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, 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 the diverse market of cleantech investing.
The key trends dominating the global cleantech sector in 2021 are offshore wind energy, electric vehicles (EVs), EV infrastructure and clean energy commercial long-haul transportation solutions, such as hydrogen and energy storage installations. Read on for more of what the space 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 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 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, Saskatchewan 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.
Cleantech investing: The present day
The cleantech industry faced a few setbacks in the US under the Trump administration. For example, during his presidency, Donald Trump repealed the Clean Power Plan and tried to replace it with a plan that would have allowed the continued operation of many US coal mines.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.
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 deployment of charging stations.
“The plan stated it would invest US$174 billion to ‘win the EV market,’ although full details on how and where this investment will be targeted are still coming through,” Charles Lester, senior analyst at Rho Motion, told the Investing News Network (INN). Around US$15 billion of that funding is earmarked for the installation of around 500,000 public EV charging stations in the US by 2030.
Céline Bak of Analytica Advisors sees offshore wind as a major sector for clean technology investment in the US. “There’s a new technology that is being developed called floating offshore wind, and my prediction is that there’s going to be a lot more investment in that,” she told INN.
Canada’s 2021 budget includes combined spending of nearly C$22 billion on climate action and a green economy. C$4.4 billion over five years will go towards helping up to 200,000 homeowners acquire interest-free loans of up to C$40,000 for energy retrofits aimed at reducing emissions.
In December 2020, Canada launched the Net Zero Accelerator initiative to “help build and secure Canada’s clean industrial advantage.” The government’s 2021 budget proposes providing C$5 billion over seven years to this program and allows for up to C$8 billion of support for jobs and projects designed to reduce domestic greenhouse gas emissions.
Lastly, Canada’s 2021 budget proposes the introduction of an investment tax credit for capital invested in carbon capture, utilization and storage projects in the hopes of reducing emissions by at least 15 megatonnes of carbon dioxide annually. Starting in 2021/2022, the government plant to provide C$319 million over seven years to Natural Resources Canada “to support research and development that would improve the commercial viability of carbon capture, utilization, and storage technologies.”
Cleantech investing: Future outlook
The global cleantech sector is expected to be worth as much as US$2.5 trillion by 2022. Unsurprisingly, that impressive figure is attracting more and more individual and institutional investment away from fossil fuels and toward cleantech 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 November 2020 report by Preqin forecasts that private equity investment in the energy transition, including in energy efficiency, renewable energy and low-carbon technologies, will climb 28 percent from 2020 figures to total US$271 billion in assets under management by 2025.
“Investments in energy transition can include everything from renewable energy such as solar and wind to battery storage, hydrogen-powered electric vehicles and charging stations,” said Arleen Jacobius, west coast bureau chief for international money management publication Pensions & Investments, in reference to the report. “These investments are being sprinkled across alternative investment asset classes, including venture capital, growth equity and infrastructure.”
Jacobius noted that some institutional investors are using their dollars and their shareholder powers to push publicly listed companies toward addressing climate change through energy transition. She pointed out that some of the largest US pension funds have successfully replaced directors on the board of Exxon Mobil (NYSE:XOM) with activist investors with experience in energy transition.
All in all, these major investments in the cleantech sector illustrate the growing importance of the movement 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.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.