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Fundraising in the Cleantech Space – May 2015

by Allison Polchinski

  • 21 May 2015
  • PE
  • NR

Preqin’s Funds in Market online service currently tracks 176 funds that are targeting investments in cleantech as part of a wider industry focus. The clean technology sector refers to a range of renewable energy sources and innovations, typically with the purpose of creating environmentally friendly energy. As population growth continues and the pressures on non-renewable energy reserves grow, cleantech could prove to be an important investment sector in the near future. As the chart below illustrates, fundraising in the cleantech space has been on the decline, possibly due to weak returns in the past. In spite of growth in certain segments within cleantech, such as increasing sales in electric vehicles and efficient lighting, cleantech fundraising is currently trying to recover after previous investments fell short of investor expectations.

Typically, venture capital funds have dominated the cleantech sector, with 59% of funds targeting cleantech employing this fund strategy over the past 10 years. Similarly, venture capital funds account for the largest proportion of capital raised, with 45% of capital focused on this industry raised by venture capital funds. The largest fund closed so far in 2015 that includes a partial focus on cleantech is New Enterprise Associates 15, which has $2.8bn available to invest across the healthcare, IT, energy and technology sectors.

The largest fund raised in the past 10 years that includes at least a partial preference for clean technology investments is an infrastructure fund raised by Global Infrastructure Partners. The firm’s eponymous maiden vehicle amassed over $5.6bn to invest in the energy, transportation, waste management and water-related infrastructure sectors. Infrastructure funds account for 15% of the total capital raised in the clean technology sector over the past 10 years, although they represent only 6% of total vehicles closed.

Most Prominent Regions

Historically, North America has drawn the largest proportion of fundraising in this sector. In 2008, cleantech’s most successful year in terms of aggregate capital raised, 54% of funds targeting the industry were focused on North America. In recent years, funds including a preference for cleantech and focused on North America have fallen from accounting for 42% of capital raised in 2013 to just 18% in 2014, as the US has lost ground to China in the ‘cleantech battle’. Last year, the majority of capital in this sector was redirected elsewhere, with Asia- and Europe-focused vehicles collecting 41% and 35% of aggregate capital respectively. Of the 176 funds in market that include a preference for cleantech, the regional focus is evenly split across North America, Europe and Asia. Despite accounting for a slightly higher number of vehicles, North America-focused funds lag well behind other regions in terms of aggregate capital sought. For example, Europe-focused funds are targeting $22bn while North America-focused vehicles are seeking only $8.6bn.

The waning fortunes of cleantech fundraising have gone hand in hand with capital moving away from North America, and this has provided an opportunity for other regions of the world to assert dominance in the clean technology sector. Despite weak fundraising statistics in the past few years, the cleantech industry will likely remain important in the years to come as global renewable energy demands grow.

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