Investing in low-emission technologies is good for both the planet and for profits

The economic benefits of productive use technology in a wide range of sectors are well understood. In the agricultural sector in emerging markets in particular, equipment can help farmers to enter into higher value products, increase efficiency, grow their customer base and cut costs. For instance, an avocado farmer investing in an avocado grading, sorting, washing, waxing and packing machine can significantly reduce the time to move each avocado from the plant and into the right container for distribution, lowering operating costs and increasing efficiency. 

What is interesting is that many productive use and low-emitting technologies result in both economic and environmental benefits. For instance, refrigeration and pre-cooling solutions for avocados reduce food waste, which has significant implications in terms of increased revenue generation potential, but also positive implications for the environment as food that ends up in landfill emits methane, a very potent greenhouse gas.

Furthermore, technological, regulatory and social changes are making investment in low-emitting and productive use technology even more appealing. 

Technological advances are resulting in a wider variety of more efficient and cleaner machinery coming onto the market that also helps end users save costs. For instance, Ampersand is a company that sells electric bikes in Rwanda and has a network of battery replacement centres. Owning and e-bike taxi is significantly more cost-effective relative to a fuel powered bike thanks to money saved on fuel. 

Regulatory changes are slowly encouraging the transition towards cleaner technologies. An example of a regulation that is spurring growth in cleaner refrigeration solutions is the Kigali agreement, which requires countries to reduce the consumption and production of fluorinated gases. This means that refrigeration companies increasingly use climate friendly refrigerants like ammonia or CO2 and produce machines that have higher energy efficiency. SMEs that are looking to purchase cooling solutions for their produce are better off buying Kigali-compliant models as they are guaranteed continued maintenance and service for the new machines. In addition, climate-friendly solutions can be cost effective. For example, ammonia-based refrigeration machines are more efficient that refrigerators that use CFC and HCFCs – SMEs that purchase these machines will save on the electricity costs of running these machines over the long run. 

Social changes resulting from climate change are also driving pressure on corporations of all sizes to be more climate-friendly. Many emerging markets feel the effects of climate change more acutely than developed nations, which drives societal awareness and pressure to change. This is because many emerging economies have a large agriculture sector, which is particularly vulnerable to changing weather patterns. For example, Africa is very heavily dependent on agriculture – the sector employs the majority of the population and accounts for 14% of GDP in sub-Saharan Africa. More unpredictable weather patterns and a warmer climate are aggravating water stress and adversely impacting agricultural production and food security.

Institutional investors putting emphasis on ESG factors is another key driver of benefits to SMEs who de-carbonise their operations. The pressure on listed corporates to improve their ESG performance is mounting, which will drive changes all the way through supply chains. For instance, in the food and agriculture industries, this means that wholesalers will increasingly source from suppliers that are environmentally conscious and have taken steps to de-carbonise their operations. Produce from farmers that invest into clean technologies today, such as electric tractors or solar-powered cooling systems, will be in greater demand relative to goods from farms with higher CO2e footprints. 

In summary, social, regulatory and technological trends are all driving growth in clean technology uptake. These trends are increasing the benefits that SMEs gain from investing in clean technology – both economic and social benefits as well as the opportunity to play their part in decarbonising our planet. 

  1. https://oxfordbusinessgroup.com/blog/bernardo-bruzzone/focus-reports/agriculture-africa-2021-focus-report
  2. https://www.ipcc.ch/site/assets/uploads/2018/02/ar4-wg2-chapter9-1.pdf

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