There are many good reasons to make clean tech investments part of your wealth portfolio. And the options are becoming more plentiful than ever.
In May, the UN’s international science panel warned that the Paris Agreement goal to limit our planet’s warming to 1.5 degrees is slipping out of reach. To stay under that target, we must cut 60% of our greenhouse gas emissions¹ by 2035.
Energy supply, industry, agriculture, transportation and business are among the biggest emitters. Fortunately, more companies are focused on finding solutions and innovations² to address these problems with clean technologies. Clean tech reduces negative environmental impacts with techniques like energy efficiency improvements, environmental protection or the sustainable use of resources.
Now, with governments and industries motivated to cut emissions, the space is primed for growth. Clean tech startups saw $12.3 billion in venture funding³ in 2022 and, on a number of fronts, climate-related private-market investment outpaced the broader market⁴. Indeed, with clean tech investments, investors have an opportunity to make a difference in climate action by supplying the capital needed to help move the market forward while capturing potential returns.
Governments the world over are stepping up⁵ and more private investors are prioritizing impact with their capital. But trillions of dollars⁶ need to move into climate action to limit global warming and solve the problems at hand.
For investors who want to make an impact, clean tech presents an opportunity to fulfill personal financial goals while being a part of the solution.
Clean tech investing has hit an inflection point
From electric vehicles to active transportation and meat alternatives, we’ve seen public consciousness perk up around reducing personal carbon footprints. The climate battle will be a long one, but clean tech innovations mean we’re better equipped to take it on than ever before, says Kathryn Wortsman, manager and partner at Amplify Capital.
Wortsman joined our recent webinar to unpack clean tech investing and the opportunities it offers for impact and sustainable investors. While she acknowledges the sector is still in its early days, she says it has evolved in three major ways just within the last decade.
To begin with, technology now is scalable and therefore economically viable for customers. Secondly, clean tech has garnered more attention from governments in two key ways. “One is more regulations forcing businesses to meet net zero obligations,” says Wortsman. “And two: there’s more capital available so companies can apply for it.”
The third change Wortsman sees is connected to a shift in consciousness among stakeholders that is motivating businesses to adopt carbon reduction strategies. In fact, a report from Deloitte found⁷ that 68% of company leaders said they felt pressure from groups like board members, consumers and clients. Combined, these factors have created an atmosphere where clean tech can flourish.
An opportunity for meaningful climate action
We know it’s time to change business as usual, but now we need the tools to do so. Clean tech companies have solutions but need the capital to grow their operations, innovate and hire – whether they’re in their early stages or working to scale and expand.
For impact investors, opportunities abound to support both established and early-stage clean tech companies through options such as high impact funds or green bonds – depending on factors such as impact goals and risk tolerance. Genus’ green bond, the Global Impact Bond Fund, for example, is fully fossil-free with 100% liquid investments⁸. Or, a high impact equity fund like Genus’ High Impact Equity Fund is a way to invest in shares of established global companies building a more sustainable future.
Amplify, for its part, is focused on helping clean tech companies in the early and seed stage. “The early stage is where really catalytic capital comes into play,” says Wortsman. An example from Amplify’s own portfolio is Hydrostor, a Canadian-based company that develops energy storage facilities that enable the replacement of fossil fuels. “[Amplify] invested in 2016 and the company had a one megawatt demonstration plant – it was a seed stage deal,” Wortsman says. “Then we fast forward to 2022 and they announced a billion dollar contract. So they’ve scaled from one megawatt to 500 megawatts.”
Clean tech also offers investors a diversity of choice across sectors. Wortsman says Amplify has seen the biggest impact gains come from synthetic biology, manufacturing innovations and industrial decarbonization opportunities. The reason being, an industry’s footprint is that much bigger. ”If you change the way an electric battery is built, for example,” says Wortsman, “the impact is massive.”
Amplify has seen significant financial return⁹ from investing in the space, but they’re not alone. “ArcTern is a great example,” says Wortsman of the Toronto-based firm. “They scaled from a $25-million fund to a $200-million fund, they’re raising their next fund now – and they’ve gone global.” Wortsman also points to Congruent Ventures, a California-based fund that supports early-stage transformative companies. The fund recently raised hundreds of millions as well as an opportunities fund to double down on their initial investments.
“In order to get these companies to scale you need these early stage investors – advisors and early-stage funds – to help these companies get off the ground, validate their technology, get that first customer and ultimately scale,” says Wortsman.
Whether opting to support clean tech companies in their early, middle or later stages, those looking to shift toward more socially responsible investing can have a major impact, not only fostering positive change by supplying the capital clean tech companies of all sizes and sectors need to move the market forward, but also changing market dynamics by shifting the focus from destructive areas to technologies that benefit the planet.
Interested in exploring how to add clean tech investments to your investment portfolio? Contact a Genus advisor to learn more.
References
Climate action must be ‘everything, everywhere, all at once,’ Un chief says | CBC News (2023) CBCnews. Available at: https://www.cbc.ca/news/science/ipcc-synthesis-report-1.6784346 (Accessed: 12 June 2023).
- Ruid, A.L.& M. (2023) Cleantech gets a big corporate push, Global X ETFs. Available at: https://www.globalxetfs.com/cleantech-gets-a-big-corporate-push/ (Accessed: 12 June 2023).
Person (2023) Venture capital investment in Clean Energy Startups soars, Reuters. Available at: https://www.reuters.com/sustainability/venture-capital-investment-clean-energy-startups-soars-2023-05-18/ (Accessed: 28 June 2023).
Dahlqvist, F. et al. (2023) Climate investing: Continuing breakout growth through uncertain times, McKinsey & Company. Available at: https://www.mckinsey.com/capabilities/sustainability/our-insights/climate-investing-continuing-breakout-growth-through-uncertain-times (Accessed: 12 June 2023).
- L, J. (2023) Clean Energy Transition Investment hits new record – $1.1 trillion, Carbon Credits. Available at: https://carboncredits.com/clean-energy-transition-investment-hits-new-record-1-1-trillion/ (Accessed: 12 June 2023).
- On one end, trillions of dollars to invest in climate. on the other, huge and urgent need. how do we connect the dots? (no date) On one end, trillions of dollars to invest in climate. On the other, huge and urgent need. How do we connect the dots? | S&P Global. Available at: https://www.spglobal.com/esg/insights/on-one-end-trillions-of-dollars-to-invest-in-climate-on-the-other-huge-and-urgent-need-how-do-we-connect-the-dots#:~:text=It%27s%20no%20secret%20that%20the,Intergovernmental%20Panel%20on%20Climate%20Change. (Accessed: 12 June 2023).
New Deloitte Research reveals majority of organizations increased sustainability investments over past year amid global uncertainty (no date) Deloitte. Available at: https://www.deloitte.com/global/en/about/press-room/new-deloitte-research-on-sustainability-investments.html (Accessed: 12 June 2023).
- (2021) Introducing the genus global impact bond fund, Genus. Available at: https://genuscap.com/introducing-genus-global-impact-bond-fund/ (Accessed: 12 July 2023).
Newton, A. (2022) Hydrostor secures US$250 million investment from Goldman Sachs Asset Management, Amplify Capital. Available at: https://www.amplifycapital.ca/news/hydrostor-secures-us250-million-investment-from-goldman-sachs-asset-management (Accessed: 12 June 2023).
