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Trends Watch: July 26, 2018

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman 

This week, Elana talks to Praveen Sahay, Partner and Managing Director of WAVE Equity Partners.

What is the outlook for clean technologies and their growth prospects?

The real breakthrough has been the understanding that profitability and wealth creation lie within these technologies. We have a saying: If it is not profitable, it is not sustainable. Businesses are being urged of course by their stakeholders to reexamine their roles within the environment and society they operate; but the revelation to these businesses has been the difference clean technologies can make to the bottom line. Additionally, discussions about impact have rapidly moved to the mainstream, and investors’ demand for impact assessment and reporting has become more specific and insistent.

From our perch, we see that efficient clean technologies are already winning. Within our own portfolio comprising the clean energy, food, water, and waste industries, companies are experiencing broad market support, with rapidly rising revenues and profits.

We are in the initial phase of a 25-year cycle when production and consumption involved in manufacturing, agricultural, energy, housing, and transportation industries will gradually move toward a circular economy. This is a multi-trillion-dollar opportunity that will be won by those entrepreneurs and investors who understand that impact should enhance economics, not subvert it.

What are the biggest opportunities you see?

The higher-profile industries like solar, wind, biofuels, robotics and AI have been popular (though not always winning) bets amongst entrepreneurs and investors.  But there are less obvious innovations that are not only game changers but can also often produce faster returns on investment. Clean technologies are often less conspicuous because they are integrated into industrial supply chains and manufacturing processes: smarter catalysts and chemical pathways to make environmentally friendly products, machine-to-machine interfaces and automation technologies that reduce errors and enhance productivity, for example.

A few of our portfolio companies also illustrate this point. Some, such as lithium ion batteries and indoor farming, are topical and easy to talk about. But we also own companies that make superior insulation materials and water heaters, and that recycle waste and water more effectively and at lower cost. Their impact is widespread and immediate.

What is your outlook for the economy?

We see a rising tide of opportunities driven by very positive developments. Corporations are racing to secure breakthrough innovations that will give them a market edge. Countries are competing to attract and retain high-quality manufacturing jobs. We see a ground movement for environmentally responsible solutions from various stakeholders that will transform how we produce and consume everything. We will be reimagining materials, technologies and processes used in mining, farming, transportation, energy, water and manufacturing. This massive shift in our largest economic sectors will generate tremendous wealth for entrepreneurs and their investors.

That said, there are some sectors that are overdue for correction; corporate valuations and acquisitions are at near highs; and the current political uncertainty could give rise to trade disputes and disruptions of global supply chains.

However, these distractions will not weaken society’s fundamental drive to transform our food and industrial systems into healthier, more sustainable and nurturing organizations. Rather, they will sharpen everyone’s attention to the cost of achieving these desires.

What keeps you up at night?

We yearn for speed! There are massive opportunities to do well and do good, and committed entrepreneurs are doing their part to launch innovative products that produce both financial and environmental dividends. Corporations are stepping up and more funds are getting raised—yet not at a pace that keeps up with the rate of innovation. With more VC/PE capital available to support young industrial companies, we have the potential to make much more meaningful financial, social, and environmental impact.

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

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