Cleantech investing involves putting money into products and technologies that aim to reduce negative impacts on the environment.
Cleantech, also referred to as “clean technology” and “greentech,” is an umbrella term that spans several industry verticals. Essentially, cleantech refers to products, services and technologies that aim to increase performance while reducing negative environmental impacts.
In a MoneyTree report, PwC describes cleantech as a combination of “agriculture and bioproducts, energy efficiency, smart grid and energy storage, solar energy, transportation, water and waste management, wind and geothermal, and other renewables.”
EcoConnect, a green energy business network, breaks the concept down further by identifying eight key categories of cleantech: renewable energy generation, energy storage, energy efficiency, transportation, air and environment, clean industry, water and agriculture. Together, these areas constitute the diverse sector of cleantech investing.
Here’s a brief overview of cleantech investing and what the market looks like today.
Cleantech investing: Coming into its own
Cleantech investing began to gain prominence in the mid-2000s, when mainstream investors started investing in the environmental, alternative and renewable energy sectors. A decade later, the sector has become an important venue for innovation.
Substantial progress has been made in the areas of wind power, solar photovoltaics, advanced batteries, energy-efficient lighting and fuel cells.
For example, according to the National Energy Board of Canada, the breakeven cost of commercial solar energy systems is lower than it is for electricity in the provinces of Ontario, Nova Scotia and Prince Edward Island. This accounts for most (but not all) commercial solar systems.
Solar panel prices have been coming down, and they have become more popular. While a solar panel unit may cost C$30,000 to install, it will reportedly save C$150 in energy costs per month.
Cleantech investing: The present day
In the US, President Donald Trump has repealed former President Barack Obama’s Clean Power Plan since taking office. In its place, Trump is creating the Affordable Clean Energy rule, which will allow the continued operation of many US coal mines.
And it doesn’t stop there: In 2017, Trump also withdrew the US from the Paris Climate Agreement. While it has not technically come into effect, the official withdrawal is scheduled for November 4, 2020 (exactly one day after the 2020 US presidential election).
Despite these hurdles, the cleantech industry is here to stay, “with or without Donald Trump.”
Clean Energy Canada notes in a report that the clean energy sector has grown at a faster clip than the overall Canadian economy. The cleantech sector averaged growth of 4.8 percent between 2010 and 2017, compared to a 3.6 percent pace annually for the broader economy.
In 2017, the cleantech sector accounted for 298,000 jobs in Canada alone.
“The clean energy sector’s impressive growth has not gone unnoticed, and companies and investors are backing it. Overall annual investment grew from C$21 billion in 2010 to C$35.3 billion in 2017 — an increase of almost 70 percent,” the Clean Energy Canada report states. Research from the study was completed in conjunction with Navius Research.
The Canadian government’s 2019 federal budget is also good news for Canada’s cleantech industry. For example, it states that C$180 billion over 12 years is being invested in the cleantech sector.
Since 2016, the federal government has invested C$9.6 billion into cleantech research and development, in addition to allocating C$1.5 billion towards reducing reliance on coal energy through investing in the Oceans Protection Plan.
Looking ahead over the next five years, the federal government is also committing C$143.4 million to food policy initiatives. The Strategic Innovation Fund is specifically slated to receive an additional C$100 million in funding to support advancements in food-processing technologies.
Cleantech investing: Future outlook
Beyond 2019, the overall cleantech sector is expected to be worth as much as US$2.5 trillion by 2020. With regards to Canada, Canadian Business writes that the country is “ahead of the curve” with almost 800 firms. In addition to the 2019 federal budget, there’s plenty to be optimistic about in terms of the future of Canada’s cleantech industry.
Under a Trump presidency in the US, however, cleantech’s future might seem a little uncertain. That said, as mentioned above, the US cleantech industry isn’t showing any signs of slowing down.
According to CleanTechnica, in the 50 states, there is high demand for employment in the solar energy sector, as indicated by data from the Bureau of Labour Statistics. The wind power sector has also garnered employment demand in a number of states in 2019.
All in all, these major investments in the cleantech sector illustrate the growing economic importance of this ethically oriented market. It will certainly be an interesting arena for investors to watch.
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.