Green investment for sustainability and profitability
~ The David and Goliath of green investments ~
In recent years, the global conversation surrounding climate change and environmental sustainability has gained momentum and ignited a surge in green investments. Here, Vijay Madlani, CEO of greentech innovator Katrick Technologies, explores the burgeoning green investment landscape and argues that investors should consider allocating their investments towards small and emerging businesses.
According to the International Energy Agency (IEA), renewable energy sources could meet 80 per cent of the world's energy needs by 2050, provided there is a significant increase in investment. Moreover, the IEA highlights that every $1 spent on energy transition towards clean and sustainable sources could yield benefits of three times that in reduced energy costs by 2050.
Investment will be instrumental in supporting and accelerating green tech growth, but where should investors concentrate their funding to ensure that they are not only contributing towards a cleaner future, but also getting the best return on their investments?
Shifting investment trends
Investment trends indicate that the UK investment sphere has been paying more and more attention to greener businesses. The UK Government’s autumn statement in November 2023 deemed green technologies ‘key to economic growth’ and £960 million has now been ring-fenced to accelerate the industry. What’s more, this investment growth is now translating into jobs. The Renewable Energy Association reported that the renewable energy sector in the UK supported over 234,000 jobs in 2019 — and this figure is poised to grow.
Global investment trends also seem to support this. The green tech industry experienced an 89 per cent increase in investment to a staggering $70.1 billion in 2022. It’s also worth noting that investment specifically in start-ups in this sphere is increasing, with a sixfold growth from $1.9 billion in 2019 to $12.3 billion in 2022, signifying a global shift in attention towards up-and-coming innovators.
Why investors should back the little guy
As with any type of investment, there are risks involved with backing start-ups and small and medium enterprises (SMEs). The market for clean technology can be volatile and this is influenced by many external factors including public opinion, material and commodity prices, and policy change. Even with the inherent uncertainty in this evolving industry, it’s becoming clear that supporting emerging businesses can be beneficial for society, for consumers, and for investors.
However, despite the growing number of SMEs entering the market, larger companies still currently threaten to dominate the greentech space. This is why it is so crucial to focus resources on these emerging innovators and nurture new technologies, rather than solely investing in the big businesses that monopolise the current landscape.
Start-ups are laying the foundation for this diversified technology landscape, and many are reliant on external investment to break into the market and bring their concepts to life. This means that investors will be instrumental in ensuring that smaller, newer companies — the green tech ‘Davids’ — aren’t eclipsed by the established ‘Goliaths’ in an increasingly competitive sector.
Start-ups have the benefit of being able to generate a level of innovation that’s difficult in an established company setting. They are often more dynamic and flexible, whereas incumbents in this industry also tend to have a more rigid company culture, something that may mean they struggle to bring in the newer R&D talent that is often responsible for some of the most ground-breaking technology.
That’s not to say there’s no place for legacy companies — after all, many of them are responsible for the existing infrastructure that green innovation relies upon. But these new players in the market tend to bring an agility and an eagerness to deploy new solutions that established companies just can’t match. That is why it is not enough to back the existing technology giants — we need to look out for the Davids in this David-and-Goliath tale.
Facts and stats
If backing the little guy and nurturing innovation isn’t enough of an incentive alone, a HSBC study on the growth trajectory of green-tech start-ups might change your mind. The report predicts that these SMEs will yield significant financial benefits for investors, with a forecast increase in year-over-year profits by large double-digit percentages.
Investing in smaller green tech companies can also avoid some of the market volatility associated with more resource-intensive industries. Sectors such as oil and gas are exposed to price changes and geopolitical instability.
An investment success story
Katrick Technologies has experience of navigating the green investment landscape as a smaller company and can attest to the significant impact of investor support. They have developed a world-first wind power generation technology, their Wind Panel, that uses oscillations rather than rotary parts to offer a completely new mean of wind energy capture. They have raised over £6 million in private investment and has secured commercial partnerships and engaged with major blue-chip clients.
This investment has allowed its novel Wind Panel to develop and move to validation for Technology Readiness Level 6, bringing it closer than ever to commercialisation. This achievement simply would not have been possible without investors willing to invest in green tech.
The green investment landscape in the UK presents a compelling opportunity for investors to align their financial interests with environmentalism, but it’s imperative that focus moves to the green tech Davids on the frontline of the energy transition, challenging the dominance of established Goliaths.
The success story of Katrick Technologies highlights the impact and the importance of backing the underdogs. In a world moving towards a greener future, supporting these Davids isn't just an investment choice; it's a strategic move towards sustainability and prosperity for generations to come.