According to a report published by the alternative investment research firm Preqin, investments in the cleantech sector are strong, despite the global economic slowdown. This includes private equity firms, funds of funds, and other institutional investors.
In layman’s terms: while the financial sector is faltering in general, investors in green technologies have hope.
In North America, the private equity landscape is dominated by venture capital funds, which are firms that invest privately in start-up companies. Venture capital investment is increasingly dominating the cleantech landscape. Private equity investors typically give money to companies in exchange for private stakes—rather than buying shares on the stock market. These investors often work closely with the companies to increase their value, thereby increasing the worth of their own shares. Venture capitalists might invest in anything from biology companies that use algae to produce energy, to creators of photovoltaic cells.
Layman’s translation: investors are increasingly investing in companies in earlier stages and sticking around to monitor their growth from the ground level.
The majority of private equity firms investing in clean technologies are located in North America (45%) but this number is closely followed by Europe (36%). 19% are located in Asia and the “rest of the world,” though this might reflect the density of private equity firms there in general, rather than only reflecting the region’s interest in clean technology. Throughout the world, investors in this sector fall into two categories: those who are investing solely in cleantech, and those who are starting to add cleantech investments to their broader portfolios. In both cases, more and more fund managers are setting aside funds for green technology; according to the report, 78 cleantech-focused funds are currently seeking out investments, which is a reassuring sign in an age when investors are wary of putting money into anything.
Why this is significant: private equity investments in cleantech are a show of confidence, even as other sectors falter in this economy. Cleantech investments have fallen somewhat this year in terms of raw numbers, but more and more firms are expressing interest in the sector—an acknowledgement that it’s the wave of the future. The increased percentage of venture capital is also notable, because it represents a shift toward long-term commitment and sector growth.
So, you ask, “Clean technology? That sounds like something out of the Jetsons.” Of course, these investments aren’t a promise of snazzy consumer gadgets in the short term. Maybe eventually we’ll be zapping CO2 out of the atmosphere with handheld devices and playing in our flying electric cars. For now, we might have to be content with companies that turn factory by-products into energy sources, and others that use nanoparticles to improve fuel efficiency and reduce emissions. The sweeping changes of tomorrow are rooted in the investments of today. And personally, nanoparticles are sci-fi enough for me.
