What do you think of when you hear the word cleantech? Does it conjure images of shiny rows of solar panels, slow-turning wind turbines, flashy electric cars — or maybe even Elon Musk?Well, you’re not wrong. These cutting-edge technologies (minus Musk) largely represent the first wave of cleantech, which began around the beginning of the new millennium and gained momentum once Al Gore started telling us inconvenient truths – and even more so when President Obama entered the White House.With investors’ (and the public’s) attention mostly fixated on cutting-edge technologies, the less sexy but much more ubiquitous non-market disrupting cleantech innovations were often overlooked.
Cleantech 2.0:
Less Flashy, More Lucrative
What do you think of when you hear the word cleantech? Does it conjure images of shiny rows of solar panels, slow-turning wind turbines, flashy electric cars — or maybe even Elon Musk?
Well, you’re not wrong. These cutting-edge technologies (minus Musk) largely represent the first wave of cleantech, which began around the beginning of the new millennium and gained momentum once Al Gore started telling us inconvenient truths – and even more so when President Obama entered the White House.
With investors’ (and the public’s) attention mostly fixated on cutting-edge technologies, the less sexy but much more ubiquitous non-market disrupting cleantech innovations were often overlooked.
“Historically, investors’ perception of cleantech was limited to clean energy — wind and solar,” said Andrew Behar, CEO of As You Sow. “However, cleantech is part of everything, it is a theme across all sectors including lighting, transportation, energy efficiency, water monitoring, forestry, recycling, traffic management, supply chain innovation, and much more.”
According to a new report from As You Sow, the Responsible Endowments Coalition cleantech research firm Kachan & Co., macroeconomic drivers such as population growth, resource scarcity, urbanization and climate change are propelling the next wave in cleantech, characterized by non-market disrupting innovations.
Just as the early Internet paved the way for Web 2.0 and the innovations that followed, could the initial cleantech wave dominated by cutting-edge technologies now be giving way to a new kind of Cleantech 2.0 categorized by non-market disrupting innovations?
Absolutely.
After years in development, these innovations are revolutionizing how we make, grow, transport and consume things. They are helping the world to meet energy demands while creating new livelihoods and prosperity in uncertain economies. From cheaper, more efficient lighting to advanced heating software, these products and services improve the efficiency, waste profile and manufacturing cost of existing analog.
The report, Cleantech Redefined: Why the Next Wave of Cleantech Infrastructure, Technology and Services Will Thrive in the 21st Century, describes and examines the latest investment opportunities and trends across clean energy, efficiency, water, transportation, agriculture, energy storage, air & environment and clean industry, and claims that cleantech is poised for even more rapid expansion across sectors and industries and offers ample opportunities for investment now that the world’s largest companies have realized its profit-bearing potential.
Recent investor behavior seems to confirm these claims. Sustainability-minded investors achieved notable victories during this year’s shareholder proxy season, with a near-record 110 shareholder resolutions filed with 94 U.S. companies on corporate sustainability challenges such as climate change, supply chain issues and water-related risks, according to Ceres.
The energy sector also saw several successes, including resolutions against hydraulic fracturing (“fracking”), flaring, fossil fuel reserve risks and other climate- and sustainability-related risks and opportunities. Many of these resolutions focused on strategies recently promulgated by the International Energy Agency (IEA), such as targeted energy efficiency measures in buildings, industry and transport; limiting the construction and use of the least-efficient coal-fired power plants; and cutting methane emissions in half by 2020.
After a number of companies responded affirmatively to their specific requests, investors were able to withdraw more than 40 of the 110 resolutions — reflecting more firms are taking sustainability and cleantech-focused investor resolutions seriously.
That’s not to say that Cleantech 2.0 will leave all the flashy, cutting-edge technologies behind. After all, Musk’s Tesla Motors is having its best year yet (and they don’t get much flashier or cutting edgier than that).
But global economic and environmental demands are shifting the greatest investment opportunities to cleantech’s less marketing-stunt-prone areas. With companies under increasing pressure to produce and consume more efficiently, capital is being invested in cleantech products and services by a variety of sources, from venture capital to cities, businesses, states, universities and individuals, among others.
In 2012, cleantech attracted nearly a quarter of the venture capital (VC) available, capturing $6.4 billion of nearly $26 billion in VC investment across all sectors, according to Cleantech Redefined. The world’s largest companies also are buying their way into cleantech, with large cap firms acquiring cleantech companies in an effort to build the portfolios of clean products and services required to remain competitive and modernize their current offerings. Energy efficiency alone could be a several hundred-billion-dollar investment opportunity in the United States.
“A fundamental of business is to drive waste out of the cost of goods,” Behar added. “There is a virtuous cycle: Every dollar invested, every product deployed — be it a smart thermostat, an electric vehicle, or an LED street light — all reduce costs due to needing less heating oil, gasoline, or fossil fuel-fired electricity. So at the same time that business and consumers want to burn less to spend less, these products reduce demand for fossil fuels.”
Ready or not, Cleantech 2.0 is upon us and the investment opportunities have only just begun. Disruptive technologies will continue to make old sectors obsolete, while well-known brands, products and companies will adopt clean technologies and products to improve their balance sheets and investors’ bottom lines.
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Mike Hower
Founder & Principal Consultant, Hower Impact
Mike Hower is the founder of Hower Impact — a boutique consultancy delivering best-in-class strategic communication advisory and support for corporate sustainability, ESG and climate tech.
Published Oct 29, 2013 3am EDT / 12am PDT / 7am GMT / 8am CET