Cleantech investors demand regulatory support

The explosion of investor interest in environmentally friendly companies has been hampered by patchy regulatory efforts and concerns over unproven technology, according to a recent survey.

The market enthusiasm for cleantech investment has not been matched with sufficient legal support and capital, according to a survey by law firm Norton Rose and Cleantech Investor, a publishing group.

Roughly two thirds of investors surveyed regarded a “lack of regulatory framework for investment” and “lack of available capital” as being the greatest barriers to entry for investors in cleantech, with 31.1 percent and 31.6 percent of the vote respectively.
 
The online survey asked cleantech companies and investors which factors will be most influential in determining future levels of investment in the industry. Cleantech companies largely agreed with investors, with 29.3 percent citing the lack of capital as the greatest barrier and 32.5 percent naming the lack of a regulatory framework category as most problematic.

“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,” said Norton Rose partner, Ian Moore, in an interview with PEO.

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

Ian Moore

Respondents also identified the risks they perceive as most important in the cleantech market.
 
More than a third of investors (40.3 percent) cited “a change of government agenda and market shift in focus” as the single biggest risk factor in the development of cleantech. The second biggest risk investors cited was “unproven technology stability”, chosen by 20.9 percent of respondents.
 
“The cleantech sector offers a number of challenges for GPs and investors,” added Moore. “For example, the stability of the particular technology being invested in has often yet to be proven. Unpredictability is also a challenge; a change in government agenda or shift in market focus could have a significant impact. Ensuring consistent and reliable goals from policy makers and the regulatory environment is therefore a clear priority.”
 
The survey interviewed 466 respondents, the majority of whom came from within the European and North American private equity and cleantech communities.