Climate Tech Break: Top Three Trends in Climate and Clean Energy in 2023
Cleantech, renewable energy and climate policy continue to dominate headlines as we enter the energy transition age. Among so many hot clean energy topics, Silverline has assessed the landscape, talked to the experts, and compiled our three top trends for 2023.
#1 - ESG: The Big Three in Values
Environmental, social, and governance (ESG) investing has grown popular in recent years as more companies seek to align their investments with their values. According to a recent PWC report, 81% of American institutional investors plan to increase their investments in ESG products over the next two years. This data is backed up by a 2022 report from McKinsey, which found that 49% of investors cite ESG as one of their top five concerns, while 70% of investment firms found a positive relationship between promising ESG scores and financial returns.
Investors, guided by the urgency of addressing climate change as well as the expectations of customers who want tangible ESG commitments, are seeking opportunities in the cleantech sector. While the growing availability of data and technology gives investors the opportunity to assess the ESG performance of potential investments, many of these funds enable investors to choose from a diversified portfolio of companies working to transition to a clean energy future. The options are almost limitless, and companies with authentic and actionable ESG commitments will rise to the top.
#2 – EVs: Picking up the Pace
Similar to ESG investment, the electric vehicle (EV) market is expected to expand rapidly in 2023, although at a slower pace than 2021 or 2022 according to BloombergNEF. This rapid growth is driven by a combination of factors, including advances in technology, government incentives, and growing consumer demand for sustainable transportation. Nearly every automaker in the U.S. is unveiling new fleets of EVs, ranging from luxury to more affordable models. J.D. Power predicts that by the end of the year, the market share of EVs will reach 12%, up from 7% by the end of 2022.
An expansion of EVs also requires expanding charging infrastructure nationwide. According to a study by PWC, the charging infrastructure market must increase tenfold between by 2030 to meet the charging needs of EVs in the U.S., resulting in an estimated increase from four to 35 million charging stations. The 2021 Infrastructure Investment and Jobs Act, which funded $7.5 billion in EV charging infrastructure, will aid in this expansion.
Also on the rise – the production of lithium-ion batteries used to power the growing fleet of EVs. Data and market intelligence provider Benchmark Mineral Intelligence reports that national EV battery capacity is predicted to grow over 500% between 2021 and 2026. The federal government is boosting investment in this sector via the Inflation Reduction Act, which offers manufacturers direct subsidies to invest in mining for minerals, as well as producing battery components and cells.
#3 - Scope 3 Emissions: Raising the Decarbonization Challenge
The third top trend presents a huge corporate challenge: Scope 3 emissions, which refer to indirect emissions from a company's operations. This includes emissions from the production of raw materials, the transportation of goods, and the use of products after they have been sold, as well as the emissions from employee commutes and business travel. According to the Center for American Progress, Scope 3 emissions account for about 88% of total emissions from the oil and gas sectors, although they are also high for industries such as finance.
Under the SEC’s March 2022 climate-related rule proposal, companies will be required to disclose their Scope 3 emissions as early as 2024; however, Scope 3 stakeholders have expressed concerns about the lack of clarity on how to collect, analyze, and report the complex data required from a range of third parties when making public emissions disclosures. Another Scope 3 emissions challenge is the hidden risk for investors, as public information is difficult to find and determining whether companies are fulfilling their climate commitments is nearly impossible.
To meet this fast-approaching deadline, companies must consider addressing energy consumption in the supply chain, promoting sustainable transportation practices, and implementing sustainable waste management practices. Companies also can incentivize their suppliers to reduce their emissions as well as develop more energy-efficient products with a smaller carbon footprint. The benefits to reducing Scope 3 emissions include improving brand reputation, increasing sustainability, and securing long-term success.
Bottom Line: Improving Sustainability
Rising ESG investment, increasing EV production, and managing Scope 3 emissions share an underlying theme: accelerating the energy transition. Action on each of these top climate-focused trends leads to a similar outcome: reducing the threat of climate change and creating a more sustainable planet for future generations – all trends worthy of transforming into traditions.
