Stimulating Interest in Clean Technology Funds
During the past month, analysts at BHA have noticed that investor interest in clean technology, which includes renewable energy, has increased. This increase can partially be attributed to the federal government committing capital to the sector. President Obama has pledged more than $150 billion to alternative energy, power saving, smart grid, and clean technologies over the next decade; the administration believes clean technology companies will create millions of jobs and this sector’s growth could be similar to high-tech’s during the dot-com boom.1 Noting the government’s sizable commitment over the next decade, many institutional investors view the industry as having tremendous potential and are earmarking investment dollars in order to capitalize on the growth.
According to an Ernst & Young report that analyzes data from Dow Jones Venture Source, in the third quarter, venture capital investment in clean technology companies increased 46 percent to $965 million during 50 financing rounds.2 This is the second consecutive quarter of growth in 2009 and the fifth-largest quarterly investment total on record.2 Compared with the first quarter, quarterly investment has increased 182 percent in terms of capital and doubled in terms of financing rounds.2
Since the start of the fourth quarter, ten percent of private equity fund investors have expressed interest in hearing from funds specifically focused on the clean technology sector. While most institutional and private investors that are considering clean technology funds think opportunity can be derived through private equity funds, approximately five percent of all hedge fund investors are looking for funds with a focus towards health care and life sciences.
As the federal government and fund managers continue to pour capital into the clean technology sector, investors will follow and take advantage of the opportunities. BHA expects the current trend will continue well into 2010.
1 DailyTech, “Venture Capital, $150B Government Investment Boost Clean Tech,” October 7, 2009, http://www.dailytech.com/article.aspx?newsid=16443.
2 Ernst & Young, “Uptick in Q2 2009 US Cleantech Investment Driven by Large Deals and Improved Investor Confidence” http://www.ey.com/US…