GLOBAL - Clean technologies increasingly disrupt traditional business models as they come down the cost curve, according to Swiss asset manager SAM.
This allows former niche markets to evolve into business-critical growth markets that private equity investors can tap through targeted investments.
Its study on the global cleantech private equity market, 'From Venture to Growth', traces the market's increasing maturation and evolution from cleantech to clean growth as many private equity investments made 10 years ago in promising start-ups with unproven breakthrough technologies now relate to profitable companies.
The study finds that a rapidly growing number of multinational corporations such as Siemens, ABB, Schneider Electric, GE, Veolia, Intel, Google, Wal-Mart, Nestle and Coca Cola have developed adopted or acquired proven cleantech solutions.
These companies now grasp the strategic value associated with increased operational efficiencies and clean and responsible product ranges, which is why M&A activity was particularly strong in 2011.
Andrew Musters, head of private equity and a member of the executive committee at SAM, said: "In just a few years, clean technology has evolved into a key global industry with significant growth potential.
"The global structural drivers of clean growth are intact, and capital needs remain high given the global demand for clean technologies. In essence, clean growth private equity is going mainstream."
A total disclosed value of $42bn (€33.3bn) made this the most important exit market for clean growth private equity investors, driven by large diversified industrial companies.
Opportunities are being created, especially for small and mid-sized enterprises, which private equity investors can capture through growth or project development capital investments.
At $10.5bn in 55 offerings, the total amount of capital raised in IPOs during 2011 was higher than during the crisis years of 2008-09.
Clean energy remains the largest segment of the clean growth private equity sector and one that continues to offer a lot of potential.
The SAM study shows that renewable energy policies in the US and the EU alone require spending of $750bn for the build-out of clean energy generation capacity until 2020.
The large investment requirements cannot be covered by traditional sources of public finance alone, but will require significant amounts of capital from multinational corporations and large asset allocators.
Funding remains strong along the entire cleantech value chain, says SAM.
At $260bn, total investments in clean energy companies and infrastructure projects had another record year in 2011, bringing the total amount invested in this sector since 2001 to $1.3trn and the past years' average annual growth rate to 40%.
Since 2000, almost 400 cleantech funds have raised $65bn in venture capital, expansion capital and project investments.
The fund universe is maturing, with several managers raising their third- or fourth-generation cleantech funds.
According to SAM, demand for clean, resource-efficient technologies, solutions and services is likely to continue to increase on the back of long-term structural changes such as population growth, increasing urbanisation, resource scarcity, climate change and changing consumer patterns.
Global primary energy consumption is projected to be 40% higher in 2030 than it is now.
The global middle class is expected to almost triple to 4.9bn by 2030, with wealthier consumers demanding more resource-intensive products such as meat and material goods, as well as more sustainable products.