DEFINITION of 'Green Tech'

The term green tech (also known as greentech or cleantech) refers to technology that is considered environmentally friendly based on its production process or supply chain. It also may refer to a means of energy production that is less harmful to the environment than more traditional ways of generating energy, such as burning fossil fuels.

Green technology is a relatively young market, but investor interest runs very high in response to global warming fears and the increasing scarcity of many natural resources. Examples of green technology in production include, for example, processes to recycle water or waste in the manufacturing process and the installation of energy-efficient fixtures such as LED light bulbs and flushless toilets. Other green technologies involve sustainable energy such as that generated from solar panels, wind turbines or hydroelectric dams.

BREAKING DOWN 'Green Tech'

Green tech may be a stated goal of a business segment or an entire company and is often included in its environmental, sustainability, and governance (ESG) statement, or can even be the focused mission statement of a firm. Green technology can cover anything from recycled product packaging to longer-lasting light bulbs and alternative energy production. Increasingly, socially responsible (SRI) investors look to companies that specifically employ or produce green technologies (or that do both).

Green technology, while it has become a buzzword in the 2010s, has been in use in some form or another since the industrial revolution when certain manufacturers sought to reduce negative environmental externalities by altering their production process to produce less soot or waste byproducts. Still, green technology as a sector or investment philosophy did not really develop until the 1990s. According to a 2018 report released by the United Nations, global investment in renewable energy and green processes surpassed $200 billion in 2017, while $2.9 trillion has been invested in sources like solar and wind power since 2004. The report also said that China was the largest investor in the world in the sector, with about $126.6 billion invested in 2017. The United States, surprisingly, shows a decline in green industry investment, which dropped to $40.5 billion in 2017.

 

Specialized investment funds known as "green funds," SRI funds or ESG funds, seek out publicly traded leaders in the green tech movement for their investment dollars. In addition, many socially conscious investors may choose to invest only in companies that are environmentally friendly or have pledged to become so.

"Cleantech" is an industry term used to describe products or services that improve operational performance, productivity or efficiency while also reducing costs, inputs, energy consumption, waste or environmental pollution.

Large companies like Starbucks and Whole Foods employ green technology practices alongside a variety of small startups. Others such as Tesla Motors and SolarCity produce or install green technologies such as electric vehicles or photovoltaic solar panels.

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