Cleantech vs. Green

I found the following in a Google Finance discussion and thought it was really helpful. I should disclose that I’m a PZD shareholder… in case anyone out there takes my blog seriously. :) Rafael, I hope you don’t mind me syndicating this here:

Actually, as the Manager of the Cleantech Index, there is a significant difference between ‘greentech’ or ‘envirotech’ and ‘cleantech’. The former were coined in the 80’s and tended to refer to ‘technologies’ that focused on regulatory-driven businesses such as hazardous waste remediation and pollution control or was we like to call them ‘end-of-pipe’ solutions.

The gist of Cleantech is intellectual property and/or know-how (usually in the form of patents) that makes products better, cleaner, safer, and lower cost, whilst (and that’s the key word) reducing their consumption of resources (materials, energy, water, soil, etc.) and other negative externalities such as pollution, soil erosion, threats to public health (e.g., toxins in toys or seafoods), deforestation, etc. Anyway, a wise man once asked “who the heck wants green water? I want clean water.”

As explained in greater detail at www.cleantechindex.com, clean technology businesses and products cut across a broad spectrum of industry sectors from energy generation & transmission, to water, to agriculture, to industrial process, to software.

Unfortunately, ‘green’ has often become associated with slick marketing campaigns frequently used to promote many undeserving companies and products such as grain- or oil-seed-based fuels, numerous so-called ‘clean coal’ technologies, and highly polluting waste-to-energy plants, or companies such as BP, Tate & Lyle, or Archer Daniels Midland. Cleantech companies also tend not to be regulated utilities or commodity product producers with little proprietary technology (low-end filters, activated carbon, ethanol).

‘Green’ also tends to connote things like organic foods, healthy lifestyles, and non-technology-driven products and services. Those are fine things, but not cleantech. Our investment thesis is that real long-term economic profits tend to be highly correlated with
intellectual property (typically patents) and its continued development. Moreover, the Cleantech Index (that underlies the PowerShares Cleantech ETF (ticker: PZD) seeks companies that have critical “game-changing” technology-driven products and services need address (and profit from) the massive and accelerating challenges mankind faces from climate change, pollution, water and resource scarcity, etc.

I hope that I have cleared things up for you.

Best,
Rafael

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