Institutional investors committed $23 billion in capital to clean-technology funds last year, but some experts see that money competing with a wall of government funding and corporate investments from around the world.
The result: too much money chasing too few opportunities. Some question whether outgoing CalPERS CIO Russell Read's plan to form a clean-tech investment firm comes at a propitious time.
“The question is: Can the business grow enough to absorb the capital,” said Jeffrey L. Ennis, senior managing director, Wilshire Associates. He also is chief investment officer of Wilshire Private Markets, the consulting firm's private equity fund-of-funds group. Wilshire Private Markets has so far shied away from investing in clean-tech funds.
According to New Energy Finance, a London-based global clean-energy research firm, $148.4 billion in new private equity, venture, government and corporate capital was invested in clean technology in 2007, up 60% from $92.6 billion in 2006. During the same period, total assets of global private equity and venture capital specialist clean-tech firms grew to $23 billion in October 2007 from $15.9 billion in October 2006, according to data from New Energy Finance.
Meanwhile, institutions have billions sitting on the sidelines awaiting investment.
The $154.5 billion New York State Common Retirement Fund, Albany, for example, will increase its commitment to private equity funds focused on clean technology to $500 million from $40 million over the next three years. Also, the $164 billion California State Teachers Retirement System, Sacramento, has $280 million committed to clean technology investments.
While venture capital funds alone raised $3 billion for clean-tech funds in 2007, the number of deals has been falling steadily for the last three quarters, leaving some in the investment community wondering whether there is a clean-tech bubble forming.