In finance, the word cleantech—short for clean technology—refers to a range of companies and technologies focused on enhancing environmental sustainability. The way this term is used has changed over time, with some people using it interchangeably with phrases like “green technology” to describe renewable energy sources, innovative recycling methods, and other eco-friendly practices.
In different contexts, the term can also mean approaches that aim to lessen the harmful environmental effects of traditional technologies like coal power or natural gas. Here, phrases like “clean coal” or “clean energy” often come up, though many environmentalists challenge the legitimacy of this terminology.
How Cleantech Works
The term cleantech comes from the venture capital (VC) investment scene, which started using it in the late 1990s and early 2000s. It gained traction thanks to Nick Parker and Keith Raab, who set up the Cleantech Group in 2002. Nowadays, this organization—based in San Francisco—acts as a hub for activities in the cleantech sector.
In the past, cleantech referred to a broad array of technologies and practices, from solar and wind energy generation to enhancements that boost efficiency in supply chains and production processes. These days, discussions around environmental issues often lean towards terms that have a clearer environmental focus, like “green technology” or “eco-friendly technology.” Still, the term cleantech is widely used in financial, VC, and business circles.
The shift towards sustainable investing is partly backed by organizations like the United Nations Principles for Responsible Investing (PRI), which gathers and shares data from a network of over 3,000 financial institutions.
These “signatories” of the PRI commit to following a set of six principles aimed at embedding environmental sustainability into their investment choices and promise to self-report on their progress.
As of January 2020, the PRI’s signatories managed a whopping $80 trillion in assets, making them a powerful force in the global investment landscape.
The Example
Investors looking to support eco-friendly companies and technologies now have a ton of choices, from single companies to diverse portfolios.
When it comes to publicly-traded firms, most of the cleantech options focus on renewable energy sources like solar, wind, and hydroelectric power. For instance, Terraform Power (TERP) in New York and Alterra Power (AXY) in Toronto are great examples. Investors can also consider diversified investment options like Brookfield Renewable Partners (BEP), a publicly-traded limited partnership.
Another key point of interest in the cleantech sector is the consistent growth in job opportunities. There are various roles in cleantech companies, including solar panel installers, civil and process engineers, technicians, and manufacturing staff, along with many trade-related jobs needed for the installation and upkeep of cleantech facilities.
For instance, Yahoo Finance highlighted that solar panel installers are the fastest-growing job category in eight states, with projections indicating that these jobs could more than double by 2026. Additionally, jobs related to wind turbine maintenance are also on the rise, with an average annual salary nearing $55,000.