Not as Clean as You Think: The Effects of a Clean Technology Investment Focus on VC Fund Success

This study examines how a cleantech technology investment focus influences both venture capital fund performance and fundraising outcomes. Utilizing both self-reported cleantech designations and actual cleantech deal activity sourced from an alternative asset dataset, the research finds that funds labeled as cleantech attract more capital, but do not outperform non-cleantech funds in terms of returns. In fact, funds with a higher concentration of cleantech deals tend to experience lower net internal rates of return (IRR), with each additional cleantech deal associated with a measurable decline in performance. The analysis also reveals a prevalent trend of greenwashing, where many funds who marketed themselves as cleantech benefit from the cleantech label without making substantive investments in the sector. The findings highlight the importance of greater transparency and stakeholder alignment in order to collectively promote innovation within the cleantech sector.