The R&D Reset Environmental Investors Can’t Ignore
It’s easy to get distracted by recent events in the middle east.
But looking closer to home, it feels like innovation has been a recurring theme in Australia for decades, that is because it has. Reports, reviews and policy statements have come and gone, each promising to unlock the country’s potential. The latest, however, carries a different tone. It is less polite suggestion and more warning shot.
The recently released Ambitious Australia report delivers a blunt assessment. (1) According to Emeritus Professor of Innovation at the University of Technology Sydney, Roy Green, Australia’s research and development system is underperforming, fragmented and no longer fit for purpose in a world defined by rapid technological and environmental change. (2)
For investors, particularly those focused on environmental themes, this matters more than it first appears.
What the Report Is About
Commissioned by the Federal Government and led by industry heavyweights including Robyn Denholm, the report is a comprehensive review of Australia’s R&D ecosystem. It examines how research is funded, how it translates into commercial outcomes and how effectively it supports national priorities.
The report’s conclusion is clear. The system is not delivering the innovation required to sustain economic growth or compete globally. Australia’s R&D spending has fallen to around 1.69% of GDP, well below its historical levels and lagging international peers.
At the same time, as reported in the Energy, business investment in R&D has declined materially, and the economy has become increasingly reliant on resources rather than high value, knowledge driven industries. (3)
This report outlines a structured plan to rebuild the system, centred on coordination, scale and commercialisation.
What Will Change
The recommendations are both broad and targeted. At their core is a push to simplify and refocus Australia’s innovation framework.
According to Emeritus Professor Green, a key proposal is the establishment of a National Innovation Council to coordinate efforts across government, industry and academia. This is designed to address one of the system’s most persistent flaws, fragmentation.
The report also identifies six priority “pillars” for innovation. Crucially, one of these is energy and environment, placing environmental technologies at the centre of Australia’s future growth strategy.
Also as reported in the AFR, there are also significant proposed changes to funding mechanisms. These include reforms to the R&D tax incentive, potential cash advances for high potential start ups and a shift toward more targeted, outcome driven investment. (4)
Importantly, the report emphasises the need to better connect research with commercial outcomes. Australia has a long history of strong scientific discovery, but a weaker record in scaling those discoveries into globally competitive businesses.
In simple terms, we are good at inventing, less good at monetising.
A Familiar History
This is not the first time Australia has attempted to tackle this issue. As reported in the Conversation, As far back as the Hawke and Keating years, there was a deliberate push to build a more innovation driven economy. Public investment in science and research increased, and for a period, productivity growth exceeded that of many OECD peers.
Yet over time, momentum faded. Successive policy initiatives struggled to maintain focus, often falling victim to political cycles or incremental thinking. Reports such as Venturous Australia highlighted similar challenges but failed to deliver lasting structural change.
Meanwhile, the economy leaned further into its comparative advantage in natural resources. While profitable, this has arguably crowded out investment in advanced manufacturing and technology, the very sectors that typically drive innovation.
The result is the position we find ourselves in today. Emeritus Professor Green calls us a country with world class research capability, but without a system that consistently translates that capability into economic leadership.
Why This Matters for Environmental Investing
The environmental transition is, at its core, an innovation story.
From battery storage and grid management to carbon capture, hydrogen and circular economy solutions, the next decade will be defined by technological advancement. Capital will flow to the jurisdictions that can develop, scale and export these technologies.
This is where the Ambitious Australia report becomes highly relevant.
As the Energy article correctly states, by explicitly identifying energy and environment as a national innovation priority, the report effectively elevates environmental investing from a thematic trend to a strategic economic objective.
This has several implications.
First, it increases the likelihood of sustained policy support. Innovation frameworks, funding programs and procurement policies are likely to be aligned toward environmental outcomes.
Second, it should improve the pipeline of investable opportunities. A more coordinated system means more projects moving from research to commercial stage, which is where investors can participate.
Third, it may catalyse the development of domestic venture capital and private markets in environmental technologies, an area where Australia has historically lagged.
There is also a broader structural shift at play. As the report highlights, without renewed investment in innovation, Australia risks missing out on high growth sectors such as clean energy and advanced manufacturing. .
The Investor Lens
From an investment perspective, the most important takeaway is not the report itself, but what it signals.
We are seeing a convergence of policy, capital and necessity. Governments are recognising that innovation is critical to both economic resilience and environmental outcomes. At the same time, global capital is increasingly seeking exposure to sustainable assets.
When these forces align, investment opportunities tend to follow.
In practical terms, this may manifest in several ways. Increased funding for early stage clean technology companies. Greater institutional support for infrastructure linked to the energy transition. More favourable regulatory settings for emerging sectors such as carbon markets and circular economy initiatives.
It also reinforces the importance of diversification. Environmental investing is not a single asset class. It spans technologies, industries and stages of development. A well constructed portfolio needs exposure across this spectrum.
Perhaps most importantly, it shifts the narrative.
We know that environmental investing is no longer just about risk mitigation or ethical considerations. It is increasingly about capturing growth driven by innovation.
The Bottom Line
The Ambitious Australia report is another in a long line of reviews, but its current message is hard to ignore. Australia’s innovation system is underperforming, and reform is no longer optional.
For environmental investors, this represents a significant inflection point. Innovation will be the engine of the transition, and policy is beginning to align accordingly.
If the recommendations are implemented effectively, Australia has the potential to move from a passive participant to an active leader in environmental markets.
And for investors, that is where the real opportunity lies.
References
Commonwealth of Australia. Department of Industry, Science and Resources. Ambitious Australia: Strategic Examination of Research and Development Final Report. 17 March 2026 https://www.industry.gov.au/news/strategic-examination-rd-final-report-out-now
Green, R. The Conversation. Australia was once a world leader in innovation. A new report shows the system is now ‘broken’. 18 March 2026 https://theconversation.com/australia-was-once-a-world-leader-in-innovation-a-new-report-shows-the-system-is-now-broken-274012
Braue, D. The Energy. Australia’s ‘broken’ R&D ecosystem is stifling innovation, panel warns. 18 March 2026. https://theenergy.co/article/australias-broken-r-d-ecosystem-is-stifling-innovation-panel-warns
Bennett, T. Australian Financial Review. Government weighs R&D tax reform after Denholm review. 16 March 2026 https://www.afr.com/technology/government-weighs-r-and-d-tax-reform-after-denholm-review-20260316-p5oav2
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