Thursday, June 8, 2023

Green Technology: Why Should You Invest?

By Sanjay Banerjee--The author is passionate about how businesses can benefit from technology. He is a tech enthusiast and a senior business leader at EFY.

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“If I had asked people what they wanted, they would have said faster horses.”—Henry Ford

The world is changing and one of the effects of these changes is on how we consume energy. The global annual average consumption of conventional energy has increased by 1.8 per cent, overall, from 2011 till 2017. If we look at the data closely, this increase is primarily driven by developing nations, whereas the developed world is moving towards alternate energy forms.

The United Nations Environment Program (UNEP), in collaboration with the Frankfurt School of Finance and Management, has released a report titled ‘Global Trends in Renewable Energy Investment’, which states that though there was a 23 per cent fall in investments in renewable energy in 2016, yet, the overall number of renewable power installations/capacities has gone up over the last decade, and was at an all-time high in 2015 (Figure 1). This shows that the demand for renewable energy remains strong despite a fall in investor interest. There can be many reasons for this fall in interest, one of which is the financing of projects.

Global new investments in renewable energy (Source: UNEP, Bloomberg New Energy Finance)
Fig. 1: Global new investments in renewable energy (Source: UNEP, Bloomberg New Energy Finance)
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In the developing nations, on the other hand, it’s a different story overall. Even if conventional energy still dominates energy consumption, infrastructural development in the non-core energy sector has gone up, aligned with government policies. This has created a conducive environment for investments. So, to the question, when is the right time to invest in green tech, I would say, “Now!”

Green technology and the related investment patterns

Technology is the application of knowledge to fulfil practical requirements. When technology is applied in a way that has minimal impact on the environment, by the sustainable use of natural resources in a manner that is socially equitable and economically viable, it is termed as green technology. In the contemporary world, where ‘progress’ is defined by constant growth driven by large manufacturing facilities, the stress on natural resources is pushing our planet towards destruction. Therefore, we need to think differently, both socially and economically. Some of the key agents of environmental destruction are the various forms of waste — industrial, natural, chemical, etc. It’s now critical that we create platforms that enable waste to be converted and reused for the betterment of society, rather than letting it either accumulate in landfills, slowly poisoning the soil; or ruining the air we breathe by emitting hazardous greenhouse gases.

Green or clean technology investments mean backing or funding organisations that have sustainable and environment-friendly products and services. There are some strong industries that are emerging in this domain like water and waste management, green energy, the organic agri business, green mobility, and the energy efficiency domain.
Even if, globally, green investments fell in 2016, consolidation in the previous years made the overall category grow in terms of capacity installation from 127.5GW in 2015 to 138.5GW in 2016. Combined renewable sources were responsible for 55.3 per cent of all new power generated worldwide. These are some very strong indicators of how the investor community and business evangelists view this sector.

Listed below are some of the key aspects of green tech manufacturing.

1. Sustainability: The effort here is to convert waste into energy and make it a sustainable process. This helps in creating better societies that are cleaner as well, and lowers the stress on natural resources.

2. Pollution reduction: The idea is to reduce pollution in all formats, and to see how we can create a greener future by converting pollutants into energy — this requires a change in production parameters and in thinking.

3. Provation theory: Here we must consider the built but obsolete assets that we have and try to repurpose them with innovation and creativity to align with current requirements. We must look at these assets and try to provate on them with the latest technology. (Provate is a term derived from ‘product’ and ‘innovate’.)

4. Framework-to-framework design: This is about making reusability the central requirement at the product creation phase itself.

5. Versatile manufacturing processes: Processes must be designed such that they can be aligned to serve multiple purposes, just by changing certain specs in the system.
The hot sectors in the green technology domain are energy, green nanotechnology and green chemistry. And these have enormous potential if the business models are aligned in the right sequence — from managing the input costs to creating value and thereby delivering profits. Figure 2 shows global green investments for 2016.

Global green investments for 2016 (Source: UNEP, Bloomberg New Energy Finance)
Fig. 2: Global green investments for 2016 (Source: UNEP, Bloomberg New Energy Finance)

Different aspects of green technology

In general, green tech initiatives involve environment-friendly methods of production, consumption and disposal. Therefore, investors and evangelists need to look at solutions ranging from product substitution to redesigning production facilities with newer technologies, and in some cases, they may have to completely overhaul factories.



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