Cleantech Private Equity Fund Managers - July 2015

by Simon Li

  • 22 Jul 2015
  • PE
  • NR

Since the 1990s, interest in sustainability has increased substantially due to a growing understanding of the human impact of fossil fuel use and a decline in the cost of clean technologies. Fund managers and investors worldwide have kept a close eye on investment opportunities in the clean technology, environmental services and renewable energy sectors.

Preqin’s Fund Manager Profiles online service currently tracks over 2,000 private equity firms that consider clean technology investments to be part of their industry focus. Of these, Preqin has data for 104 private equity firms that focus predominantly on the cleantech sector. The vast majority of these fund managers are based in highly developed geographic regions, with 51% and 36% of them located in North America and Europe respectively. Many of the governments of these economically developed regions provide subsidies and offer tax credits for investments in renewable or alternative energy. However, a considerable number of governments that started clean energy production subsidies have been unable to continue funding them.

In terms of strategy, the bulk of solely cleantech-focused firms focus on venture capital investments, as shown in the chart above. A further 12% follow a growth strategy, while the remainder pursue a mixed range of strategies.

The largest firm, in terms of aggregate capital raised in the last 10 years, focused on the cleantech space is Hudson Clean Energy Partners. Hudson is global in scope and looks to invest exclusively in renewable power, alternative fuels and energy smart technologies in sectors that include wind and solar energy, biofuels, biomass, geothermal energy, energy efficiency and storage. Hudson typically takes controlling positions in high-growth firms with minimal technology development risk. The firm is currently managing the $1.2bn it raised through Hudson Clean Energy Partners Fund, which closed in 2009. The firm also has a separate infrastructure arm that raised a $150mn solar photovoltaic (PV) power generation fund in 2013.

Over the past few decades there has been a dramatic increase in environmental awareness, driven by environmental organizations, NGOs and governmental dialogue. As a result, cleantech investments were initially met with enormous levels of hype by both the media and the private equity industry. However, it seems investments have not fully lived up to their expectations and fundraising has fallen off, especially following the financial crisis in 2008. Despite the weakening preference for cleantech investments, there remain reasons for optimism. The price of solar panels and other clean technologies are continuing to fall, the usage of electric cars (predominantly in Europe) is increasing, and technology related to energy storage continues to improve, making it easier for businesses to adopt clean energies. 

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