Insight Bite

The growth of the world’s digital giants is good news for clean firms and start-ups, as the continued influence of Silicon Valley is driving up interest and investments in alternative energy sources. As Apple’s CEO Tim Cook last week told the public at the company’s annual shareholders meeting, “If you want me to do things only for [return on investment] reasons, you should get out of this stock.”

This public stance on company policy is generally in stark contrast to other industries, where much is made of developing a “green” image, but few investments actually flow that way. Imagine an oil major telling its shareholders the company aims to go green and reduce its oil output. Or a car manufacturer publicly stating its vehicles will be increasingly green-only. Cynics might say companies such as Apple have an interest in cleantech evolution, since its trade is not based on the consumption of fossil fuels and such firms already have large interests in the continued expansion of alternative sources. However, actions speak louder than words. The US firm increased usage of renewables from 35% in 2010 to 75% by 2013 across its global operations, and the aim is to reach 100% within a few years. The company has also announced its new headquarters in the US will include the largest solar panel array in the country, with the development projected to generate about $11 million in annual revenue and 7,400 jobs to California.

The backing of self-confessed green enthusiasts such as Apple and Google will be essential in driving the value and investments of cleantech enterprises as the amount of capital invested by VC funds in the segment has fallen sharply in 2013. According to PitchBook, corporate financing of cleantech companies involved in segments such as solar-panel manufacturing, wastewater treatment, biofuels and algae technologies declined by 62% in 2013. The capital raised by VC-backed cleantech funds saw a similarly large decrease, from $4.5 billion in 2012 to under $1 billion in 2013. Cleantech offers lots of potential and innovation but continues to deliver little in actual hard profit and venture capitalists are becoming tired of chasing what could be “the next big thing if only it catches on”. The truth is that the world’s emerging markets, which hold the overwhelming share of the global population, are not in a hurry to implement cleantech. Economic growth is still fuelled by fossil fuels. While an innovative e-commerce platform can catch on in all countries provided they have sufficient Internet users, companies still see cleantech as a luxury they can ill afford.

Yet this is where digital majors will become key. A cleantech world is in their interests, and they hold the key to reinvigorating the market in 2014, whether through acquisitions and funding or by adopting cleantech principles that can serve as an example to other major firms. Other industries could certainly take a bite out of Apple’s playbook.