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November 01, 2013
As Fossil Fuel Divestment Grows, Cleantech Offers Opportunities for Investors
    by Robert Kropp

As You Sow teams with Kachan & Co. and the Responsible Endowments Coalition to outline opportunities for investors in cleantech. Second of a three-part series.


As described in yesterday's article at SocialFunds.com, the fossil fuel divestment campaign originally organized by 350.org is gaining widespread support at a rapid rate. A divestment guide published by 350.org, Green Century Capital Management, and Trillium Asset Management outlines steps for investors to take to ensure their portfolios are fossil free.

But as the guide points out, divestment is only the first step for investors. Environmental and financial opportunities present as well for those who reinvest in companies providing goods and services that contribute to reducing the threats of climate change. “In a recent survey, the Bureau of Labor Statistics (BLS) reported that greener industries are growing faster than the overall economy,” the guide states. “In fact, according to the BLS from 2010–2011 green jobs grew at a rate of 4.9%, almost four times the rate of overall jobs.”

Another recently published report focuses on the investment opportunities available in cleantech products and services. The report, entitled Cleantech Redefined was co-authored by Dallas Kachan of the research firm Kachan & Co. and Danielle Fugere of As You Sow and includes contributions from the Responsible Endowments Coalition.

The basic drivers of cleantech products and services “are intact and fundamentally reshaping the future,” the report states. These include population growth, resource scarcity, and the likelihood of regulatory action, as well as climate change and other factors. “Investors need to understand and incorporate what has traditionally been so-called 'extra-financial' information into their risk analysis and investment valuation,” the report states, addressing the importance of risk mitigation in the investor's portfolio. “In order to achieve both our economic and environmental objectives, capital will need to be allocated toward products and services that can do and provide more with less.”

“Clean technologies can play an important role in portfolio risk diversification,” the report continues.

Kachan & Co., which is a cleantech research and advisory firm (report co-author Dallas Kachan is credited with coining the term cleantech), “categorizes clean/green technology innovation into eight major areas,” the report states: clean energy, efficiency, transportation, water, agriculture, energy storage, air and environment, and clean industry. Clean energy generation—which includes solar, wind,
renewable fuels, marine, geothermal, and fuel cells—“continues to draw a preponderance of clean technology investments,” the report observes.

“Growth is expected to continue as numerous regions are mandating standards for percentages of power produced from clean energy by specific dates,” the report continues. “Clean energy remains the 'poster child' of the clean technology theme.”

Energy efficiency, which includes green building, smart grid, cogeneration, and data centers, “is the leading cleantech theme for VC (venture capital) investment,” the report observes, and with global energy demand expected to rise sharply over the coming decades the market is likely to remain strong. On the other hand, investments in water management remains comparatively low, although that should change soon; “The global water industry must experience a drastic transformation that involves significant investment in water technology,” the report states.

“With pressure from consumers, shareholders and regulators, and a growing comprehension of the material risk to operations from population growth and increased resource constraints, corporations are increasingly focusing on making their business models more sustainable.”

Whether the specific cleantech area has reached a stage of relative maturity, as have renewable energy and energy efficiency, or like agriculture remains in a state of relative fragmentation, “the major categories of cleantech innovations all represent exciting investment opportunities today,” the report concludes. “The fundamental drivers behind cleantech will only intensify.”

Next: Investors call on fossil fuel companies to account for stranded assets.

 

 
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