Capex trends and investment enablers

Juergen Liss, Global Account Manager, Siemens Financial Services

‘Green Capex’: a driver towards net zero

A recent piece from investment bank and analyst Goldman Sachs [1] has introduced us to a fascinating new expression – ‘Greenablers’. The analyst discusses Green Capex (capital expenditure) which it notes is emerging as a powerful growth theme for investors as greater capital is required to meet net zero, clean water and infrastructure mandates. Within the concept of Green Capex “a mosaic of key technologies and impacted sectors exist, including ‘Greenablers’ - companies operating in what we describe as building block sectors” (e.g., copper/aluminium, electricity transmission, semiconductors, cybersecurity) where increased reinvestment will be needed.

 

Cynics might say that all this is just new language and jargon to dress up a rather obvious trend. The whole world knows about the COP26 resolutions, the US presidential commitments of 2020, the greenhouse gas mitigation laws in Europe and the public policies to reduce carbon emissions in India and China. Nevertheless, I find the concept a neat way of looking at the issue. And I am much taken by the idea of ‘Greenablers’ – mainly because our contribution to Greenablement is by making the necessary investment affordable and financially sustainable.

 

The reality is that there is a huge cross-over between the drive for digital transformation in industry, and the drive towards carbon reduction targets. Reducing the use of energy, raw materials, water, waste – all these activities also save a manufacturer money, help carbon reduction and go hand in hand with the digital transformation.

The need to invest in green tech vs. the desire to preserve capital

There’s already massive momentum behind the green transition. According to Bloomberg [2], global investment in the energy transition totaled $755 billion in 2021 – a new record – off the back of rising climate ambition and policy action. In parallel, digital transformation is creating the smart manufacturing infrastructure needed to enable greener production processes. The annual value of this smart manufacturing market is estimated to reach $598 billion per year by 2028.

 

At the same time as being presented with a massive need to invest in digitalization and greener process technologies, the pandemic’s aftermath, along with geopolitical disruption, have made manufacturers hesitant to invest – even in such obvious necessities. I get it. Companies want to keep their own capital in reserve because they just don’t know what’s around the corner, and want to have those funds available for rapid reactions to circumstances and opportunities.

Bridging the investment gap through smart finance

So, this is where we are increasingly bridging the gap – between necessity to invest and the contrary impetus to conserve capital. The providers of technology themselves are unable to set up financing options for their own technology since the balance sheet size would soon impede the cash flow of core production. Moreover, risk management for long term financing requires professional know how. Because a specialist like SFS has the expertise, intimate industry knowledge and scale, we can flex agreements, so they meet each end-customer’s particular circumstances and cash-flow profile.

 

In my next blog, I am going to look more closely at some of those financing methods – such as managed service agreements, and various forms of pay-per-use, that are enabling (and Greenabling) manufacturing technology investment across the globe.

[1] https://www.gsam.com/content/gsam/us/en/institutions/market-insights/gsam-connect/2022/Green_Capex_Capturing_the_Opportunities.html

[2] https://about.bnef.com/blog/global-investment-in-low-carbon-energy-transition-hit-755-billion-in-2021/

About the author

Juergen Liss, Global Account Manager for Digital Industries, Siemens Financial Services

I studied radio frequency in Hamburg and Bremen, wrote my PhD in Berlin. Siemens offered me the most appropriate position, since I wanted to work for the multinational company in different countries. This was the plan and Siemens helped me to make it happen. I spend four years on delegation in Russia, four years in Croatia, six years in Hungary and again four years in Russia. The last delegation was the most challenging one, since I was responsible for the entire Siemens Digital Industries (IA and DT) business in the cluster Eastern Europe.

 

After spending the whole professional life of 30 years working for Siemens in different positions and tasks and countries I decided finally to change the direction again and joined Siemens Financial Services as a Global Account Manager for Digital Industries.

 

I have two children, I like jogging, diving, skiing,  play table tennis, but my big passion is photography. In case you like photography feel free to visit my site https://juergenliss.smugmug.com/