(Bloomberg) -- The Federal Reserve’s interest rate cut decision has renewed investor interest in the clean tech industry, a sector that has spent most of 2024 in the doldrums.
That’s according to Lucy Brash, a managing director and the head of JPMorgan Chase & Co.’s North American Energy, Power and Renewables Equity Capital Markets group based in New York. Brash has shot up the ranks at the firm since she started her career as an analyst in 2010. She’s part of the team that built JPMorgan’s renewables practice and oversaw a number of large initial public offerings and issuances during the sector’s recent heyday, which started in 2020 and peaked in 2023. (Her remit also includes helping raise money for the fossil fuel industry.)
Since then, investor activity has slowed markedly, with climate tech equity funding down 50% compared to the same period last year, according to data from BloombergNEF. (Funding globally shrunk to $22 billion for the first half of 2024, with companies in the US raising $6.7 billion.) That’s due in part to the higher cost of borrowing, inflation and supply chain disruptions, which have impacted the investing landscape broadly.
The clean tech sector was hit particularly hard because companies often come with soaring capital costs, first-of-a-kind technology that is often perceived as risky, as well as uncertain demand for their offerings. But that may be changing.
“Sentiment, in my view, is showing signs of improving, and we’re perhaps at the precipice of investors starting to come off the sidelines,” Brash said. “I'm quite optimistic about the fundamental demand and outlook.”
At an invitation-only conference she helped organize for investors and clean tech companies, which took place in New York City Thursday, the day after the rate cut decision, the mood was “energized.” The Clean Tech Stars conference convened a range of investors, from venture capital to growth and private equity, as well as companies across the space in sectors like batteries, renewable fuels and carbon capture. The 50-basis-point move has already boosted prospects for faltering renewable sectors.
Recently, the firm conducted an investor survey with about 50 senior portfolio managers and heads of capital markets, asking them whether or not they would invest in unprofitable IPOs if rate cuts materialized in September as the market had been forecasting. 87% of them said they would consider an unprofitable business in that scenario, which is “quite different” from the narrative Brash had been hearing from the market earlier in the year, one that sought profitability from companies looking to go public.
That shifting sentiment has positive implications for the clean tech space, which is largely made up of high-growth startups yet to make a profit. “We're starting to see that evolution, and that's very positive,” Brash said.
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