Solar panels and wind turbines in the Netherlands.
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Clean energy stocks may underperform in the public market. But there is still a lot of interest in companies focused on decarbonization in private markets, with Clean Energy Ventures’ new fund being the latest example.
The climate technology company said Wednesday that it had raised $305 million for its second fund, five years after closing its first fund. This latest fund was oversubscribed – the original target was $200 million – but interest from limited partners including The Grantham Foundation, Builders Vision and Carbon Equity led to a larger raise.
The company is already putting the new money to work, focusing on technologies that go beyond traditional green investments in solar and wind energy.
Daniel Goodman, co-founder and managing partner, identified industrial decarbonization as a compelling industry – particularly emissions-reducing technologies for the cement and steel industries.
“When you think about where we need to have significant impact and where there are sectors where the technology really hasn’t changed in many, many decades, steel and cement are at the top of the list. So we think there’s great opportunity there,” he told CNBC.
Two other areas of interest for the new fund are plastics – both more efficient recycling and cost-competitive bioplastic production – and grid-improving technologies for distributed energy, such as virtual power plants.
Clean Energy Ventures backed 20 companies in its first fund and has already made six investments through its second fund, including Israel-based green ammonia company Nitrofix and sustainable jet fuel company Oxccu, which is also based in the UK and is opening a new office in London , with Goldman calling the European opportunities “truly incredible” while pointing to opportunities in Israel.
Much has changed in the renewable energy landscape since 2019, when Clean Energy Ventures launched its first fund, including the rise – and subsequent decline – of special purpose acquisition companies. During the Covid era, SPACs have proven to be a popular way for clean energy companies to gain access to public markets. Many have performed poorly since then, leading some to argue that enthusiasm for SPACs caused companies to go public when they weren’t ready.
However, Goldman said the unwinding of SPAC trading and the poor performance of publicly traded clean energy stocks have not affected investors’ perceptions of the value of investing in clean energy or the idea that greener investments come at the expense of returns. Clean Energy Ventures’ limited partners, which include institutional investors, asset managers, family offices and registered financial advisors, are not impact investors – in other words, they are focused on returns.
None of the companies in Clean Energy Ventures’ first fund have gone public, but the company views IPOs as a “nice-to-have” rather than a “necessary.” Goldman said Clean Energy Ventures’ approach is to focus instead on strategic sales and backing companies that are developing technologies that a much larger company, such as an energy or industrial giant, might be interested in.
No companies were acquired from the first fund, although Goldman said there were interested buyers.
In other private markets, private equity is playing an increasingly important role in energy transition-related transactions. Private equity-backed energy transition deals rose to over $25.9 billion in 2023, compared to just $500 million in 2018, according to Mike Collier of financial advisory firm Weaver.
Private equity plays a critical role because it can be a stepping stone for companies that have outgrown venture capital but are not yet ready for the public market.
Clean Energy Ventures helps its portfolio companies reach the next level by partnering with private equity, and Goldman said the company has seen increased interest from this market in the last six months.
“I’m not saying that [private equity] “They come and take early-stage technology risks, but once you have a demonstration – or the first of its kind – they can be comfortable jumping in for follow-on projects, much earlier than has traditionally been the case,” he said.
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2024-05-29 13:42:53
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