Study Puts Cleantech’s Gross IRR At An Underwhelming 6.6%


Cleantech returns” is widely seen as an oxymoron. The belief is that nothing much has come from the tens of billions venture capital and private equity funds put into alternative energy and energy efficiency companies since the start of the investment boom.

This isn’t exactly the case, according to a study from Cambridge Associates. Instead cleantech’s gross IRR is presently 6.6% and the value of investments to paid-in capital is 1.2x since 2000, the study found.

In truth, relatively little of this value is fully realized – just 22%. And returns trail the 15.2% gross IRR for a broader basket of investments over the same period, including non cleantech ones.

But it is a suggestion that failures, such as Solyndra, are less the rule than many might think.

To develop its initial quarterly cleantech report, Cambridge looked at 1,222 cleantech investments in 644 private companies. Invested capital in the study totaled more than $21 billion and came from 302 venture capital and 106 private equity funds. Almost three-quarters of it went to U.S. based companies.

“While the sector is young, so far overall clean tech returns have been below what institutional investors expect from their private investments,” Cambridge said in a press release. “This is true particularly after investors pay fund management and incentive fees, which are not reflected in these gross investment-level returns.”

However, final judgment may have to wait several more years until the investments mature and exits do or do not occur.

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