Cleantech investment surge defies downturn

Investment in clean technology and greener business models is continuing to go from strength to strength and is largely resisting the effects of the financial turmoil gripping the world's markets, according to two reports released this week.

A new survey of 150 of the world's largest companies published today by consultancy giant Ernst & Young, found that 90 per cent are now undertaking climate change initiatives with disclosed financial commitments of $276bn over the next decade.

The results were published alongside new research into investor attitudes towards cleantech, which revealed that more than a third of corporate venture capital programmes plan to increase their investment in cleantech companies within the next year and 44 per cent plan to increase investments within five years.

Moreover, a survey of institutional investors carried out by the company found that just over half claim to always consider a company’s response to climate change when making investment decisions.

Ernst & Young's research found that these commitments are translating into a rapid increase in investment levels which will see cleantech account for 11 per cent of all global venture capital funding this year, up from just 1.6 per cent five years ago.

And the early signs are that the economic downturn of the past year has had little impact on the sector's fortunes with Ernst & Young predicting that global venture capital investment in cleantech will "significantly exceed" the record $3bn invested in 2007, having already reached $2.2bn in the first six months of 2008.

Speaking to BusinessGreen.com, Gil Forer, global director of cleantech, IPO and venture capital initiatives at Ernst & Young, argued that cleantech was better insulated against the effects of the recent financial turmoil than any other investment category.

"Energy costs have not gone down, scarcity of resources has not been solved; we will see a slowdown for cleantech because the economy as a whole will slow, but if there is a sector that is better positioned to cope I'd like to see it," he said. "There'll be some slowdown in investment and IPOs, but cleantech will still attract interest as it is largely about helping firms become more efficient – in the long term the outlook is very solid."

He added that there were also signs that the sector was maturing with more and more mainstream companies investing heavily in cleantech developments. " What we're seeing now is that the innovative, dedicated cleantech firms have developed the products and services that have enabled a response from the big multinationals," he observed.

The Ernst & Young study comes just a day after a similar study from analysts The Cleantech Group confirmed that the past three months represented a record quarter for cleantech venture capital investment with $2.6bn invested across 158 companies globally.

The total marks a 37 per cent increase on the third quarter of 2007 and a 17 per cent rise on the second quarter of this year.

Michael Goguen, managing partner at venture capital firm Sequoia Capital and co-chair of the North American advisory board of the Cleantech Group's Cleantech Network, said that the sector had "continued to show strong growth, despite the unprecedented turmoil in the credit markets during the quarter". But he did sound a note of warning, predicting that "in the coming quarters, we could foresee large scale cleantech projects having to work harder to get financed".