Last month FREE brought a group of social entrepreneurs to Bozeman. Participants included investors who understand that economic progress is a decentralized process of discovery. It depends on the imagination and talents of individuals anticipating and responding to changing conditions and preferences.

In particular, investors see long-term benefits in companies offering products that promise to foster the transition towards a lower carbon, more efficient, greener energy future. Despite concerns over climate change, the global energy market is immense and growing. In the U.S. alone energy demand is predicted to grow 44 percent by 2030, and by far more in developing nations.

Investors will do well to explore opportunities in the third world, an especially target rich environment. Why? Because billions of the world’s poorest people are struggling to climb out of desperate poverty. Access to energy is essential to their successful escape.

Africa provides a useful illustration. It is a continent rich in natural resources and home to just over a sixth of the world’s population, nearly one billion people. But it generates only four percent of the world’s electricity. Images from space reveal that at night most of Africa is as dark as the vast, empty reaches of Siberia.

The World Bank counts some 500 million sub-Saharan Africans living without what the Bank describes as “modern energy.” Connecting them to grids will be slow and expensive. But access to electricity carries important environmental benefits. Gordon Mwesigye, a senior official in Uganda explains why: “If people don’t have electricity,” he points out “they will cut down trees, and Africa will lose its wildlife habitats....”

Africa is a fertile ground for savvy investors and entrepreneurs. For example, the Chinese company Hebe Solar has an entire product line of off-the-grid solar lights and generators. In contrast to their limited role in modern, energy intensive economies, wind and solar could make important contributions to Africa’s energy supply, especially in remote areas.

Here’s another example. In colonial America, people warmed their homes using fireplaces. This was dangerous, inefficient, and consumed a lot of wood. The quintessential American entrepreneur, Ben Franklin, remedied this by inventing what we know today as the Franklin stove. By confining, channeling, and controlling air and fuel, Franklin dramatically increased thermal efficiency. Modified versions are still produced some 250 years later.

Envirofit International is following Franklin's example. It has introduced a clean-burning stove specifically designed for the developing world. This is critical, since the World Health Organization reports that half of the world population and 80 percent of rural households in developing countries cook with biomass fuels, e.g., wood, coal, crop residues, and dung.

These materials are typically burnt inside homes over open fires. The incomplete combustion means that the women and young children who cook around them are exposed to high levels of indoor air pollution. Here is a video link so you can see the damage this causes.

In order to be successful, entrepreneurs like Hebe and Envirofit appreciate the important role that institutions and culture play in fostering social wellbeing. In that vein I commend a book by one of our participants, In the River They Swim: Essays from Around the World on Enterprise Solutions to Poverty by Michael Fairbanks.

Fairbanks understands the key insights of Nobel Prize-winning economist Douglass North who explains the importance of institutions: “Institutions are the...constraints that structure human interaction. They are...formal...(rules, laws, constitutions) [and] informal...(cultural norms of behavior, conventions, and self imposed codes of conduct).... Together they define the incentive structure of societies and...economies.”

In the River They Swim reminds us that however well endowed, wealth does not come to a nation directly from its natural resources. Rather a requisite for success is a nation’s “intangible capital,” especially its laws and institutions. Successful green investors will be alert to and appreciate these linkages. FREE designs conferences, such as ours last month, to foster their appreciation and discovery.