Legal firm calls on political and regulatory support

Ian Moore, a corporate finance partner at Norton Rose LLP, calls for concerted political and regulatory support by governments around the world, and the financial incentives that they provide for innovation, are seen as crucial factors in the continuing growth of the cleantech sector.

Mr Moore The report, Cleantech investment and private equity, details the views of nearly 450 specialists operating in the international cleantech market, including both investors and cleantech companies.

Key findings from the report include:

31% of investors cited a lack of clear regulatory framework as a major barrier to entering the market

40% of investors admitted that a change in government agendas or a shift in market focus was the single biggest risk factor for placing their investment

45% of investors claimed that government support and related financial stimulus was the key factor when deciding which region to invest in

46% of investors reported that they viewed cleantech investments with greater caution than any other venture capital or private equity investments

The report also reflects the view that cleantech generated electricity alone will not be able to satisfy the world's ever-increasing energy needs in the immediate future.

Survey respondents agree that it will take some considerable time to displace fossil fuel based technology.

Our respondents had very strong views about the need for an international treaty to provide sufficient regulatory and financial support to the cleantech sector.

While a number of individual countries have policies in place to support cleantech, there is a demand for much greater policy certainty and for a binding global legislative framework to assist the sector to develop and grow, and to give greater confidence to investors.

While there are some significant investment and regulatory challenges for cleantech organisations, the sector is certainly not in crisis. Cleantech should not be mistakenly compared to the dot com bubble.

There is an undeniable need for cleantech as energy demands rise and traditional options falter.

The weight of concerns about energy supply and climate change, mixed with faster technological innovation and growing global consumer demands for cleaner solutions, means that cleantech developments are here to stay.
A secure international legislative framework is needed especially given the long and costly research and development processes of many cleantech technologies.

We expect to see a steady transition towards a predominance of cleantech energy rather than an abrupt change. There will need to be a portfolio of old and new technologies working alongside each other for some time yet.

Other main findings from the survey include:

Energy efficiency is expected to be the cleantech sector attracting the most investment interest in the immediate short term according to 77% of the survey respondents. This was followed by 74% citing energy generation.

Wind energy will continue to be the main sub-sector in cleantech energy generation according to 40% of respondents, with 31% saying solar and 19% for biomass.

That said, solar energy has recently attracted more investment than any other sub-sector, according to data from Bloomberg New Energy Finance.

The USA was identified as being the most likely beneficiary of private equity driven cleantech investment by 44% of both investors and cleantech companies.

This was significantly ahead of the next most identified country, China, which was selected by 19% of investors and 11% of cleantech companies. The UK was selected by 10% of both investors and cleantech companies, a little ahead of Germany.

Europe is perceived as offering the greatest incentives for cleantech investment. This is particularly the case for Germany which was identified by 43% of investors and 31% of cleantech companies as offering the greatest incentives for cleantech investment.

Approximately two-thirds of respondents believe banks to be still cautious about lending to the sector, despite proposals to support the green economy; and debt remains tightly controlled.

46% of investors and 52% of cleantech companies consider cleantech investments are viewed with a greater degree of caution in comparison with investment in other sectors.

Survey respondents were involved in a wide variety of cleantech activity ranging from energy generation to biodegradable packaging. Of the total of 446 survey respondents, 69% were located in Europe and 18% in the United States. The remaining 13% were located in the Middle East and Asia Pacific regions. Just under half of all respondents confirmed that cleantech accounts for 75% or more of their business focus. Investors formed 46% of the total respondents.

Copies of the Cleantech investment and private equity report can be downloaded from www.nortonrose.com

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