Historically, people passionate about climate change and the environment were not the norm. Today, the perception has shifted and sustainability has become one of the key drivers in the corporate world. Mainstream businesses are now under pressure to join venture capital firms to invest in green tech with investments increasing every year. JP Morgan Chase has pledged to finance more than $2.5 trillion dollars over the next decade to advance climate action and to further sustainable development. The bank of America has also announced its decision to finance $1.5 trillion towards sustainable finance mobilisation by 2030. Sustainability has been pushed to the top of the priority list for companies worldwide as investors and financial markets are increasingly demanding a solid Environmental Social and Governance plan to net-zero carbon emissions. The big tech giants are paving the way as Microsoft, Intel, Google and Apple are all striving to rely solely on green tech. Apple has committed to 100% renewable energy to power its data centres which has influenced its suppliers to follow their footsteps. Whilst Intel is the leading company that operates on green energy using wind, solar, hydro and biomass to manufacture their products.
Dry Powder
The term dry powder dates back to the 17th century military days of using guns and cannons. Gunpowder needed to stay dry in order to be effective so a reserve of powder was always on hand. The term later evolved to the financial definition of keeping cash in a reserve. So what has dry powder got to do with green tech? As the director of Powerhouse Energy Group put it “In green tech, it’s pretty much all dry powder.” Today, around $20 billion remains in investable green tech dry powder. This means that substantial capital has already been committed to be invested into green tech, despite the benefits not being clear in terms of funding rounds. For climate tech this is an exclusive advantage, given that many sustainable technologies and projects require more time and money to develop than the average SaaS business.
IoT and Fish Farms
At first glance IoT and fish farms don’t have anything in common, but fishing companies can actually save $11 billion per year using IoT devices. These devices coupled with AI are giving fishing companies intel on how to improve the time and place of their fishing, along with sensors that detect the type of fish and cameras that assist with sorting the catch. The data can also help the wild fishing industry improve its operational costs, with insights to reduce fuel consumption and optimise the maintenance of fleets using AI predictive maintenance. But sustainable IoT isn’t just restricted to fish, businesses across all industry sectors are now planning to spend an average of $2.8 million on their IoT investments through to 2024. Many of these investments are exclusive to climate tech using AI to reduce carbon emissions, maximise crop production, and preventing poaching whilst maintaining a low impact on the environment.
How to make green tech worth the investment
Investing in green tech was a concept many businesses couldn’t justify, and It’s only been in recent years that green tech has been adopted into the mainstream. The industry still poses many doubtful questions: How can you quantify ROI in green tech? Bank of America actually discovered that companies with better ESG have higher returns and are more likely to become high quality stocks and so less likely to go under substantial price declines. Wealth managers are now monitoring ESG funds and retail banks are introducing a larger variety of sustainable banking products, including green home-improvement loans. Bank customers have a wider variety of sustainable investment and banking products to choose from such as ESG-linked bonds.
Sustainable tech investments are on the rise. Once only associated with Venture Capital firms, now mainstream companies are cashing in on the green potential, and with $20 billion gathering in climate tech dry powder, green tech start-ups have the chance to thrive, with investors favouring SMEs for investment. During the pandemic, $87.5 billion was invested into green tech, a 210% increase from the year prior.The pandemic has proved this recession isn’t something to be feared, as green tech soars even in the midst of financial ruin.
