Commodity SWFs Should Invest in Cleantech

Ashby Monk

Over the past few years, I’ve been fascinated with the cleantech venture capital wave that has gripped my home town of San Francisco. Investment in cleantech has gone from around $500 million in 2001 to well over $8 billion in 2008 (despite the credit crisis). Whether it is the drive to build a more efficient server or a battery powered car that does 0-60 in under 4 seconds, cleantech appears to be the “new, new, new thing” in Silicon Valley (to borrow words from Michael Lewis).

As such, I think cleantech would be a great investment for commodity based SWFs. Since sponsors of such funds typically rely on resources that will lose-out if the cleantech revolution succeeds, these investments would offer a very nice hedge over a long-term time horizon (~30 years). Indeed, getting in on the ground floor of cleantech would attenuate any loss of revenues associated with a technological advance that reduces our dependence on hydrocarbons.

It appears one SWF has finally gotten the message. I was reading this article this morning about the growing momentum in cleantech and came across the following:

“A variety of investors continue to support the cleantech sector. Of the top 10 venture capital-led deals in Q3 09, four included private equity investors, three included corporate investors, and one included a sovereign wealth fund.”

Watch this space…

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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