Investing in the Bioeconomy: Risks & Rewards

As with any market, investing in the bioeconomy comes with risks and rewards. Bioeconomy investments often require a longer-term perspective than other investments, as much of the industry is still in its early stages and may take time to generate returns. That said, the potential for long-term growth, very good returns, and the ability to have positive environmental and social impacts make bioeconomy investments a very attractive option for many investors. Investors should consider the subsectors within the bioeconomy (e.g., biofuels, bioplastics, bio-based chemicals, etc.) in which they want to invest, as each subsector has unique risks and rewards. As the bioeconomy is relatively new, investors should always employ seasoned experts familiar with the areas to help them evaluate the technology, the assumptions underlying the proposed economics, the team involved in the project, and a myriad of other factors.

Risks in bioeconomy investments include:

1. Regulatory risks. As the bioeconomy is highly regulated, investors must be aware of potential risks associated with regulatory changes and their impact on profitability.
2. Market risks. As the demand for bio-based products may be more limited than with more traditional products, investors must seek studied opinions as to whether the market will develop as quickly as anticipated.
3. Technology risks. As the bioeconomy is still in relatively early stages, there is always a risk that new technologies may not work as expected. Further, there may be many competing technologies coming to market virtually simultaneously. Seasoned experts can help define the relative strengths and weaknesses of each and determine whether the selected technology is the best for the project.
4. Financial risks. As with any new area, the bioeconomy often presents a high-risk investment. While “crunching the numbers” is a regular task of investors, making certain that the inputs are correct in these very specific sectors is likely unfamiliar territory. Techno-economic analysis of any bioeconomy project is a good idea.

There are many rewards to investing in the bioeconomy, including:

1. Environmental benefits. Investments in the bioeconomy have positive environmental impacts, such as reducing greenhouse gas emissions, reducing waste, and promoting sustainable agriculture. These impacts are precisely what causes these investments to be mandated in many instances.
2. Innovation. The bioeconomy is a rapidly evolving field with a lot of potential for innovation. This leads to new products and cutting-edge technologies that can have significant market potential.
3. Economic benefits. In addition to the handsome profits bioeconomy investing has in many instances, these investments also lead to job creation and economic growth, particularly in rural areas.
4. Diversification. Investing in the bioeconomy can provide diversification in an investor’s portfolio, reducing overall risk.
5. Social benefits. The bioeconomy has many positive impacts on society. Things like promoting sustainable practices and providing solutions to global challenges such as climate change and food security, are good for the world.
6. Long-term returns. Investing in the bioeconomy can provide long-term returns, as the industry is expected to grow in the coming years.
7. Government support. Many governments around the world are providing support and incentives for investments in the bioeconomy, which can reduce the risk for investors.
8. Consumer demand: Growing consumer demand for sustainable and eco-friendly products exists. This drives the growth of the bioeconomy and increases the value of investments in this sector.

Investing in the bioeconomy can provide both financial and environmental benefits. It is important to enlist the help of seasoned bioeconomy experts to help evaluate the risks and rewards before making investment decisions.

Among its 150+ experts, Lee Enterprises Consulting has a wide range of services in bioenergy, biomaterials and chemicals, biotechnologies, and feedstocks.  Take a look at our experts and the services we provide. You will note that most of our experts are also available for ancillary engagements and advice, for specialty engagements like serving as expert witnesses in litigation matters. Call us at 1+ (501) 833-8511 or email us for more information.