryption standards that protect against “classical” computers but are easily cracked by quantum computers. Innovation at the intersection of cryptography and quantum technology, byte and atom, is necessary to secure our digital future.
Wearable ultrasound device spots early breast cancer
Researchers at the Massachusetts Institute of Technology have developed a flexible patch that can be incorporated into a bra for ultrasound monitoring of high-risk breast cancer patients. The device uses a 3D-printed patch with a new piezoelectric material that miniaturizes the scanner. The portable device can provide real-time screening between biennial mammograms with a similar resolution to medical imaging centers. This additional data can better screen for “interval cancers,” tumors developed between mammograms, that account for nearly 30% of breast cancer cases.10
Why it matters: The survival rate of early diagnosis of breast cancer is nearly 100%, while later stage diagnosis falls to a 25% survival rate.10 Innovation in medical devices and form factors provides additional health care data to increase the quality of treatment, and survival rate, for the most common form of cancer.
There are also risks in investing in this or any asset class. The initial potential of any asset class may not carry over to any specific company or the entire asset class chosen for investment, over any investment time period. Any of the investment assumptions may never come to fruition. Investors should be prepared for potential losses as well as the possibility of investment gains. Ideas, products, companies or entire asset classes with positive past performance are not indicate of future results.
Endnotes
- Source: “The world needs more battery metals. Time to mine the seabed,” The Economist, July 6, 2023.
- Source: Conca, J. “Is mining the ocean bottom for metals really better than mining on land?” Forbes, February 24, 2021.
- Source: Kolata, G. “We know where new weight loss drugs came from, but not why they work,” The New York Times, August 17, 2023.
- Source: Burger, L. “Novo says Wegovy drug helps obese people with heart failure in trial,” Reuters, August 25, 2023.
- Source: Penn, I. “A new job for electric vehicles: powering homes during blackouts,” The New York Times, July 16, 2023.
- Source: “How much electricity does an American home use?” U.S. Energy Information Administration, October 12, 2022.
- Source: Lutz, H. “EV virtual power plants could provide support in times of peak demand,” Automotive News, February 5, 2023.
- Source: Goodin, D. “Google announces new algorithm that makes FIDO encryption safe from quantum computers,” Ars Technica, August 18, 2023.
- Source: Bursztein, E. “Towards quantum resilient security keys,” Google Security Blog, August 15, 2023.
- Source: Trafton, A. “A wearable ultrasound scanner could detect breast cancer earlier,” MIT News Office, July 28, 2023.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
Investments in fast-growing industries like the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments.
The opinions are intended solely to provide insight into how securities are analyzed. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. Past performance does not guarantee future results.