What is Cleantech Investing?

Cleantech Investing
female hand holding a green earth

Cleantech investing supports the development and adoption of technologies aimed at reducing negative environmental impacts, including climate change and resource depletion.

Clean technology, or cleantech, is in the spotlight. This expanding market refers to products, services and technologies that reduce negative environmental impacts through improving energy efficiency, the sustainable use of resources or environmental protection activities.

Cleantech spans several industry verticals, including: renewable energy generation, energy storage, energy efficiency, transportation, air and environment, clean industry, water and agriculture. Together, this array of sectors constitutes much of the diverse market of cleantech investing.

The key trends dominating the global cleantech sector in 2022 are energy storage, electric vehicles (EVs), hydrogen solutions and carbon capture. Read on for more of what the space looks like today.

How cleantech investing is coming into its own

Cleantech investing began to gain prominence in the mid-2000s, when mainstream investors started investing in the environment, as well as the alternative and renewable energy sectors.

A decade and a half later, the sector has become an important venue for innovation. Substantial progress has been made in wind power, solar photovoltaics, advanced batteries, energy-efficient lighting and fuel cells.

For example, according to the International Energy Agency, new capacity for solar electricity generation increased to a record level worldwide in 2021, and this growth is expected to continue in 2022. In fact, solar photovoltaics is set to account for 60 percent of global renewable power growth in 2022.

The North American landscape for cleantech investing

The US cleantech industry faced a few setbacks under the Trump administration. During his presidency, Donald Trump repealed the Clean Power Plan and tried to replace it with a plan that would have allowed the continued operation of many US coal mines. In 2017, Trump also withdrew the US from the Paris Climate Agreement.

Current President Joe Biden returned the US to the Paris Climate Agreement within a few hours of taking office. In March 2021, the Biden administration released a US$2 trillion infrastructure plan that includes steps to accelerate the adoption of EVs and the deployment of charging stations.

However, as of mid-2022, the climate change provisions in the Build Back Better plan had been all but erased following significant pushback by Senate Republicans and Democrat Joe Manchin.

Despite these troubles, the US Energy Information Administration (EIA) forecasts that “most of the increase in U.S. electricity generation through 2023 will come from renewable energy sources as a result of growth in U.S. renewable generating capacity.” The EIA sees renewable energy accounting for 22 percent of the country’s electric power sector generation in 2022 and 24 percent in 2023, up from 20 percent in 2021.

Looking north, in October 2020, the Canadian government announced a four year C$100 million investment to accelerate cleantech development and adoption in the oil and gas industry. In December 2020, Canada launched the Net Zero Accelerator initiative to “help build and secure Canada’s clean industrial advantage.”

Canada’s 2022 budget provides funding for electrifying the transportation sector, clean energy transmission projects and advances in clean technologies. Greening transportation efforts include C$1.7 billion to get Canadians into EVs by extending a zero-emission vehicle (ZEV) program until March 2025, as well as additional funding to build out the country’s EV charging infrastructure. Businesses will also get financial assistance to upgrade their fleets with medium- and heavy-duty ZEVs through a C$547.5 million four year new purchase incentive program.

Clean electricity projects in pre-development stages, such as inter-provincial electricity transmission projects and small modular reactors, are slated to benefit from C$250 million in support over four years.

Meanwhile, under the Smart Renewables and Electrification Pathways Program, C$600 million is allocated over seven years for renewable electricity and grid modernization projects. In its fall 2022 economic and fiscal update, the Department of Finance Canada is expected to announce details of an investment tax credit of up to 30 percent aimed at net-zero technologies, battery storage solutions and clean hydrogen.

What is the outlook for cleantech investing?

The global cleantech sector is expected to be worth as much as US$3.3 trillion in 2022. Unsurprisingly, that impressive figure is attracting more and more investors away from fossil fuels and toward clean energy solutions.

In both the US and Canada, increased cleantech investment is likely to move those countries toward greater consumer acceptance of renewable energy and EVs as cost-effective, sustainable means for power and transportation. This in turn will help drive further growth in North America’s cleantech and manufacturing sectors, creating jobs and more opportunities for investors.

A recent S&P Global report shows that in 2021, private equity and venture capital investment in cleantech totaled US$14.66 billion. That strong investment is continuing into 2022, with US$11.92 billion across 33 deals as of late May, up 144 percent compared to the same period in the previous year. Cleantech investments in the US and Canada represent more than half of that figure at US$6.62 billion.

“With an eye towards the future, private equity firms have been investing heavily in the transition to a low-carbon economy and renewable energy,” said Eamon Nolan, partner at international law firm Vinson & Elkins. “The opportunity is enormous. Forecasters, including Credit Suisse, have put the price tag for the global undertaking at $100 trillion over the next 30 years, with most of the money coming from private sources.”

All in all, these major investments in the cleantech sector illustrate the growing importance of the move toward a cleaner, greener economy. It will certainly be an interesting arena to watch.

This is an updated version of an article first published by the Investing News Network in 2015.

Don’t forget to follow us @INN_Technology for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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