Solar panels and wind turbines in the Netherlands.
Daniel Bosma | Moment | Getty Images
Clean energy stocks may underperform in the public market. But there is still a lot of interest in companies dedicated to decarbonization in the private markets, with the new Clean Energy Ventures fund being the latest example.
The climate technology firm said Wednesday it has raised $305 million for its second fund, five years after closing its first. 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 higher increase.
The firm is already putting new money to work, focusing on technologies beyond traditional green investments in solar and wind energy.
Daniel Goldman, co-founder and managing partner, identified industrial decarbonization as one of the promising verticals, particularly emission reduction technologies for the cement and steel industries.
“When you think about where we need to make a significant impact and where there are industries where technology hasn’t really changed in many, many decades, steel and cement are high on the list. So we think there’s a huge opportunity here.” ” he told CNBC.
Two other areas of interest for the new fund include plastics—both more efficient recycling and cost-competitive production of bioplastics—and grid-improving technologies for distributed energy, such as virtual power plants.
Clean Energy Ventures has backed 20 companies in its first fund and has already made six investments through its second fund, including Israeli clean ammonia company Nitrofix, as well as UK-based clean aviation fuel company OXCCU. opening a new office in London, with Goldman calling the European opportunity “truly incredible” and also pointing to opportunities in Israel.
A lot has changed in the renewable energy space since 2019, when Clean Energy Ventures launched its first fund, including the rise (and subsequent decline) of special purpose acquisition companies. In the Covid era, SPACs have proven to be a popular way for clean energy companies to gain access to public markets. Many have since performed poorly, leading some to argue that the enthusiasm around SPACs caused companies to go public when they weren’t ready.
But Goldman said the winding down of SPAC trading and the poor performance of publicly traded clean energy stocks haven’t hurt investors’ perception of the value of clean energy investing or the idea that greener investments come at the expense of profits. 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 profit-oriented.
None of the companies in Clean Energy Ventures’ first fund went public, but the company views an IPO as a nice-to-have rather than a necessity. Goldman said Clean Energy Ventures’ approach is to focus instead on strategic sales – backing companies developing technologies that a much larger company, say an energy or industrial giant, might be interested in.
None of the companies in the first fund were acquired, although Goldman said there were interested buyers.
Elsewhere in private markets, private capital is playing an increasingly important role in transactions related to the energy transition. The number of private equity-backed energy transition deals has grown to more than $25.9 billion in 2023up from $500 million in 2018.
Private equity is critical because it can provide a springboard for companies that have outgrown venture capital but are not yet ready to go public.
Clean Energy Ventures is helping its portfolio companies reach the next stage by partnering with private equity, and Goldman said the company has seen more interest from that market over the past six months.
“I’m not saying that they [private equity] come in and take a technology risk early on, but once you have a demo – or the first of its kind – they can get used to being involved in subsequent projects, much earlier than traditionally. business,” he said.