“Welcome to the chaos of the 2020s!” Those were the opening words of Richard Youngman, CEO of Cleantech Group, at the opening session of the Cleantech Interactive event. “If we go on with business as usual for another decade, we are headed for disaster. Ingredients for an unpredictable decade are plentiful,” he pointed out and cited, for example, the current health crisis and its financial consequences as well as a rather unstable geopolitical situation in many places.
If we go on with business as usual for another decade, we are headed for disaster.
This happens after a decade of considerable, steady investment growth in cleantech companies. “Cleantech investments surged above $35 billion in 2019, maintaining the 5-year growth trend,” Mr Youngman said. The burning question is therefore what will happen to the sector during and after the coronavirus epidemic.
Cleantech investment: short-term impact, long-term optimism
An investor survey by Cleantech Group paints a relatively positive picture. Although investors expect a somewhat negative impact on their investment portfolio in the next 1-2 years, the number of new investments in 2020 will probably be unchanged. “Funds are still very much open for business, although companies and investors should expect that the valuation will change for the next year or so,” said Mr Youngman.
Nothing has really changed in terms of our activity and desire to give away capital.
“Nothing has really changed in terms of our activity and desire to give away capital,” confirmed Daniel Goldman, co-founder and managing director of venture capital fund Clean Energy Ventures. “However, at the moment we are of course particularly focused on supporting the companies that are part of our current portfolio.”
The survey also showed that investors expect to have to increase the capital invested in their portfolio companies to help them through this difficult period. “This crisis is different from others,” Mr Youngman pointed out. “It is not only a financial crisis as in 2008 but a global economic one, but at the same time, the climate clock has not stopped. Deals are continuing, but we will see a significant fall in Q2 and Q3 of 2020.” Nevertheless, the crisis might also open up new opportunities in the cleantech field.
New opportunities for cleantech innovation
Many of the Cleantech Interactive participants thought that COVID-19 would be an accelerator for cleantech innovation, even though government support might be reduced in the coming years as a result of the need to focus on safeguarding jobs.
“Crises, dislocations and dissonance always bring opportunities,” Mr Youngman agreed and highlighted areas that might potentially “gain” from the coronavirus crisis. Indoor farming, solutions for making the electricity grid more flexible and resilient, domestic water purification and last-mile delivery solutions are just a few examples. “Anything that will strengthen or localise supply chains is much in focus right now. People will probably also care more about the use and origin of resources.”
Anything that will strengthen or localise supply chains is much in focus right now. People will probably also care more about the use and origin of resources.
However, the long-term development is dependent on our behaviour and policies once the pandemic is under control. “Will we build new or continue focusing on the ‘old school’ way of doing business? Will we collaborate more or continue to pursue zero-sum competition with profit as a company’s only responsibility? Will we interpret the current price of hydrocarbons as proof that these industries now need to be responsibly and gradually transitioned, or benefit (financially) from their cheapness?” Mr Youngman asked. The future will tell.
Photo: © Luxinnovation / Sabino Parente