Green tech refers to a type of technology that is considered environmentally friendly based on its production process or its supply chain.
Green tech–which is an abbreviation of "green technology"–can also refer to clean energy production; clean energy production is the use of alternative fuels and technologies that are less harmful to the environment than fossil fuels.
Although the market for green technology is a relatively young, it has garnered a significant amount of investor interest due to increasing awareness about the impacts of climate change and the depletion of natural resources.
KEY TAKEAWAYS ABOUT GREEN TECH
Green tech–or green technology–is an umbrella term that describes the use of technology and science to create products that are more environmentally friendly.
The goal of green tech is to protect the environment and in some cases, to even repair past damage done to the environment.
Examples of green tech include the technology infrastructure used to recycle waste, purify water, create clean energy, and conserve natural resources.
Understanding Green Tech
Green Technology is an umbrella term that describes the use of technology and science to create products and services that are environmentally friendly. Green tech is related to cleantech, which specifically refers to products or services that improve operational performance while also reducing costs, energy consumption, waste, or negative effects on the environment.
The goal of green tech is to protect the environment, repair damage done to the environment in the past, conserve natural resources and preserve the Earth's natural resources. Green tech has also become a burgeoning industry that's attracting enormous amounts of investment capital.
The use of green tech can be a stated goal of a business segment or a company. These goals are typically outlined in a company's environmental, sustainability, and governance (ESG) statement, or can even be found in the mission statement of a firm. Increasingly, socially responsible investors are looking to narrow down their prospective investments to only include companies that specifically employ or produce green technologies.
While green tech has become increasingly popular in the modern age, elements of these business practices have been in use since the Industrial Revolution.
Beginning in the Beginning in the early 19th century, manufacturers have sought to reduce their negative environmental externalities by altering production processes to produce less soot or waste byproducts. Still, green technology as a recognized business sector did not really develop until the 1990s.
According to a 2018 report released by the United Nations, global investment in renewable energy and green technology processes surpassed $200 billion in 2017; $2.9 trillion has been invested in sources like solar and wind power since 2004.
The U.N. report also stated that China was the largest global investor in the sector, with approximately $126 billion invested in 2017.
Companies that are part of the green technology movement might engage in conserving natural resources or the discovery of new environmentally-friendly energy sources.
Investors may choose to support green technology initiatives through the purchase of a company's stock that employs green technology practices. This type of investing is sometimes referred to as socially responsible investing (SRI). These investors may turn to investment funds known as green funds, SRI funds, or ESG funds. These funds contain publicly-traded companies that are leaders in employing green technologies.
Some companies generate all of their revenue and profits from green technology activities. However, it's important to note that the term "green" can have many interpretations and applications, and these vary from industry to Industry. If an investor is interested in supporting green technology initiatives through their investments, it's important for them to thoroughly research the validity of a given company's claims of green policies, standards, and accomplishments.
Examples of Green Technology
Green technology is used in the recycling process, as well as in waste incineration. Recyclable material can be used when manufacturing plastics, fertilizer, and fuel. Green technology can also be a part of the production process, such as processes to recycle water or waste in the manufacturing process.
Green tech is used to purify water resources around the world. In parts of the world where there are scarce water resources, green technologies can be employed to purify dirty water or remove salt from seawater in order to increase the availability of clean drinking water.
Green tech is used in processes that purify the air by reducing carbon emissions and gases that are released into the air from manufacturing plants.
Green tech can be used in processes intended to conserve energy, such as energy-efficient light fixtures. Green technology is also used to create alternative fuel sources that are more environmentally friendly than fossil fuels. Fossil fuels typically create waste as a byproduct of their production. Solar, wind, and hydroelectric dams are all examples of green technology because they are safer for the environment and don't produce fossil fuel waste by-products. Besides the environmental benefits of these alternative energy sources, they can also be used to power a home or a utility power plant.
Corporate Green Tech
In 2004, Starbucks Corporation (SBUX) performed a study to measure the company's greenhouse gas emissions. The study revealed that 70% of the company's emissions came from the purchase of electricity used to power their stores. As a result, the company has been working to source all of its power from renewable energy sources for all of its global store operations, including the company's global supply chain and corporate offices.
According to Starbucks, in 2018 the company made investments into wind and solar energy. For example, in North Carolina, the company bought a 140,000-acre solar farm. This farm supposedly delivers enough clean energy to power an equivalent of 600 Starbucks retail stores. In 2019, the company also invested in wind projects, which are intended to provide power for 116 Seattle, Wash.-area stores, as well as stores in the state of Illinois.
Reference: Investopedia (Will Kenton)