Investing in clean tech: Opportunities and challenges
July 18, 2022
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4 Minutes
The momentum behind the energy transition has accelerated significantly over the past few years. We've seen increasing interest from investors who want to support clean energy technology companies, as well as increased societal, governmental, and regulatory support for clean energy. At TD Securities' three-day 2022 Global Clean Technology & Energy Transition Conference, hundreds of global investors and clients heard from over 50 companies and influential investors actively transforming the industry landscape and facilitating the energy transition.
Long-term tailwinds present opportunities for growth
There is broad acceptance across the industry, and indeed at our conference, that energy transition is a necessary element of the path to net-zero. Companies focused on clean energy technologies will be at the forefront of the transition, creating opportunities for investors and industry trailblazers.
"There are significant long-term tailwinds behind the clean tech and energy transition sectors, despite the current market volatility," says Steve Akman, Director, Global Energy Investment Banking at TD Securities. "There is broad consensus that energy transition is necessary to mitigate climate change, so companies that are developing or have proven technology, and robust commercial plans will be well positioned to succeed over time."
For example, during our Technology to Optimize the Renewable Sector panel, investors heard about unique solar modules developed for building-integrated solar, as well as light concentrating overlays that boost energy production on solar modules. In that same panel, another participant provided a glimpse into the use of AI and large data sets from renewable energy assets to optimize production gains and drive cost reductions. The data can help improve performance and identify risk factors, providing market intelligence on previous blind spots in renewable projects. These technologies will serve to advance the proliferation of renewable energy by tapping into new sources of energy, and making existing forms of generation more efficient.
While fossil fuels are still relied upon for power in many regions, supply constraints, increasing international demand, and increasing power prices have driven a renewed focus on energy independence and energy security as a key element of the energy transition. With significant private capital, government, and regulatory support to commercialize these clean technologies, and the growing desire for energy security, the trajectory of the industry favours renewable and clean technologies.
The importance of capital and finding the right investment partners
A significant amount of capital is often required for clean tech and energy transition investments. As many of our conference presenters acknowledged, their organizations are still in the early stages of research and development, or are establishing the commercial viability of their technology. There are an increasing number of large seed, VC, and growth stage investors looking to support innovative ideas, technologies, and management teams. However, some incumbent energy sector investors find that investing in these companies or technologies carries a higher risk profile than their traditional core business, and nascent markets don't always allow for large scale investment.
Accordingly, many newer or smaller clean energy companies, often require expert advice as they explore how and where they fit into the current energy landscape, how to best access the right pockets of capital, and can benefit from introductions to investors to make these opportunities come to life.
"Our team seeks to develop a deep understanding of technologies that will accelerate our trajectory to a low-carbon economy. In doing so, we foster strong relationships with companies involved in clean tech and energy transition so we can support clients in finding the right funding or strategic partner," says Steve. "We share our knowledge and advice to make the connections that drive successful outcomes for our clients." In providing this advice, our industry and product experts work closely with our Sustainable Finance & Corporate Transitions group to provide environmental, social and governance advisory services to our worldwide client base. This includes structuring and framework creation for green, social, and sustainability-linked products; advisory services on best practices and market standards for ESG integration in corporate strategy and reporting; and ESG due diligence for M&A and private equity transactions.
Challenges for clean energy companies and investors
Despite these tailwinds, the current landscape is not without its challenges. With the confluence of events like the Russia-Ukraine war, rising interest rates and inflation, and supply chain issues, we are witnessing a market pullback across many sectors. Early-stage growth companies that have outperformed in recent years, have been disproportionately impacted.
Given the market backdrop, investors are applying more scrutiny to business plans and growth trajectory, the size of the addressable market, and whether companies can scale up to meet demand and compete.
Looking forward to a clean future
The broad participation in TD Securities' 2022 Global Clean Technology & Energy Transition Conference is a testament to the growing investor interest in clean tech and energy transition. Climate change is one of the most pressing issues of our time. As a global financial institution, we understand the important role we play to support the entrepreneurs, companies, and investors who are driving the energy transition forward to create a brighter, cleaner future.
Director, Global Energy Investment Banking, TD Securities
Director, Global Energy Investment Banking, TD Securities
Director, Global Energy Investment Banking, TD Securities
