Investors put $2.57bn into clean tech

Worldwide investment in clean-energy start-ups rose to US$2.57 billion last quarter, according to the Cleantech Group.

AMSTERDAM // Global investment in clean-energy start-ups rose to US$2.57 billion (Dh9.43bn) last quarter, according to the Cleantech Group, which hosts meetings to link investors with promising new ventures.

That was the second-highest quarterly investment on record and an increase of 12.7 per cent from the $2.28bn invested in the same period last year.

Some of the cash helped to jump-start solar power, energy efficiency and other green-technology projects. That investment is expected to continue flowing as unrest in some of the oil-producing areas of the Middle East and North Africa and the nuclear crisis in Japan make alternative energy more attractive.

"What happened recently should help to spur investment in the clean-tech sector," said Raoul Arvengas, a business development manager at the French energy giant GDF Suez, which invests in renewable energy. "There is so much money available in the world that the creation of large funds is possible … We are not talking about $200 million; we are talking about $1bn."

Mr Arvengas said he expected to see more infrastructure funds created to back large projects in established technologies such as offshore wind farms and solar plants. Meanwhile, venture capital is expected to bypass those businesses in favour of less saturated fields such as green packaging and farming with less water.

"In solar or wind, it's difficult to make a difference there because it's very crowded," said Maarten Goossens, an analyst at Rabo Ventures, an investment division of Rabobank in the Netherlands. "So what people are doing now is expanding into niches."

Rabo Ventures is a case in point. The €60 million (Dh316.2m) fund was launched in 2008 to finance young businesses in the sustainable production of food, energy and materials. In 2009 the fund put money into solar and wind-power ventures. But last year Rabo Ventures invested in a water desalination company and a start-up that reduces the amount of energy and packaging used in shipping food.

The story of a clean-technology business often begins with a small player and ends with institutional investors such as Rabobank. Multinational investors, including GDF Suez, tend to treat such ventures more like lab experiments than money-making enterprises.

"The idea is really to understand the environment, to get faster solutions than the ones we could develop, and probably better solutions," said Mr Arvengas. "It's another way of doing research and development."

Young companies must recognise the need to partner large corporations, said Richard Youngman, the Europe and Asia managing director for the Cleantech Group, which hosted a meeting in Amsterdam this week for investors to identify promising start-ups.

"The days of everything being small and nimble are over," Mr Youngman said. "It's become obvious that the capital investment requires corporates to play … It's unlikely that they can do that without people who are already incumbent in the industry."

The Middle East has seen fewer start-ups in clean technology, said Mr Youngman, whose company held a similar meeting in Abu Dhabi in 2009.

"In the Middle East you don't have the heritage of building companies of that nature," he said yesterday at the meeting in Amsterdam. "But there is a lot of investment in assets."