Investment, Research, Innovation... and SMEs?

The recent announcement by Bill Gates on the formation of the Breakthrough Energy Coalition which will support investments in green technologies is a welcome one. The fact that is tied to a commitment by the governments of the countries in which it will invest to increase public funding in energy research and development is even more welcomed as for all we talk of the importance of the private sector we would be remiss in forgetting that many of the developments we take for granted today originally came from basic government research.  

Is it not time that we start to build green technology development capacity in developing countries?

The question that emerges though is both where do we expect green innovation to come from and how will we reach out to the truly small-scale companies that might hold the key to tomorrow’s energy sources?

A quick look through the countries involved in the Breakthrough Energy Coalition and Mission Innovation programmes show that most of the work will be done in the developed world with a few exceptions such as Mexico, Indonesia, Chile, Brazil, and India. Whilst it makes sense from the point of view of harnessing the proven scientific and research experience of the major economic powers it does raise the question of whether we potentially lock out developing countries from the economic benefits of developing green technology and maintain the paradigm of one part of the world innovating and the other part of the world merely purchasing technology. As we’ve seen the emergence of developing countries into major emitters is it not time that we start to build green technology development capacity in these countries as well? Is this not an opportunity to create new industrial sectors, centres for learning and new economic markets in developing countries that can support these countries on their road to higher incomes? Additionally, when we focus our efforts on the developed world we run the risk of missing out on learning from the ingenuity of people who have often been forced to learn to do with less and come up with innovative, efficient ways to use materials not out of choice but out of necessity.  

How do we ensure that we don’t miss out harnessing green SMEs throughout Latin America, Asia and Africa?

The other question that these two initiatives raise is how do we channel money to SMEs working in the sustainable space across the world, not just in certain countries which have an existing risk and venture capital network. Climate change not only offers a challenge to the world, it is a very time constrained challenge. We cannot afford to wait for green technologies to develop over time in the normal development cycle as we can with other technologies. We need to deploy at scale and quickly. So how do we ensure that we don’t miss out harnessing green SMEs throughout Latin America, Asia and Africa? The rise of impact investing is attempting to address this problem but the size of the pool of money available is almost laughably small compared to the problem. Additionally, most impact investors shy away from focusing on green technology in favour of areas such as health and education, further limiting the access to funding that cleantech entrepreneurs in emerging markets have access to.  

We can only applaud the aspirations that Bill Gates has with his new initiative, it is a much-needed boost to clean tech funding and highlights an important gap in the market. But this shouldn’t stop us from asking why yet again the green SME community in developing countries is likely to continue to struggle to access risk capital and growth funding and start talking about what needs to be done to fix this.