The following article, which discusses the need to make large gains in energy efficiency, also argues that there are important investment opportunities in the field. The author, Rahul Bhushan (pictured below) is managing director at ARK Invest Europe, part of the Florida-headquartered group. With the continuing requirement to manage energy efficiently – likely to be more urgent given the huge demands likely to come from AI and electric vehicles – the author argues that investors should consider profiting from this opportunity.
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Rahul Bhushan
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In 2023, global investment in clean energy generation reached unprecedented levels, with $1.8 trillion directed towards renewable energy projects such as solar, wind and hydropower (1).
However, only a fraction of this amount has been allocated to energy efficiency measures. The International Energy Agency (IEA) reports that in 2022, investments in energy efficiency – such as building renovations, public transport and electric car infrastructure – were just over $560 billion, highlighting a significant disparity in funding (2).
Despite this disparity, energy efficiency presents immediate, scalable and cost-effective solutions for reducing energy consumption and greenhouse gas emissions – and is a core long-term investment focus for us.
By prioritising investments in energy-efficient technologies, investors can drive substantial environmental and economic benefits while addressing the urgent need for climate action.
Energy efficiency plays a critical role in reducing energy demand, lowering emissions and cutting costs. According to the IEA, enhancing energy efficiency could deliver more than 40 per cent of the emissions reductions needed to meet global climate goals by 2040 (3). Furthermore, energy efficiency improvements are estimated to save households and businesses around $680 billion annually across IEA countries (4).
Energy efficiency solutions stock opportunities
1. Heat pumps for heating and cooling
Johnson Controls is at the forefront of heat pump technology, which offers a highly efficient alternative to traditional gas boilers. Heat pumps can reduce energy consumption for heating by up to 50 per cent, providing a significant reduction in household energy use and emissions (5).
This technology is already commercially viable and widely available, making it an immediate solution for reducing energy demand in buildings.
2. Smart infrastructure for energy management
Siemens Energy and Signify NV are leaders in smart infrastructure solutions that optimise energy use in real time.
For example, Signify’s smart lighting systems can reduce energy consumption by up to 80 per cent by automatically adjusting light levels based on occupancy and daylight availability (6, 7, 8).
These technologies are essential for enhancing energy efficiency in both residential and commercial buildings.
3. Building insulation and efficiency
Kingspan and Owens Corning produce advanced insulation materials that significantly reduce the energy required for heating and cooling.
Proper insulation can lead to energy savings of up to 30 per cent, as supported by data from the US Environmental Protection Agency (9, 10).
Investing in high-performance insulation is a straightforward and effective way to improve energy efficiency in buildings.
4. Advanced metering and grid management
Itron and Landis+Gyr provide advanced metering infrastructure (AMI) that enables precise energy monitoring and management.
These systems help utilities and consumers optimise energy usage, reducing waste and peak demand.
According to Itron, their AMI solutions have achieved up to 20 per cent energy savings in various implementations, demonstrating their effectiveness and scalability (11) .
5. Energy-efficient industrial solutions
Eaton Corp PLC and Alfa Laval AB offer a range of energy-efficient industrial solutions, from electrical components to heat exchangers.
These technologies can enhance the energy efficiency of industrial processes by 10 to 30 per cent, significantly reducing energy consumption and operational costs (12).
Such solutions are critical for making industrial sectors more sustainable and cost-effective.
Conclusion
Energy efficiency stands as one of the most cost-effective and scalable solutions for reducing energy waste and enhancing sustainability. Despite its clear advantages, investment in energy efficiency continues to lag behind other areas of clean energy. This is a missed opportunity, as energy efficiency offers one of the best risk-reward profiles in sustainable investing.
Often, the focus should not be on the latest flashy technology, but on proven, effective solutions that deliver immediate benefits. By investing in practical, scalable solutions such as heat pumps, smart infrastructure, building insulation, advanced metering and energy-efficient industrial technologies, the world can effectively tackle climate and environmental challenges.
This pragmatic approach not only ensures strong financial returns, but also promotes a sustainable future with tangible, near-term results.
Notepad
1, Bloomberg New Energy Finance, “Global Clean Energy Investment Jumps 17%, Hits $1.8 Trillion in 2023, According to BloombergNEF Report”, January 2024. Available at: https://about.bnef.com/blog/global-clean-energy-investment-jumps-17-hits-1-8-trillion-in-2023-according-to-bloombergnef-report/#:~:text=New%20York%2C%20January%2030%2C%202024,research%20provider%20BloombergNEF%20(BNEF).
2, IEA, “Global energy efficiency progress is accelerating, signaling a potential turning point after years of slow improvement”, December 2022. Available at: https://www.iea.org/news/global-energy-efficiency-progress-is-accelerating-signalling-a-potential-turning-point-after-years-of-slow-improvement
3, IEA, “Executive summary”, 2022. Available at: https://www.iea.org/reports/energy-efficiency-2022/executive-summary
4, Ibid
5, The Record Herald, “Heat pumps up, gas and oil down: Waynesboro site gets millions from Department of Energy”, December 2023. Available at: https://eu.therecordherald.com/story/news/2023/12/04/johnson-controls-gets-millions-for-heat-pump-production-in-waynesboro-biden-frick-carbon-emissions/71767568007/
6, Signify, “Mitigating the energy crisis with smart lighting”, March 2022. Available at: https://www.signify.com/global/our-company/blog/sustainability/green-switch-how-connected-lighting-can-help-resolve-the-energy-crisis
7. Signify, “The time to switch to energy-efficient lighting is now”, 2024. Available at: https://www.signify.com/global/sustainability/sustainable-lighting/climate-and-energy
8, Signify, “Energy efficiency is a can't-do-without”, April 2023. Available at: https://www.signify.com/global/our-company/blog/sustainability/green-switch-energy-efficiency-is-a-cant-do-without
9, US Environmental Protection Agency, “Identifying Greener Insulation”, 2024. Available at: https://www.epa.gov/greenerproducts/identifying-greener-insulation
10, US Environmental Protection Agency, “Calculating Energy Savings”, 2024. Available at: https://archive.epa.gov/epa/statelocalclimate/calculating-energy-savings.html