Clean tech investment sees record first three quarters

Venture capital investment in the world's largest clean tech markets almost doubled during the first three quarters of the year, according to the latest research from Ernst & Young and DowJones Venture Source.

The study found that venture capital investment in clean tech firms in the US, Europe, China and Israel during the first three quarters climbed 82 per cent year on year to a record $4.6bn (£3bn).

Gil Forer, Ernst & Young's global director of clean tech, IPO and venture capital initiatives, said that the increase in investment levels underlined the growing maturity of many clean tech firms.

"Global venture capital investment in clean tech accelerated in 2008 as a number of companies, particularly in the solar and wind market, entered the capital-intensive stage of commercialising new technologies," he said. "This increase in activity has been stimulated by a strengthening corporate commitment to tackling climate change."

However, he warned that 2009 was likely to see a sizable slowdown in investment as the global economic downturn begins to bite. "As the global financial crisis continues and the time from initial investment to exit gets longer, venture capital investors will likely moderate the pace of investment across all sectors, including clean tech," he predicted.

The report showed that the US continued to dominate the sector, with investment over the period up 71 per cent year on year to $3.3bn, while Europe held on to second place as investment climbed 67 per cent to €482m (£455m).

However, there were signs that other clean tech hubs were enjoying stronger growth, with investment in Israel more than doubling year on year to $76.5m and interest in the Chinese market soaring as investment rocketed from just $29m in the first three quarters of 2007 to $165m a year later.

Chinese solar firms alone attracted over $85m in funding and the report predicted that the country is likely to see continued high investment levels, particularly in manufacturing-based sectors such as solar and wind.

It also predicted that the country could attract investment from developers of new energy-efficient technologies and smart grid systems. "Makers of energy efficiency technologies see in China an opportunity to achieve scale quickly," it explained, adding that multinational firms also "increasingly view China as a test market for intelligent network systems and sensors".