Originally published on www.inc.com on October 15, 2015.
Remember back to the financial crisis, when President Obama launched a program to create jobs through green innovation, a kind of environmental New Deal? And then one solar energy company that had received money from the government failed spectacularly, and the idea of a clean tech renaissance seemed to have gone out the window?
Colin le Duc, a partner at Al Gore-founded Generation Investment LLP, says that in that first era of clean tech, people were "trying to shoe-horn clean tech solutions into traditional models." But since then everything has changed. "Now we're in Clean Tech 2.0," he says. Disruptive digital, financial and environmental technologies are offering sustainable solutions and challenging old industry models.
Generation Investment has been investing since 2004 in companies it considers part of a transition to a low-carbon economy. The reason is twofold: there are significant long-term risks in ignoring this transition, and there are great investment opportunities in Clean Tech 2.0.
The risks mainly have to do with so-called "stranded assets." The assets on oil companies' balance sheets, which are factored into the companies' share prices, include reserves they may one day have to write off, given global political commitments to cap emissions, trends toward energy efficiency, popular climate change outcry, and a glut of energy supply. Stranded assets are a risk that has come to the attention of many a financial analyst.
The opportunities have to do with disruptive technologies emerging to solve problems like drought, vehicle emissions, home energy efficiency, and so on. Le Duc cites companies like Tesla, which made electric cars fashionable; Nest Labs, which is revolutionizing home temperature control and energy use; and Solar City, which scaled up industrial solar panels, all of which are taking revenue from companies with older business models.
A May, 2015 report by Generation Investment's foundation includes a long list of areas to look for innovative, sustainable solutions to invest in. Some of these are: nanomaterials, precision agriculture, conversion of waste to energy, desalination technology, data center efficiency, urban farming, fleet logistics solutions, and products replacing meat.
In its portfolio analysis, Generation Investment is mindful of six large-scale trends, outlined in the foundation's report, and described at length in Al Gore's book "The Future - Six Drivers of Global Change." These are:
1. Corporate globalization, which Gore calls "Earth Inc." Powerful corporations are driving manufacturing and labor revolutions in an increasingly interdependent global economy, exacerbating inequality and challenging nations' ability to govern themselves. Innovations like 3D printing and electronic financial trading platforms are driving sweeping change.
2. Interconnected networks, which Gore calls "the Global Mind." Big data, device proliferation, and "the internet of things" (such as smart washing machines or thermostats) are all driving change, including the democratization of information.
3. Shifts in power centers, which Gore labels "Power in the Balance." These include the rise of China as an economic and political powerhouse, governance failures and growing private sector influence over political processes, and the rise of financial markets focused on short-term gains.
4. Demographics and apparent limits to natural resources, which Gore calls "Outgrowth." Population growth, urbanization and consumption trends call for global resource management.
5. A life sciences revolution. People are living longer, healthier lives, thanks to genetic engineering, artificial limbs and organs, precision medicine and connectivity.
6. The climate crisis. Global warming is affecting oceans, food and water supply, coastal areas and biodiversity, and creating what Gore calls "the largest business opportunity in world history, as the global economy decarbonizes and becomes hyper-efficient."
All of the six drivers point to both risks and opportunities. The first wave of clean tech may have arrived too early to be universally acclaimed, but since then lots of disruptive technology has begun to shift whole industry models. Those clinging to the old ways may find themselves stranded, just like fossil fuel assets. Clean Tech 2.0 is here and moving fast.
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