Green investment boom expected in next decade

The next decade should see a rising wave of investment in green funds, leading financiers are predicting.

Research firm Prequin said green investment funds have gathered $12 billion to spend worldwide, with a further $26.7 billion on the horizon.

The company's 2010 Private Equity Review said many fund managers were investing heavily in 'clean-tech' funds, defined as anything designed “to minimise any negative environmental impact and efficiently manage the Earth’s natural resources". This includes investment in forestry projects and lumber.

The firm is watching developments in the sector very closely, however, as the recent nature of most green venture-capital funds – most raised since 2006 – means there are very few precedents against which to measure success.

“Target [returns] suggest that fund managers are expecting to generate high returns but it remains to be seen whether clean-tech funds will achieve these targets.”

The average clean-tech fund has promised investors an 18.5% annual return on their money, only just below the 19.2% promised by the general funds, according to Preqin, which provides data for the alternative investment industry.

European early-stage, buyout and infrastructure funds for clean tech investments have $5.1 billion to invest, of which around $3.1 billion is designated for the UK. Green funds are raising a further $10.9 billion for European investments, with about $3.1 billion destined for the UK.

General fund managers are also expected to catch on to the trend, ploughing portions of their cash into clean-tech investments.