Responsible Investor

optimism in the potential of new and unknown media; speculation beyond sensible limits.
However, the differences between dot-com and clean tech are not all good for the investor. Unlike websites, the development of novel and hi-tech hardware is cash intensive and often reliant on other companies in the innovation and supply chain. This means high chances of unforeseen serious problems that can cause high volatility in the value of clean tech firms. The demand for large amounts of capital and the inherent risk mean that investments often need to be syndicated, potentially diluting gains.
Volatility goes both ways though. For example, Biofuels Corporation lost 97% of its value because the price of its feedstock rose sharply. It was eventually delisted from the London Alternative Investment Market. Conversely, Q Cells earnt Apax Partners, the UK private equity company, a 27-fold return on investment over 22 months. The point is that all high-tech, high-growth companies have the prospect of volatility: there will be short-term singular disasters, overvaluations and speculation but the demand for clean tech will only grow because of the strong drivers behind it.
How large is the demand for clean tech? The scale of growth in clean tech needed to transition to sustainability are huge. Figure W (see download) shows the now famous Princeton Wedges Model for stabilising carbon emissions at 7 gigatons per year until the year 2050-2055, which is half the business-as-usual prediction. Each wedge is an existing clean technologylow-carbon option (most are based on clean technologies) that saves 1 gigaton. This level of

emissions would stabilise the atmosphere’s concentration of green house gases at 550ppm (CO2 equivalent). It is currently at 430ppm. To give an idea of the scale of growth in each of these technology areas that the wedges represent, solar capacity would need to increase by 700 times and an area the size of Portugal covered by wind turbines to complete two wedges. Even at 550ppm, scientists think it likely that temperatures will rise by more than two degrees celsius: the level the European Union believes will lead to dangerous climate change.
The science shows that the demand for low-carbon technologies may well be even greater. What options offer the most emissions reductions to investors? The London Accord is a consortium of investment houses, academics and NGOs researching this question right now. As a sponsor, Forum for the Future is finalising a paper on the possible wider sustainability impacts of the options considered. For instance, some second-generation solar cells use highly toxic materials in their production yet offer clean electricity generation and poverty alleviation to developing countries. Some technologies that currently fall under the clean tech umbrella are cleaner than others. It is likely that the drivers will become more discriminatory and favour the cleanest of the clean techs. The European Parliament is already considering the sustainability implications of different types of biofuels over their life-cycle in the proposed Fuel Quality Directive because it has become clear that some biofuel production methods are more environmentally and socially damaging than others. Investors would be wise to look for the most sustainable technologies, and not just in terms of carbon emissions,

Not a member? Register here »