(1c) Innovation policy and institutional investors

Finally measures that aim at innovators indirectly influence institutional investors as a ‘third-tier’ (indirect) effect. All interviewees acknowledge that governments are using large-scale investment programs or investment incentives to steer market participants. For instance, the emergence of the Cleantech VC industry is perceived to be closely connected to the Californian “Green Wave” initiative implemented by the pension funds California Public Employees' Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS). US investors often referred to the leading role of policy makers in mandating investments in certain asset classes or sectors such as CT with large volumes of dedicated funds, sometimes even overruling specific risk-return requirements. This regulatory push at a time when most of the underlying innovative companies in the CT field were at an early stage and did not need later-stage investment rounds created a boom period, which some see as a bubble, and led to unfulfilled expectations and poor returns at the fund level, as mentioned by public and private investors alike. Overspending at the initial phase of development led to an abrupt halt of investment. “The institutional investors engaged in the field are hesitant to pursue further investments until previous investments are returned and positive results are realized” (USA20 - Institutional Investor).

Similar to the US, institutional investors in Germany also contributed significant amounts of capital to the CT sector. The main difference from a regional point of view pertains to asset allocations that are used in the CT sector (see Figure 9): Unlike in the US, where institutional investors said to accept VC and PE in technology companies as an asset class, the preferred alternative of German institutional investors seem to be CT asset finance investments. In fact, the KfW (Kreditanstalt fur Wiederaufbau) in Germany, a state-owned institutional investor continues to make significant investments in CT asset finance but ceased its capital commitments to German VC funds in 2012. “Real asset investing does not really have any upsides, but investors like it because its risks resemble fixed income investing.” (GER11 - Institutional Investor)

Table 7 — Perceptions of innovation policy for CT