Responsible Investor

Climate change: mother of invention and investment returns

Why the technological revolution will clean up the planet and drive profits.

We need clean tech and lots of it. The cleaning-up of every industry will play a crucial part in our transition to a sustainable economy over the coming decades. Clean tech’s high year-on-year growth will continue over the long-term given the enormity of the environmental challenge we face to maintain the planet as a life-support system. We already use natural and synthetic resources at a rate that would need 1.2 earths to sustain (see fig F in download). At the same time, world population and demand for resources continue to rise, particularly from India and China. The business-as-usual scenario of continued overshooting of the environment’s ability to support us (see the blue line in fig F) is ecologically impossible to maintain. Its consequences would be rapid economic and population decline due to limited water, food and energy resources. This will be familiar to many readers, but its fundamental links to the future of clean tech are often forgotten. It is clear to governments, scientists and Forum for the Future that the solution is a transition to an eco-efficient economy: one that drives sustainable economic development whilst bringing our resource use and waste production down to levels that the earth can cope with. To make this transition, we must use far fewer resources and change the way we work,

play, buy, and invest. Technological change will be pivotal.
Change creates opportunity and necessity is the mother of invention. Financing the innovation and expansion of clean technologies presents great opportunities to investors. Forum for the Future is working with its partners to drive this change and make sure it is on the right path. Earlier this year, we published our ‘Clean Capital’ report on financing UK clean tech firms. Figure D (see download) shows the main drivers that this identified for long-term growth. The drivers fall into two categories. Firstly, those related to the need for transition in regulatory pressures and emissions controls. Secondly, those driven by the profit-motive: technological advances and demand growth. Investors should bear both types in mind. The regulatory drivers will strengthen and become more sophisticated but many clean technologies are under-utilised on a pure cost basis. For example, insulation of new building can save €200 for every tonne of CO2 avoided.
What are the prospects of a clean tech bubble? Unlike the dot-com boom and bust it is clear that there are strong, long-lasting and predictable drivers for clean tech. The dot-com bubble was driven by unbridled

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