Tim Rogers: Investing in Greentech, Cleantech and Climate tech, it’s all the same….. Isn’t it?

It’s a minefield - Greentech, Cleantech and the newly coined Climate tech mean different things to different people.

In many ways these terms are synonymous with common areas of interest but with different end games. With Climate tech we have a new and evolving set of priorities aimed at tackling a global challenge (like the UN Framework Convention on Climate Change).

Cleantech on the other hand is focused on improving quality of life and humankind’s interaction with the immediate environment.

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People often interchange Greentech and Cleantech.

In 2002 Cleantech became a catch all term describing ‘green and clean’ technologies that became the next big thing in technology investing after the collapse of the tech boom.

Then at the end of the 2000s we had what was known as the “mini green bubble”. Unfortunately, after the 2008 financial crisis, the journey for Cleantech – like Greentech before it – came to a sticky end. Maybe this should be a cautionary tale to investors now looking at the next big thing - Climate tech.

Many financial commentators are excited by Climate tech seeing it as a great economic and planetary transformation, where a new breed of climate tech venture capitalist is now piling in.

Transitioning our society to a carbon-free future is a huge and difficult challenge.

Nevertheless, people argue that we have the technology required we just lack the political will to do it. I don’t think it is that simple. I certainly don’t have the confidence to predict which technologies either in isolation or as a collective can meet that challenge, or come to that which company either existing today or yet to be conceived will deliver them.

Perhaps history can be our guide here.

I remember my first steps into industry in the 80s and working with the first crop of Green technologies, it was a more ambiguous term back then.

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In my case it was introducing new chemistries for moving the world away from leaded petrol, in another it was supplying CFC replacements for aerosols.

My later transition into Cleantech was more quantifiable and tangible as we were bringing down exhaust emissions of road vehicles.

By emissions we chiefly meant Particulates, Nitrogen Oxides and Carbon Monoxide, namely products deemed harmful to human health.

So, for me and for most of the automotive industry it was always about clean air and improving human health it was never about reducing Green House Gases (GHG).

If we now add GHG into the mix then the environmental space starts to get very confusing.

Technology solutions for clean air often don’t lead to reductions in GHG. There aren’t the magic one-size-fits-all technologies to address all concerns.

This has resulted in confused - if well-intentioned- policy making (combined with unhelpful industrial lobbying) that bogs down program making.

Ministers I met have confused smoke emissions with the Carbon emissions of a vehicle. Local Government sponsored “Clean Air” initiatives based on faulty thinking have had unintended consequences.

For example, the first London Low Emission Zone (LEZ) program in 2002, introduced an exhaust emission technology that whilst significantly reducing particulate emissions from trucks a buses, also led to increases in unwanted NO2 emissions meaning London failed to meet its air quality targets. Additionally many companies supplying the technology went under.

Given the above, who made money from Cleantech and who will make money from Climate Tech?

Interestingly, the private equity firms I have dealt with continue to invest heavily into clean air and clean water development. They remain cautious on Climate tech, however.

I am not in a position to pick companies from this sector. For example, we know that wind energy is on the rise, yet we are told that rising raw-material costs, unreliable Government subsidies and concerns over transporting these huge machines are affecting earnings for the complete wind turbine companies like Siemens, Vestas and General Electric.

In truth, the sector in general barely turns a profit and now consolidation and takeovers are happening. It’s true to say that much of the renewable sector has the same factors and issues that affect the wind energy industry. Another side to this however are the component suppliers, the company Yaskawa who make the direct drive generators for wind turbines is very profitable.

My conclusion here is simple, the provision of clean air and clean water is very important in addressing environmental and human health concerns and will remain so. In themselves Cleantech technologies do not actively reduce GHG emissions but they have quantifiable outcomes and the mature technology is already in place to make it happen. It needs continual monitoring and enforcement, witness the increase in discharge of sewerage into the rivers in the UK. For me the Climate tech opportunity remains unclear.