Green energy startups raised about $8 billion in equity in the first quarter of the year, the lowest since 2020. The post Green Startups Funding Hits Lowest Level Since 2020 appeared first on Tokenist.
Green Startups Fundraising Dropped 40%
The green energy sector, including everything from renewable energy to climate-related technological innovations, has seen funding run down in the year’s first quarter. According to a report by the WSJ, green companies raised about $8 billion in equity in Q1, down by 40% compared to the previous year.
Sustainability-linked bonds and loans market has also seen a drop in activity. According to the financial analytics platform Dealogic, the debt raised for climate projects hit the lowest level in the first quarter of the year in more than two years.
The sector also managed to avoid a downturn last year courtesy of the Inflation Reduction Act, which includes nearly $370 billion in climate change incentives that could be injected into the green industry over the next decade.
“The earlier stage a deal might be, the more likely it is that the senior decision makers are suggesting a pause or to review the valuation. Those are the things that can slow down markets and kill deals.”
Furthermore, investors are waiting for the US Treasury Department to release its guidance on sourcing requirements for the Inflation Reduction Act’s clean energy incentives. The guidelines will determine how hundreds of billions of dollars in new EV tax incentives will be distributed.
Investors Withdraw $4 Billion from iShares ESG ETF in One Day
Investors pulled out $3.9 billion from ESG-focused iShares ETF in one day at the beginning of last week, bringing down the fund’s total assets under management to $14.4 billion. The redemptions mark a steep drop in the AUM of the fund, which saw another $1.6 billion in net outflows last year.
“As we actively manage our models to capture opportunities in the market, some ETFs included in BlackRock model portfolios experience inflows or outflows, driven by advisers who trade their clients’ portfolios in line with BlackRock’s models.”
Analysts also noted that the swap might indicate that interest in ESG products is weakening. “ESG ETF inflows have waned over the past year due to a nasty combination of underperformance, political backlash and investors generally questioning the overall merits of such an approach,” Geraci said.
Do you think ESG investing is losing its appeal? Let us know in the comments below.