Venture capital investment in cleantech companies reached a record $4.6 billion in the first three quarters of 2008, according to Ernst & Young's analysis of activity in the U.S., Europe, China and Israel, based on data from Dow Jones VentureSource. This is an increase of 82% compared with the same period last year and represents 13% of all venture capital investment in these geographies.
‘Global venture capital investment in cleantech accelerated in 2008 as a number of companies, particularly in the solar and wind market, entered the capital intensive stage of commercializing new technologies,’ says Gil Forer, Ernst & Young's global director of Cleantech, IPO and Venture Capital Initiatives. ‘This increase in activity has been stimulated by a strengthening corporate commitment to tackling climate change. However, 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 cleantech.’
The U.S. continues to be the main driver of global venture capital investment in cleantech companies. A total of $3.3 billion was invested in the first three quarters of 2008 in 135 financing rounds, surpassing the figure for the same period last year by 71% in terms of capital raised and 4% in terms of financing activity.
Several U.S. regulatory developments in 2008 supported the continuing development of the cleantech market. The Housing and Economic Recovery Act of 2008 extended tax credits for wind energy, geothermal, biomass and other renewable energy projects, continuing and expanding an important source of financing for renewable projects.
The Regional Greenhouse Gas Initiative, a mandatory cap-and-trade program to reduce CO2 emissions from the power sector in 10 Northeastern and mid-Atlantic states became operational, which will likely drive long-term demand for efficiency and emissions-reduction technologies. Missouri and Michigan joined the growing number of states with binding or voluntary renewable portfolio standards.
SOURCR: Ernst & Young