Funding with foresight

Bullish outlook for cleantech stocks, says reportFirst the good news. Clean technology businesses are set for major expansion – and the best place for them to find investors is London, where the Alternative Investment Market is the number one choice for small tech start-ups.

Investors, too, know they’re in a growing market – though they can still find it tricky to pick likely winners. When something is flavour of the month, whether it be biofuels, nano-solar or whatever, some stocks can get overpriced. But the overall picture, according to a new report called Clean Capital, is that we still need much more investment. The Stern Review estimated, after all, that stabilising global greenhouse gas emissions would require a spend of 1% of global GDP each year.

Alice Chapple, one of the report’s authors at Forum for the Future, is confident that the appropriate business models are working to stimulate innovation and entrepreneurship. “Much progress was made in 2006,” she says – but she’s still worried that both public and private investment decisions are being distorted by an uneven playing field. While fossil fuels are subsidised to the tune of $150-250 billion per year globally, “each tonne of CO2 they emit causes both environmental and economic damage – which is not currently factored into investment decisions.”

Clean Capital urges government to set robust and transparent targets, in particular for carbon emissions, to provide a stable platform for innovation. It should also use public procurement more effectively and supportively. Another major conclusion of the report – written with the support of the City of London Corporation, Defra, the DTI and Gresham College – is that investment analysts should expand their coverage of cleantech stocks, while sharpening up on the real environmental and economic downsides of traditional technologies. – Roger East

11 March 2007

Roger East