Everyone interested in investing in cleantech should know these facts – that speak not only to the eco-conscious but the savvy investor too.
What is cleantech?
Cleantech, or clean technology, is an overarching term for all green and sustainable energy and environmental products. These services and solutions span several industry verticals. Oriented around ethics and a vision for the future, this market has superstar spokespeople in the form of celebrities like Elon Musk of Tesla (NASDAQ:TSLA) fame and Leonardo DiCaprio’s LDF.
Why is cleantech an important and growing market?
Much of cleantech’s success relies upon governmental initiatives and the decisions of policy makers. Under the Obama administration the Clean Energy Investment Initiative, essentially a huge monetary commitment, has helped companies take their technologies from lab to market. It is also top priority for Canada’s government; individual provinces have price policies that raise energy prices and therefore incentivize reduced energy use. Subsidizing consumers who adopt cleantech is admirable, but governments can do more. Some plan a cap-and-trade market that rewards companies who cut back on pollution and others already have a carbon tax. These represent the carrot and stick approach respectively; companies will find cleantech solutions or be more efficient in order to avoid the tax.
Consumers also make buying decisions based on their personal beliefs with many wanting the companies they buy from to be addressing climate change, which continues to drive growth.
Who are the biggest cleantech companies?
Tesla has driven the lithium and motor industries with lithium supply agreements needed for the vehicles’ lithium-ion batteries. With their latest electric car model, Tesla has reached out to mass markets, not only aiming for high-end luxury. Tesla is working to use only ethically sourced raw materials for its batteries.
Google (NASDAQ:GOOGL) has, so far, funded almost $2.5 billion in clean energy solar and wind projects. They aim to have a carbon footprint of zero and are the largest corporate purchaser of renewable energy on the planet. A small way they try to encourage their users to choose eco-friendly options is Google Maps highlighting the bike, walking or public transport routes.
Honeywell (NYSE:HON) uses cleantech components in buildings so homeowners can lessen their energy consumption. For example, air conditioning is controlled through a thermostat. Smart blinds harvest sunshine in the winter to save on heating and in the summer they provide shade to make room cooling energy redundant.
How can I invest in cleantech?
Investors can get into cleantech investing through different tools. These include:
- The PowerShares Cleantech Portfolio ETF (NYSEARCA:PZD) has 55 stocks, with the US represented most heavily, at almost 57 percent.
- Market Vectors Glb Alternative Energy ETF (NYSEARCA:GEX) has a market capitalization of US$77.8M. This could be the best bet for investors interested in Tesla as they have high representation in this ETF.
- Index: Investing via the S&P TSX Renewable Energy and Clean Technology Index (INDEXTSI:TXCT) is a form of passive investing and a way of spreading the potential risks, in this case over 22 companies.
- Stocks: Investors who do not want diversified holdings can invest in specific companies. The top holding on the PowerShares Portfolio is Johnson Controls (NYSE:JCI), a peer of Honeywell and a solid investing choice with analysts rating it a “Buy”. Specialized companies are also available on the TSXV exchange, including DynaCERT (TSXV:DYA), whose carbon emission reduction technology has been described as having ‘Tesla-like potential’. Natcore Technology (TSXV:NXT) are working to provide a commercially lucrative alternative to fossil fuels by increasing solar efficiency and lowering manufacturing costs.
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Securities Disclosure: I, Emma Harwood, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: DynaCERT and Natcore Technology are clients of the Investing News Network. This article is not paid-for content.