Clean technology means many different things to investors. Given the volatility of clean tech over the past few years, risk may well come to mind as asset owners consider clean technology investments.
First-off, how do we define clean technology? Technologies that increase efficient use of scare resources. While many investors classify clean technology as primarily renewable energy, such as wind and solar, we at Essex define clean technology across our nine Essex Global Environmental Opportunities Strategy (GEOS) themes. Indeed, solar and wind are prevalent, but clean tech also includes technologies such as natural gas engines, electric vehicle storage, energy meters, desalinization technologies, solar and LED manufacturing equipment, water purification, and ultra capacitors. These eight technologies equate to five of our nine GEOS themes, and we invest in many more clean technologies. We believe a thematic approach allows for wider investment opportunity and greater diversification than narrower investing in any one segment of clean tech, such as wind, solar, or water.
The opportunity for clean tech is vast, and the challenges and catalysts are great. While energy demand is flattening in the developed economies, why, given the Great Recession, have commodity prices stayed generally robust? The bottom line is the vast majority of energy demand is now stemming from India and China. The International Energy Agency (IEA) projects that over 50% of energy demand will come from China and India in the coming years, and indeed they need this energy to power their rapidly growing economies. The IMF projects that the emerging economies will surpass the global GDP of the developed markets over the course of the next 18 months.
Energy Demand Growth (in million tons of oil equivalent)