Goldman Sachs, one of the world’s big four investment banks, has created a buzz in the cleantech segment by announcing a $40 billion target fund for financing and investing in cleantech companies over the next decade. This major support of financing by a fairly mainstream investor is set to reinvigorate the outlook for a segment that has lost its edge among venture capitalists, as demonstrated by declining levels of liquidity in the cleantech market in 2013. The opportunity to attract corporate financing of this scope is appealing for business transfer agents, who will have access to much greater flows of venture capital should other investment banks follow Goldman’s lead.
Cleantech has lost some of its glean in the last few years, with acquisitions and institutional financing rates declining in the segment. In part, this is down to the unfulfilled promise of renewables and the slow pace of growth in mainstream usage of clean innovations. In short, many thought that by now electric cars would be ubiquitous and green energy output high. Investors have grown tired waiting for returns, instead turning to digital media opportunities that are more in-trend due to their perceived faster profitability and which have greater resale success. However, Goldman’s investment fund bucks the trend and is symbolic of the growing understanding of cleantech opportunities and their long-term potential. Companies capable of playing the long game, not just those looking for a quick buck, are increasingly providing the much-needed corporate financing to drive cleantech development.
There are two primary factors heightening the appeal of cleantech for majors like Goldman Sachs. The first is the mainstream success of energy-efficient brands, namely car manufacturer Tesla and smarthome innovator Nest Labs. Tesla has made electric cars sexy, winning over regular consumers and seeing surging triple-digit annual growth as a result. Nest, meanwhile, has developed practical products for the consumer home, resulting in its $3.2 billion acquisition by Google. The second factor driving Goldman’s future strategy is the surging demand for cleantech among developing giants such as India and China, and the subsequent major state contracts potentially on offer for the right technology. Clean energy and green technology are set to be major cornerstones of economic growth in Asia’s polluted emerging markets. For the early-stage investor with patience, hitting the jackpot in Asia is a realistic prospect that can pay off on a gigantic scale.
Whether other investment banking giants will follow Goldman’s lead remains to be seen, but the vote of confidence by one of the world’s largest financial institutions will certainly boost the cleantech market. Business transfer agents can look forward to a new type of corporate investor, while cleantech start-ups will be re-energised by renewed investor interest.
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