Cleantech Investing in Australia

Cleantech Investing in Australia

Cleantech investing in Australia is gaining steam. Learn about the market’s key players and how to get involved in this growing space.

Climate change is a looming issue for Australians, with 82 percent concerned about bushfires and 81 percent worried that drought or flooding will affect crop production and food supply.

This is where conscious investors look to the cleantech sector, which covers everything from renewable energy to low-emission technologies to water technology to battery storage and more.

What should investors know about cleantech in Australia before they jump in? Read on for a look at key factors, including market size, the industries encompassed by cleantech and big players to watch.

Cleantech investing in Australia: Market size

Cleantech is growing in Australia, and one way to get a picture of the space is through the Deloitte Australia CleanTech (DACT) Index. It included 90 companies with a combined market cap of AU$73 billion as of February 2021, and is designed to track their market-cap-weighted share price performance.

Launched in 2008, the DACT has now outperformed the wider market for seven years in a row, which according to Deloitte Australia indicates growth and maturation in the cleantech sector.

The post-COVID-19 recovery presents new opportunities as cleantech can contribute to both economic recovery and global decarbonisation efforts. The latest DACT report shows it is “well above” its pre-coronavirus levels, suggesting a positive investment environment for low-carbon companies.

Cleantech investing in Australia: Industry breakdown

Deloitte Australia breaks the cleantech market down into a number of sub-sectors.

The firm emphasizes that cleantech is different than socially responsible investments and environmental, social and governance investments, better known as SRI and ESG.

The distinction is that SRI and ESG look at incremental improvements in company performance, while cleantech is about companies that positively enhance communities and ecologies.

Here’s a look at the cleantech sub-sectors Deloitte Australia mentions:

  • Biofuel: corn ethanol, sugar ethanol, cellulosic ethanol, biodiesel, algae production and biotech providers.
  • Biogas generation: landfill gas, waste to energy, biomass digester gas and biosygas.
  • Biomaterials: organically based materials and plastics, energy materials and green chemistry.
  • Carbon trading: environmental offsets, carbon farming, soil management and livestock management.
  • Energy storage and fuel cells: Energy storage systems, batteries, pumped hydro and fuel cell technologies.
  • Environmental service providers: environmental engineering, specialist services and equipment providers.
  • Geothermal: hot fractured rock, conventional geothermal, technology and equipment providers.
  • Green buildings: green building design, precinct design, products and services, rating systems and building management.
  • Smart grid and energy efficiency: demand response, grid management, peer-to-peer trading, energy efficiency, home automation and internet of things.
  • Solar: traditional photovoltaics, concentrating photovoltaics, nanotechnologies and solar thermal.
  • Vehicle technologies: hybrid, flex fuel, hydrogen and electric vehicles and recharging and refuelling infrastructure.
  • Waste management recycling: residential and industrial waste collection and disposal and recycling operations.
  • Water: desalination, water reuse, sensor technologies, water efficiency, utility management and treatment technologies.
  • Wave, tidal and hydro: surface and submerged wave technologies, tidal, major and mini-hydro and pumped storage schemes.
  • Wind: onshore, offshore, urban, turbines, developers, tower and blade manufacturers and community wind farms.

Cleantech investing in Australia: Major companies

As mentioned, the DACT tracks the performance of 90 Australian cleantech companies, and is intended to provide a measure of the market. Investors who want to enter this growing tech sector can start by exploring some of the index’s top stocks by market cap.

Consistently performing renewable energy stock Meridian Energy (ASX:MEZ) regularly tops the list by market cap, and is also New Zealand’s largest renewable energy power company.

Other major index players include Reece Group (ASX:REH), Australia’s largest supplier of plumbing and bathroom supplies. Notable examples in the renewable energy space include Mercury (ASX:MCY), which deals with hydroelectric-generating and geothermal plants in New Zealand, and Contact Energy (ASX:CEN), another New Zealand electricity generator that dabbles in natural gas and broadband retail.

One of the biggest companies in the waste sector is Cleanaway Waste (ASX:CWY), which is an end-to-end e-waste recycler that employs some 6,000 Australians over its 250 branches nationwide.

Cleanaway Waste performed well throughout the coronavirus crisis and is well-placed to capitalise on Australia’s growing efforts to deal with plastic, as well as the country’s desire to be waste self-sufficient after China’s ban on accepting recycling from Australia.

Cleantech investing in Australia: Other opportunities

Investors specifically on the lookout for cleantech startups instead of listed stocks may want to join EnergyLab, which purports to be Australia and New Zealand’s largest cleantech acceleration program. EnergyLab receives submissions from cleantech startups in the region that are looking to raise capital and passes select opportunities on to its members.

Looking forward at renewable energy uptake in Australia, the country’s Clean Energy Council describes 2020 as significant in that more than one-quarter of the nation’s total electricity generation came from renewable sources for the first time.

The top renewable energy source for Australia last year was wind, followed by small-scale solar and hydro. The Clean Energy Council notes that the country’s states and territories have taken the lead on renewable energy policy rather than the federal government.

Further into the future, an abundance of sunshine and natural resources means the nation has the ability to move to a 100 percent renewable system, as per the Australian Energy Market Operator. However, trading in gas- and coal-powered electricity would require major political shifts.

For investors, it’s clear that as Australia looks for climate solutions and economic gains post-COVID-19, there will be no shortage of opportunities in the cleantech space to take advantage of in the near future.

Don’t forget to follow @INN_Australia for real-time updates!

Securities Disclosure: I, Ronelle Richards, hold no direct investment interest in any company mentioned in this article.

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