Cleantech investment is undergoing a period of transition as key capital markets providing financing to the industry have pulled back in light of ongoing global macroeconomic, credit and liquidity issues, according to a report by the Cleantech Group.  

Its analysis of worldwide clean technology investments in the first quarter of 2009 shows that cleantech investment is undergoing a period of transition, as the key capital markets providing financing to the industry - venture capital, private equity, project finance, tax equity, public equity - pull back in light of ongoing global macroeconomic, credit and liquidity issues.  

The first quarter of 2009 was the second consecutive major quarterly decline in cleantech venture capital, resetting financing to 2006 levels. The public capital markets, which were the first to react in 3Q08 to the downturn, remain depressed, especially in the M&A and IPO segments that provide the liquidity events, says the report.  

Despite the lower levels of investment activity (which is consistent across all other cleantech asset classes, including project finance and tax equity), the Cleantech Group notes that the $1 billion invested in venture capital in cleantech companies in 1Q09 would be considered a healthy amount in other sectors.  

“We believe that the cleantech venture market will level out in the next quarter or two, although it may be several quarters before we see renewed growth. Many of the original investors in the cleantech space are preoccupied helping their portfolio companies navigate through the downturn, while many of the more recent investors  in the space have returned to the sidelines.”  

Investors have shied away from funding large, late-stage rounds in companies with capital intensive business models, and it remains to be seen whether appetite for these investments will return, even when the cycle turns positive.  

Encouragingly, many leading GPs are in the process of raising new, bigger, cleantech-focused funds. Although fundraising in this environment is very tough, the Cleantech Group has no reason to believe that experienced investors with strong track records will not be successful in raising new funds, eventually. Once public equity markets recover, followed by the private equity markets, there is every reason to expect cleantech investment to resume its strong growth.  

Read the full report in its latest Cleantech Investment Monitor^TM, now available for download. It details which sectors received the most investment attention in the first quarter of this year, and from whom worldwide, spanning: Energy generation, storage; infrastructure & efficiency; Transportation; Water & wastewater; Air & environment; Materials; Manufacturing/industrial; Agriculture; and Recycling & waste.  

Since 2002, the quarterly Cleantech Investment Monitors have been the industry’s most authoritative reports on data, trends and analysis of clean technology venture investment. They now incorporate perspective from global advisory firm Deloitte.