What Is Green Tech?

The term green tech refers to technology that is considered environmentally friendly based on its production process or supply chain. Green tech–which is short for green technology–can also refer to clean energy production. Clean energy is the use of alternative fuels and technologies that are less harmful to the environment versus fossil fuels.

Although green technology is a relatively young market, it has garnered investor interest in response to fears of climate change and a growing scarcity of natural resources.

Key Takeaways

  • Green tech or technology is an umbrella term that describes the use of technology and science to create products that are environmentally friendly. 
  • The goal of green tech is to protect the environment and in some cases, repair damage done in the past.
  • Examples of green tech include technology used to recycle waste, purify water, create clean energy, and conserve natural resources.
  • Green tech is big business with more than $200 billion in global investment in renewable energy and green processes.

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 also called environmental technology or cleantech. Cleantech is used to describe products or services that improve operational performance while reducing costs, energy consumption, waste or negative effects on the environment.

The goal of green tech is to protect the environment and in some cases, repair damage done in the past. Green technologies can be used to conserve natural resources and preserve the Earth. One of the benefits of green tech is that it has become a burgeoning industry that's attracting enormous amounts of investment capital. However, green tech benefits extend beyond financial opportunities and include creating a safer and cleaner environment.

Green tech can often be a stated goal of a business segment or company. These goals are typically outlined in a company's environmental, sustainability, and governance (ESG) statement, or can even be the focused mission statement of a firm. Increasingly, socially responsible (SRI) investors look to companies that specifically employ or produce green technologies.

Green technology–while it has become increasingly popular–has been in use in some form or another since the industrial revolution. Manufacturers have sought to reduce the 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.

Examples of Green Technology

Green tech is employed in many different ways. Below are a few examples of green technologies that are used today.

Recycling

Green technology is used to recycle waste, including paper cardboard as well as waste incineration. Recyclable material can be used for plastics, fertilizer, and fuel. Green technology is also involved in production, such as processes to recycle water or waste in the manufacturing process.

Clean Water 

Green tech is used to purify water throughout the globe. With the scarce water resources in various parts of the world, green technologies offer a solution to purify dirty water or removing salt from seawater to create drinking water for those in need. 

Clean Air

Green tech helps purify the air that we breathe by reducing carbon emissions and gases that are released into the air from manufacturing plants. Green technology helps reduce carbon, which is harmful to the environment. The population benefits due to cleaner air and fewer respiratory issues. 

Energy 

Green tech is used to conserve energy as well as create alternatives to fossil fuels that are more environmentally friendly. Fossil fuels typically crate waste as a byproduct of their production. Solar, wind, and hydroelectric dams are examples of green technologies that are safer for the environment and don't produce fossil fuel waste by-products. Besides the environmental benefits, these alternative energy sources can be used to power a home or a utility power plant. Green tech is also employed for the conservation of energy such as the installation of energy-efficient fixtures and LED light bulbs.

Investment in Green Tech

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 stated that China was the largest investor in the world in the sector, with approximately $126 billion invested in 2017. The United States showed a decline in green industry investment–falling to $40.5 billion in 2017.

Companies that are part of the green movement might engage in conserving natural resources or the discovery of new environmentally-friendly energy sources. These companies can also be involved in clean air projects as well as environmentally-conscious dealings.

Some companies generate all of their revenue and profits from green business activities. However, it's important to note that the term "green" can have many interpretations and applications, which can vary from industry to Industry. It's important for investors to research a company's claims of green policies, standards, and accomplishments.

Green Funds

Investors can invest in green companies through the purchase of their stock. Investors engaged in socially responsible investing (SRI) often turn to investment funds known as green funds, SRI funds, or ESG funds. These funds contain publicly-traded companies that are leaders in investing and employing green technologies.

Green mutual funds are funds that contain a basket of securities such as stocks of companies engaged in the green movement. Some of these funds include the

  • Portfolio 21 Global Equity Fund Class R (PORTX)
  • The TIAA-CREF Social Choice Equity Fund (TICRX)
  • The Green Century Balanced Fund (GCBLX)

Real World Example of Green Tech

In 2004, Starbucks Corporation (SBUX) performed a study to measure the company's greenhouse gas emissions, which found 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 100% of their power from renewable energy for all global store operations, including the company's global supply chain and corporate offices.

Starbucks has been engaged in purchasing energy from solar and wind farms. The energy from the farms is then transferred to the utility power grid, which is in turn, transferred to the stores and used for electricity.

According to Starbucks, in 2018, the company made investments into wind and solar energy, including in North Carolina where the company bought a 140,000-acre solar farm. The farm delivers enough clean energy to power an equivalent of 600 Starbucks' stores. The company also invested in wind projects, which are expected to launch in 2019 and power 116 Seattle-area stores as well as stores in Illinois.