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Green is Good

By Spear's

Ben Goldsmith on two compelling reasons for embracing clean technology — saving the planet and making a packet
IF IT WERE possible to bring back to life Alexander Graham Bell, the father of telecommunications, to show him how things have changed, our telecommunication systems, including mobiles and the internet, would be utterly unrecognisable to him. Why then, when so many areas of our lives have been transformed beyond recognition, has the energy sector remained until now largely unchanged for more than a hundred years?

Across all areas of our economy we remain mind-bogglingly wasteful in our use of not just energy, but water and raw materials, too. Our buildings leak valuable heat, often running air conditioning and heating units at the same time; we generate enough electricity at all times to meet potential spikes in demand, use what we need at the time, and let the rest dissipate; the inefficiency of our cars and lorries in their use of fuel is a travesty and we are drowning in mountains of potentially valuable waste.

If you take into account our new-found understanding of the likely catastrophic effects of global climate change, our ballooning trade deficits in the West or the fact that our thirst for fossil fuels sees over $1 trillion a year transferred from liberal, secular democracies into the hands of some of the most unstable and unpleasant regimes in the world — the US alone spends $300 billion annually on buying oil just from the Middle East — our lethargy becomes even more baffling.

But don’t despair. Even if our governments are slower on the uptake than they need to be and therefore insufficiently bold in their actions, businesses across all industrial sectors are not. At the turn of the millennium, in most companies, it was the responsibility of the then lowly head of ‘corporate social responsibility’ to look at ‘green issues’ such as energy efficiency and renewable energy. Many companies trumpeted token efforts and were roundly accused of ‘greenwash’.

But during the past decade this responsibility has shifted to the finance director and CEO, across the board. Because companies have realised that by becoming more efficient in their use of resources — energy, water, raw material inputs — and by reducing and making use of waste, they can save meaningful amounts of money at the same time as future-proofing themselves against increasingly volatile commodity prices and tightening environmental regulation (not to mention the prospect of a price on carbon emissions for all sectors).

Indeed, according to the largest ever research study into the attitudes of CEOs on corporate sustainability carried out this year by UN Global Compact and Accenture, in spite of the recent economic downturn, an overwhelming majority of corporate CEOs — 93 per cent — say that sustainability will be critical to the future success of their companies. Furthermore, CEOs believe that a tipping point will be reached that fully meshes sustainability with core business — its capabilities, processes and systems, and throughout global supply chains and subsidiaries.
CONSEQUENTLY THE WORLD is now undergoing nothing less than a green industrial revolution. Chemicals giant DuPont has invested a vast amount of effort and money in improving the energy efficiency of its operations and has announced cumulative net savings from its energy bills of more than $3 billion in the last decade. The CEO of DuPont talks regularly about tackling climate change by ‘picking up $100 bills from the factory floor’.

Retail giant Walmart’s recently stated goals are ‘to be supplied 100 per cent by renewable energy’, ‘to create zero waste’ and ‘to sell products that sustain our global resources and the environment’. Walmart is recognised as being ruthlessly efficient in reducing costs. Once it started looking at its operations through the sustainability lens, the company discovered that it could reduce environmental impact while simultaneously reducing costs.

Walmart’s sustainability programme is directly driving this agenda hard across its supply chain and among competitors. Ford’s River Rouge car plant, for many years the largest factory on earth, is now perhaps the greenest factory on earth (with the largest green ‘living’ roof on earth). Ford is working towards ‘zero process water consumption’, ‘100 per cent renewable energy’, ‘zero solid waste to landfill’ and so on. Stories like DuPont’s, Wal-Mart’s and Ford’s are to be found throughout the corporate landscape globally.

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Moreover, the scale of investment globally in renewable sources of energy today is beyond the wildest dreams of Friends of the Earth or Greenpeace a decade or two ago. In 2008, $190 billion was invested in energy generation capacity globally, of which more than half was invested in renewables such as hydropower (harnessing the power of flowing water), wind and solar. An increasing proportion of this is being invested in ‘decentralised’ renewables, such as solar panels on factory and household rooftops and community-owned wind farms.

Jeremy Rifkin of Wharton Business School and the president of the Foundation on Economic Trends in Washington recently said that ‘we are on the cusp of a new energy era and a new economic paradigm that will literally empower hundreds of millions of human beings to create their own energy and share their surpluses with neighbours across regions, nations and continents.

The democratisation of energy gives rise to a new “Distributed Social Vision” in the 21st century that will change our economic, political and cultural institutions as dramatically as the Enlightenment vision that accompanied the first Industrial Revolution two centuries ago.’

The scale of this green industrial revolution, and the innovation that is driving it, represent the investment opportunity of a lifetime. The next wave of billionaire success stories will be made up of green technology entrepreneurs, green service providers, renewable energy developers and project financiers.

That’s why I am devoting my career to this. WHEB Venture Partners, which I created with two colleagues in 2003, now manages two venture capital funds (totalling £130 million) that focus on the clean technology theme. So far we have provided growth capital to fourteen emerging and fast-growing businesses, including businesses that provide advanced home-smart energy meters, the first economically viable waste rubber recycling process, environmentally benign alternatives to agricultural pesticides, soil moisture sensors and ‘smart irrigation’ software and so on.

We have since created WHEB Infrastructure Partners, which provides capital to renewable energy project developers across Europe, and WHEB Asset Management, which manages a successful long-only equities fund focused on those large, established, publicly quoted global businesses that stand to benefit directly from this mega theme, such as solar-module or wind-turbine manufacturers, water infrastructure specialists or the hi-tech businesses involved in developing a smart grid. This latter fund has daily liquidity and is accessible to investors of all sizes. 

Illustration by Jeremy Leasor

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