Can Israel be the Cleantech Nation as our Prime Minister declared in Glasgow during his speech in the COP 26 convention? Or should this one be a team effort, being a member of the “Cleantech Team of Countries”? Those and many more questions arise when trying to compare the Israeli high-tech business world with the Israeli cleantech business world. The challenges that cleantech faces are materially different from high-tech’s challenges. For example, while cyber technologies grow rapidly, cleantech products have slower growth, longer time to market, and face many barriers. Therefore, it is difficult for a Cleantech startup to compete in the capital fundraising market.
Due to the requisite scientific knowledge and experience required for the development of new cleantech technologies, as opposed to a new mobile application or internet trade portal, coupled with the hope of becoming a unicorn fast, the innovative cleantech market does not attract as many young people as high-tech does, thus making it hard to compete in attracting manpower as well as investments.
Therefore, the Israeli Prime Minister’s “Green Sand Box” team as he called it in his speech in Glasgow, will have to think of long term wholistic solutions starting with education (for example, supporting science classes), providing means and opportunities for cleantech startups, and creating a special tender setting for public cleantech infrastructures. However, the success of their proposed solutions will require cooperation between countries for better funding, more opportunities, faster regulation and larger markets.
While demand for high-tech products and technologies is worldwide and touches all sectors including public, business and private sectors, demand for cleantech products is mainly from governments and industry when either obliged by regulation or for strong industry players seeking high ESG rating to better compete in the capital markets. However, governments, as well as industrial businesses, are reluctant to invest in new expensive technologies, which may fail or at least, not fulfill their expectations, especially when their economical contribution is marginal or non-existent. Therefore, the aim should be to develop new markets and new incentives for cleantech products, such as providing securities for the home use of solar energy.
An incentive for corporations seeking funds in the capital markets or cheaper loans can be offered by giving higher sustainability (ESG) ratings to corporations who invest in improved new technologies rather than the available best technologies.
That is in the private sector, however the public sector must change in order to allow new cleantech technologies to be utilized by public authorities. Municipalities, water corporations and other authorities, responsible for cleaner infrastructures, are reluctant to choose new innovative solutions for many reasons: risky new technologies as opposed to existing proved technologies, no proof for long term ability to supply spare parts and services, and inability to meet the prices that returning contractors offer.
Therefore, a government authority consisting of engineers, scientists, and other requisite experts assisting tender committees in publishing simpler tenders putting fewer risks on the contractor, assisting in the assessment of innovative cleantech technologies, providing governmental supported complementary solutions to cleantech technologies (for example, long term operation and maintenance services by incentivizing cooperation between cleantech startups and established contractors or by long term service contracts), and preparing financial models to allow putting more weight on quality rather than pricing, may support the participation of innovative startups in tenders knowing that they may have a real chance in the competition. This will also attract investments funds and banks to provide financing to cleantech startups.
The pressure for low pricing requires government support, knowledge and experience to incentivize investments funds and startups investing in long term sustainable cleantech technologies that can compete with the existing technologies. This can be achieved with new tender mechanisms and not just by the existing innovation grants by the different ministries like the Water Authority’s grants, the Environmental Ministries grants, the Innovation Authority’s and others, but through a long term support mechanism to incentivize cooperation between governments, investment funds, big contractors and startups.
Finally, to our friends debating whether investment should be made in adapting and mitigating the results of global warming or in innovative technologies to stop and prevent additional warming, we say that we must invest in both, urgently, as the results are hitting us fast. Adapting and mitigating will not be enough in a fast-growing population striving to survive.
For more information, please contact Adv. Merav Niv Geva (meravn@gkh-law.com).
Gross & Co. Law Firm (GKH) is one of the leading law firms in Israel, with over 170 attorneys. Gross & Co. specializes, both in Israel and abroad, in various fields of law including Mergers and Acquisitions, Capital Markets, Technology, Healthcare and Life Science, Banking, Real Estate, Project Finance, Litigation, Antitrust, Energy and Infrastructure, Environmental Law, Intellectual Property, Labor Law and Tax.
This alert is prepared as an informational service to clients and colleagues of Gross & Co. (GKH) and the information presented is not intended to provide legal opinions or advice. Readers should seek professional legal advice regarding the matters about which they are particularly concerned.
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