Green R&D: Companies Betting Big On Green Innovation

The Green Transition Scoreboard reports that $241 billion was recently invested in green R&D by large multinationals like Samsung, General Electric, and Nissan and smaller companies like Owens Corning, Cree, and First Solar. Companies around the world are recognizing a tremendous opportunity as we shift from a dirty fossil fuel-based economy into a cleaner, greener future. The Green Transition Scoreboard documents this shift, and its August 2012 Supplement focuses on R&D’s contribution to the more than $3.6 trillion of private investments in renewable energy, green construction, smart grid, energy efficiency, cleantech and R&D since 2007.

The August 2012 supplement to the February 2012 Green Transition Scoreboard annual Global Green R&D Report (PDF) tracks more than $241 billion of investments companies are making in green R&D. Major investment in green R&D by large companies is evidence of a management bet on increasing revenues from consumers who are demanding green products. For smaller companies who are purely focused on green industry, these investments illustrate the tremendous growth opportunity in green sectors.

Multinationals Investing Billions Into Green R&D

Large multinational corporations are investing billions into green R&D. They’re not doing it for good PR; they’re doing it to enhance revenues.

Samsung is betting more than $21 billion on solar panels, LED lighting, and batteries for electric cars, expecting to earn more than $32 billion in annual revenues by 2020.

Since 2005, General Electric has been investing $1 billion per year into their Ecomagination initiative. The gamble has paid off well, generating $18 billion in revenues through 2010 and becoming so profitable that GE is doubling down, earmarking $2 billion (PDF) per year for green R&D through 2015.

Carlos Ghosn, CEO of the Nissan/Renault alliance, is also seeing the potential to profit from the growing green economy. He believes that electric cars will make up 10 percent of global auto sales by 2020, and is investing €4 billion to ensure that his company gets a large share of the market.

Growing Group of Smaller Green Tech Companies With A Global Reach

There is also a growing group of smaller companies that focus solely on green technologies.

Some of the pure plays are on companies that promote energy efficiency for the end user, such as Owens Corning and Cree Inc., which are producing the next generation of insulators and efficient LED lights.

Utilities are getting smarter at energy delivery, and there are plenty of firms like Maxwell Technologies that are designing ultra-capacitors that optimize energy storage and power delivery, and like Elster Group that delivers energy management solutions to measure and control the flow of water and electricity.

Finally, there are renewable energy technology firms, like First Solar, Yingli Solar, Vestas and Natcore, that are innovating more cost-effective ways of producing energy from the sun and wind.

Research & development investments are key drivers growing the green economy. They are resulting in new products that meet human needs, while minimizing the impact on our natural environment. Significant investments in green R&D symbolize that a company has integrated sustainability into their core strategy. They serve as a strong indicator for investors who are betting on increasing consumer demand for green products.

The green transition is happening at an extraordinary rate. Investors seeking growth opportunities should take note, and consider companies that are positioning themselves as innovators in this space.

Full disclosure: Co-author Henderson is invested in CREE, FSLR and NXT.CA.