Talent, Investment Flock to Cleantech
Climate change is moving up the corporate agenda, and clean tech investment is reaching record levels – with $5.2 billion invested since January 2007, according to Ernst & Young. The firm says “climate change challenges are creating opportunities for next generation technologies as companies seek to respond to stakeholder expectations, current and anticipated regulation, and rising energy costs.” E&Y also notes that climate-smart companies view this as an opportunity to make them more innovative, efficient and competitive.
“Cleantech has passed an important investment tipping point. Demand for cleantech solutions is increasing due to higher energy and resource costs, regulatory requirements and the desire for corporations to pursue climate change related market opportunities. This, combined with the attraction of talent and investment to the sector and resulting accelerated technological change, has created a self-reinforcing dynamic of innovation and company creation, which is vital for any successful response to the climate change challenge. Cleantech is here to stay,” says concludes Gil Forer, Global Director, Cleantech, IPO and Venture Capital Initiatives at Ernst & Young.
Across the country, the wealth of individuals and institutional investors getting involved in the energy and clean technology sector is growing. Executive search firm, A.E. Feldman, says opportunities are opening up for investment professionals with expertise in energy and alternative technologies. CEO positions are also open for proven leaders to run alternative energy companies. The firm adds that legal jobs are opening up as law firms build practice groups that target the clean tech sector as an increasing number of firms with close ties to the VC community and strong IP practices jump on the green energy bandwagon.
Climate Change Initiatives on the Rise
A growing number of companies are pursuing climate change programs. That’s according to a recent survey of 150 global companies conducted by Ernst & Young. The research published in October shows that an overwhelming majority, 90%, of respondents are involved with some type of climate change initiative. In fact, those polled have allocated a combined $276 billion over the next 10 years to achieve their objectives. E&Y concludes that firms are now creating cleantech divisions. One example of this trend is GE which has allocated $2 billion just to its wind unit.
E&Y research also reveals that 35% of corporate venture capital programs will increase their investments in cleantech companies next year, and 44% will do so within the next five years. Moreover, the firm found that globally 51% of institutional investors always or sometimes consider a company’s climate change response when considering investment in a new issue.
Global VC Investment in Cleantech to Grow
Altogether, Ernst & Young says that clean technology ventures have grown nearly 10% over the past 5 years – up from just 1.6% of all investments in 2003 to 11% in 2008. And in terms of value, global venture capital investment in cleantech is set to significantly exceed the record $3 billion invested last year, having already reached $2.2 billion in the first six months of 2008.
According to Ernst & Young’s Venture Insights, the U.S. accounted for the majority of venture capital investment during 2007 and the first half of this year, raising $2.5 billion and $1.6 billion respectively. As of June 2008, there were 549 private venture capital backed cleantech companies globally with $8.9 billion in venture capital. The US is the largest region with 301 venture-backed cleantech companies that have received cumulative investment of $7.29 billion.
Moreover, E&Y reports that cleantech indices have significantly outperformed the broader market in recent years and in 2007 institutional investors allocated $23 billion in funds to cleantech equity investments. In fact, the nation’s biggest pension fund, CalPERS, says that it is pumping $200 million into clean energy technologies over the next several years.
In keeping with the trend, former CalPERS CIO Russell Read announced in November he has co-founded a new investment firm called C Change Investments that aims to support clean technology and environmental investments. On the company’s website, C Change says its mission is to “achieve superior financial returns by investing in transformative energy and environmental technology solutions which improve the utilization of the world’s natural resources.”
The firm says it will focus on investments that combat natural resource consumption and energy demands and views itself as a partner to the venture capital industry. “We intend to play a key role in identifying, developing and deploying innovative clean energy technologies, new construction techniques to conserve energy, and advanced materials as well as insightful strategies for managing renewable resources,” said Read.
Looking Ahead…
“Clean energy is increasingly identified as the sector with the largest growth potential in the U.S. economy, and offers the best promise of meeting the twin challenges of economic and environmental decline,” said the study’s Co-Author, Ron Pernick, Clean Edge Co-Founder and Managing Director. A.E. Feldman’s CEO, Carol Schwam, says the burgeoning clean tech sector is looking for super-brokers who can funnel money into their businesses. She notes, however, that entrepreneurs in this sector must bridge the gap between the science behind the technology and a successful business.
Are you working in energy or clean technologies? If you want to grow your career or your company’s bottom line, contact A.E. Feldman’s President, Mitch Feldman, today!
