As the population has grown it has also urbanised. Today, 53 per cent of people are living in cities, towns and other urban areas, accounting for more than 70 per cent of greenhouse-gas emissions, energy consumption and use of material resources. Clean tech is the answer.
" This forecast explosion is expected to drive consumption of world resources higher and higher and drive demand for alternative, sustainable 'clean technology."
Jane Olsen, Freelance journalist
'Clean tech' is a general term describing companies that develop products, processes or services reducing waste and minimising use of non-renewable resources.
Clean tech solutions are demanded by consumers whose awareness and preferences are changing and governments implementing regulation, forcing companies to reduce their carbon footprints and adopt energy efficient technology.
Australian Clean Tech managing director John O'Brien says clean technology incorporates the industries of the future and the sector's growth should drive increases in employment, investment and trade.
“Clean tech companies deliver both economic and environmental benefits and their growth will be driven by the fact they offer more efficient, more profitable and more sustainable ways of doing business," he says.
Beate Meyer, local executive director of Swiss fund manager Vontobel Asset Management, says climate change and pollution is driving demand for clean technology.
“Shifting trends in consumer demand combined with tighter regulations and standards are behind the push for better energy efficiency, reduced emissions and improvements in the quality of water, food, goods and services," she says.
“The growth prospects of companies active in this clean tech space looks favourable."
Whether it's energy efficient insulation materials, electric cars or water-filtering technology, sustainable technology companies are meeting growing demand for eco-friendly solutions from ethically-conscious consumers and governments. It's a long-term global trend that's delivering strong social, economic and investment returns.
Successful companies in this area typically achieve high growth rates and high margins, allowing them to defend or expand their market position, according to Meyer.
The MSCI Global Clean Technology Index returned 4.27 per cent annualised for the three years to December 31, 2015, against the MSCI World Index's annualised return of 10.23 per cent over the same period.
The Australian CleanTech Index – developed by Australian CleanTech – returned 6.1 per cent in the year to September 30, 2015, compared to the S&P/ASX 300 Accumulation Index which lost 0.68 per cent.
Based on research by Vontobel Asset Management (ANZ has a strategic alliance with Vontobel, a Swiss private bank) there are four key investment themes in clean technology.
Buildings currently consume around 40 per cent of global energy and emit 30 per cent of global carbon dioxide with heating, cooling and lighting accounting for up to 60 per cent of a building's energy consumption, according to manufacturing company Saint-Gobain.
The high cost of such energy consumption is a major concern for property owners, especially with the imposition of stricter standards by governments.
Efficient insulation materials and coatings of glass can decrease heat loss or cooling needs by up to 75 per cent, according to a 2012 MarketsandMarkets report on global trends and forecasts in the thermal insulation market.
Initially driven by stricter building regulation in developed countries, energy-efficient building technology to keep operating costs low is increasingly requested by potential tenants – also in developing countries.
Similarly, light-emitting diodes (LEDs) are more efficient and longer lasting than traditional light bulbs. LED lighting is expanding fast into commercial and residential buildings, but also into industrial and public-lighting systems thanks to lower life-cycle costs.
Transport accounted for 14 per cent of the world's greenhouse gas emissions in 2010, according to the Intergovernmental Panel on Climate Change, with most transport around the globe using fossil fuels as their source of energy.
This level of consumption is linked to major pollution and health problems. Developing efficient mass-transportation systems with less environmental impact is a priority for the transport sector and governments; and suppliers of intelligent transport systems are poised to benefit.
The automotive and aviation industries are also working to improve fuel efficiency. Major trends in car manufacturing include shrinking engine size while maintaining performance, the adoption of various composite materials to reduce weight and the development of electric vehicles.
Wind and solar-power generation is becoming increasingly cost competitive relative to traditional power generation; furthermore, the 'Paris Agreement' reached in December 2014 will accelerate the world's transition away from fossil-fuel-based energy.
Modernising the electric grid to create a 'smart grid' is essential for integrating smaller and decentralised sources of renewable energy. Efficient energy storage solutions also become necessary.
Innovation, economies of scale and increased reliability are speeding up broader adoption, particularly in China, India and the U.S. where pollution from coal-fired power plants is enormous.
By 2030, demand for water is expected to be 40 per cent higher than it is today, and more than 50 per cent higher in most rapidly developing countries, according to a recent McKinsey & Co Report.
However, the Charting Our Water Future report also found the future 'water gap' can be closed, with careful management of resources and the potential adoption of water saving techniques and technologies.
Populous countries facing potential water shortages such as China and India are therefore investing heavily in water treatment systems while others are raising water tariffs. The preservation, efficient use and treatment of water are consequently key areas of focus for the clean tech sector.
Supply of water is not the only problem. Water pollution is one of the main concerns. New technologies to filter contaminants and to provide safe and clean water therefore offer attractive growth opportunities in both developed and emerging markets.
High-end water technology systems associated with filtration, desalination and water testing may offer attractive investment opportunities within the water market.
Jane Olsen is Freelance journalist
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.