The physical manifestations of climate change and its socio-economic impacts are starting to be felt worldwide. Climate change, if unchecked, is set to cost the world over $178 Trillion by 2070, so it’s no wonder that more and more governments, organisations and investors are starting to commit to climate action beyond words and are now writing cheques.
Our race to net zero is anticipated to significantly disrupt our existing economies and lives. A recent McKinsey report has predicted that by 2050 oil and gas production will be 55% to 70% lower than it is today. This demand reduction will affect other sectors, including the automotive industry, agriculture and food systems, waste removal and recycling systems, manufacturing, and so much more.
With economic disruption already in the works, there is a significant opportunity for investors to tap into. In October 2021, Blackrock CEO Larry Fink declared that the next 1,000 unicorn startups worth $1 billion or more would be involved in climate tech. We believe all Australians should be able to get their piece of the economic pie in this new carbon-free economy.
This blog will explore some cleantech investment themes, the opportunity size of investing in cleantech and how you can get started on your own.
Cleantech Investment Themes You Could Explore
Cleantech encompasses a lot of different sectors and technologies. Presenting an almost overwhelming amount of themes, projects and companies you could invest in. At Bloom, we’ve based our asset selection process on two of the world’s leading climate science authorities - Project Drawdown and ClimateWorks. These frameworks give us close to 100 different climate solutions we can invest in. Here are our favourite 5 investment themes based on their research.
1. How to Invest in Solar Energy
The sun offers us light but can also guide us into a renewable future with a near-unlimited supply of clean and free fuel. Solar solutions include distributed and utility-scale solar photovoltaics (PV), concentrated solar power (or solar thermal electricity), and solar hot water.
Distributed and Utility-Scale Solar PV: refers to rooftop and large-scale PV panel farms that can generate electricity for homes, businesses, power grids, and more. The PVs react to sunlight photons to kickstart the PV’s electrons into moving and generating electricity.
Concentrated Solar Power (CSP): Unlike PVs that convert sunlight into energy, CSP uses solar radiation as its primary fuel to heat fluid, produce steam, and turn turbines which generate power.
Solar Hot Water: heats water through the sun’s radiation and replaces conventional energy sources with a clean alternative.
2. How to Invest in Wind (On and Offshore)
Like ceiling fans, we can use blades to generate wind and keep us cool. On a massive scale, the wind is captured, stored and sent to the grid to blow traditional electricity away. The wind industry is marked by a proliferation of turbines, dropping costs, and heightened performance.
There are three categories of wind impact solutions from Project Drawdown that you could invest in:
Micro Wind Turbines: Windmills that capture kinetic energy for pumping water, charging batterries, and providing power for rural locations
Onshore Wind: Onshore wind farms have small footprints, typically using no more than 1% of the land they sit on, so grazing, farming, recreation, or conservation can happen simultaneously with power generation.
Offshore Wind: Offshore Wind Turbines use offshore utility-scale wind power technologies to generate electricity. This solution is increasingly being adopted where the wind is less intermittent, and the turbines can harvest more energy than is the case for onshore wind.
3. How to Invest in Hydrogen
Green hydrogen is the baby amongst the renewable energy group as the technology is still being refined. However, this emerging industry does present significant opportunities for investors.
Hydrogen has been an energy source for decades for industrial companies like mining. Energy is generated from Hydrogen by splitting the two hydrogen atoms. The goal is to use this energy to produce heat which is turned into electricity.
But, different variations of what kind of power is used to create hydrogen impact the number of emissions produced. Most ‘colours’ (brown, blue, black and grey) use fossil fuels somewhere within their lifecycle. Whereas green hydrogen uses renewable sources like wind.
Green hydrogen is a perfect alternative for vehicles with heavy payloads and where rapid refuelling is required. Companies like Acconia see it as a great alternative as it’s easily storable, transportable, clean and renewable, ticking all the boxes for an alternative sustainable source for trucks driving around Australia instead of needing electric recharging stations or, worse, using fossil fuels.
4. How to Invest in Reduced Food Waste
Roughly one-third of all food produced worldwide is wasted, along with the emissions from the energy, resources, and money across the production, processing, packaging, and transporting.
The solution must tackle two issues: food loss and wastage, not just in the production stage but across the lifecycle. If you’re like us, sometimes you might buy too many veggies when grocery shopping, so sometimes you order takeaway, resulting in organic food waste. Companies like Hello Fresh are changing people’s perspectives on how we eat. Since they only provide the necessary ingredients, by the end of the week, the only thing left is the cabinet staples with a longer shelf life. Resulting in 25% lower emissions than buying ingredients from Coles or other supermarkets.
5. How to Invest in Net-Zero Buildings and Energy Efficiency
Project Drawdown’s Net-Zero Buildings solution uses energy efficiency-boosting and on-site renewable energy systems to create buildings that consume zero energy. Schools, government buildings and universities are already using this solution worldwide by installing things like solar panels and dynamic glass to reduce energy consumption and generate power for the entire building.
“We need nothing short of a dramatic and ambitious transformation from a world of thousands of net zero buildings, to one of billions if we are to avoid the worst impacts of climate change,” said Terri Wills, CEO of the World Green Building Council.
Why should we be looking at buildings as a climate change solution? They are responsible for 40% of global CO2 emissions. But the worst of it is how they run. Imagine the biggest building in your city and think about the aircon, lights on after dark, servers and technology running; these actions account for roughly 75% of those emissions. What about the other 25%? Well, that covers what the people in high-vis do, from construction to seeking out the materials. Companies like Goodman focus on GreenPower for buildings and how to reduce emissions produced through infrastructure and renewable energy.
What’s the Opportunity Size of Investing In a Carbon-Free Economy?
Our transition to a carbon-free economy has already begun, presenting an opportunity for investors to ride the early wind tails of the economic shift we are about to experience over the coming decades.
The Australian Cleantech Industry is Beating the ASX200 Returns.
The Deloitte cleantech index, which tracks and reports on Australian-listed clean tech stocks, has seen a 22.3% growth over the past three years and 39.7% growth over the past five years. In comparison, the ASX200 has experienced a 3.2% drop over the last three-year and a 21.2% five-year growth. Demonstrating the growth and positive performance of the cleantech industry and its resilience over the long term.
Government and Private Funding is Supporting the Sector in Australia and Overseas.
Additionally, the cleantech industry is on the cusp of receiving significant cash investment across government, private and public sectors.
For example, Australia has recently signed historic legislation legally binding our net-zero commitment. With these pledges, states like Victoria are putting their money where their mouths are, spending $157 million on renewable energy and storage projects.
In other parts of the world, investments in the energy transition are even more rapid. For example, the United States Department of Agriculture has recently invested $121 million into 289 projects actively assisting in climate change in rural states.
The German Government is also making their pledge to net-zero clear, with a commitment to invest 200 billion euros in decarbonising its energy systems and building infrastructure to move away from fossil fuels.
And even China is racing towards net zero and investing significantly with $120 billion into solar projects alone in the first half of 2022.
And it’s not just world governments that are financially committing to our race to net zero; the private sector is also starting to inject some serious cash into a carbon-free economy.
First Solar has just announced its plans to invest $1 billion in new manufacturing operations in the US.
Or even here at home, with AGL’s recent announcement that they plan to close some mines ten years ahead of schedule and invest an extra $20 billion into their renewable energy goals.
It’s becoming increasingly clear that a zero-carbon economy presents significant opportunities for investors if they get in early.
The Different Ways You Could Invest In Renewable Energy and Net-Zero Economies In 2022
There are three primary investment vehicles you could explore when looking to invest in renewable energy, they are:
1. Joining a Managed Fund (like Bloom)
Imagine a group of investors standing in a circle putting money in the centre. This concept is how managed funds work. Only the money invested is put into assets (projects, shares or cash) by the overseeing manager on your behalf.
Considering the manager actively oversees and makes judgements about risks and performance, ‘performance fees’ are incurred as part of joining the fund.
Bloom has created the Climate Impact Fund, which includes over 50 climate solutions and 95 assets that can be accessed from $100 (for individuals) in a single trade.
2. Investing in (some) ETFs
ETFs are similar to managed funds, except they are most often bought and sold on the ASX. Just like managed funds, they provide diversification, transparency, and relatively low cost. Although many ETFs are labelled ethical, not many are climate-positive ETFs, so always look closely for their holdings (list of companies they actually invest in). After thorough research, Bloom has selected two ETFs to join our fund, including ERTH, managed by Betashares and CLNE, managed by iShares. These two could be an excellent place to start.
3. Curating Your Portfolio
Curated portfolios are self-driven through research. People can either use a financial advisor or do their own research and make asset selections independently. This approach provides a very bespoke portfolio but requires a fair bit of time and research, particularly if you want to invest ethically and are screening each investment choice against its ESG credentials. Platforms like CMC, Superhero, and Commsec offer a relatively easy way to build your own portfolio by directly buying and selling shares on the ASX. On such platforms, often a brokerage fee applies for each trade, so always look for their full PDS to understand the fees and total cost of building your own portfolio.
5 Renewable Energy Companies In 2022 That You Could Invest In
If you’re looking to make an impact with your money, these 5 companies could be a good place to start.
But, before we get into the nitty-gritty, always do your own research before making any financial decisions.
Here’s a guide on the featured financial information given below:
Company performance:
When the information was collected (21st of November, 2022)
Market Cap: The dollar value of their stock multiplied by the total number of pending shares
Earnings (TTM): The company's wages or money earned trailing over the previous 12 months.
Revenue (TTM): The company's total profits generated operations like sales trailing over the previous 12 months.
Investment Theme: Solar
Meridian - ASX (MEZ)
Meridian is Australasia’s largest 100% renewable energy generator through its solar, wind farms and hydropower portfolio plants. Their solar solutions include residential and commercial solar panels.
Meridian is supporting the decarbonisation of our transport system by partnering with companies like Paddon Rally Group (EV Rally) and ElectricAir (Electric helicopters). They’ve also committed to launching a network of EV chargers throughout New Zealand to help people switch to electric cars.
At a glance
Meridian Energy's performance:
Information was collected on the 21st of November, 2022
Market Cap NZ$12.13b
Earnings (TTM) NZ$451.00m
Revenue (TTM) NZ$3.70b
NZ: New Zealand Dollar
Impact: Manages ~50% of NZ's Hydro storage
Investment Theme: Wind
Northland Power produces, develops, constructs, owns and operates clean, green electricity and power infrastructure, including natural gas, wind, and solar.
At a glance
Northland Power performance:
Information was collected on the 21st of November, 2022
Market Cap CA$9.23b
Earnings (TTM) CA$641.77m
Revenue (TTM) CA$2.45b
CA: Canadian Dollar
Impact: Renewable facilities mitigated 2.15MT of CO₂e.
Investment Theme: Green Hydrogen
Located in South Korea, Doosan Fuel Cell develops and distributes power generation cells in power plants, refrigerated warehouses, large buildings, and hot springs. These cells convert hydrogen fuel into electricity with extremely low air pollutants and noise to create clean energy technology.
At a glance
Doosan performance:
Information was collected on the 21st of November, 2022
Market Cap ₩2.42t
Earnings (TTM) ₩8.53b
Revenue (TTM) ₩379.22b
₩: South Korean Wan
Impact: Has supplied ~330.9MW (758 units) of Doosan Fuel Cells globally
Investment Theme: Reduced Food Waste
HELLO FRESH SE - XTRA (HFG)
HelloFresh is a German company that delivers meal kit solutions to prepare home-cooked meals. Having provided over 600 million meals last year while boasting around 7.7 million active customers earlier this year, Hello Fresh has emerged as a market leader in the meal-kit industry. HelloFresh achieved recognition as the first carbon-neutral meal kit company worldwide.
At a glance
Hellofresh performance:
Information was collected on the 21st of November, 2022
Market Cap €4.11b
Earnings (TTM) €140.40m
Revenue (TTM) €7.31b
€: Currency sign for the Euro
Impact: HelloFresh meals produce 25% fewer GHG than supermarket meals
Investment Theme: Net-Zero Buildings
Goodman Group is a global commercial and industrial property group based in Australia. With a worldwide property portfolio spanning 14 countries, Goodman Group is amongst the most significant industrial property groups listed on the Australian Stock Exchange. The company’s business operations are centred around the ownership, development and management of industrial real estate designed to meet its customers' property/space requirements.
At a glance:
Goodman's performance
Information was collected on the 21st of November, 2022
Market Cap AUS34.77b
Earnings (TTM) AU$3.41b
Revenue (TTM) AU$4.81b
Impact: Every Australian Goodman property under its operational control is powered by 100% GreenPower
Whether you want to go direct, purchase an ETF or join a managed fund, make sure you do your own research into the ESG and climate impact credentials of the companies you are investing in. At Bloom, we use leading climate science research from Project Drawdown and Climateworks to help map and inform our asset selection process. We’re rigorous with our research and closely monitor every company in our fund to ensure we’re making a genuine and positive climate impact while striving to deliver financial returns.
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The information on this blog is prepared by Bloom Impact Investment Services Pty Ltd (ACN 651 965 098 AR 001294778), who is an authorised representative of Cache Investment Management Pty Ltd (ACN 624 306 430 AFSL 514 360) (Cache). All information is general information only and does not take into account your personal circumstances, financial situation or needs. The financial products described herein will be issued by Melbourne Securities Corporation Limited (ACN 160 326 545 AFSL 428 289), as disclosed in the relevant PDS. You should also read the TMD which describes who the financial products mentioned herein, may be appropriate for. All information is general information only and does not consider your personal circumstances, financial situation or needs. Before making a financial decision, you should read the PDS and consider whether the product is right for you and whether you should obtain advice from a professional financial adviser.