1. Introduction
Australia is establishing itself as a clean tech hub, with exciting new ventures ranging from record breaking solar and battery projects to cutting-edge waste-to-energy solutions, carbon capture and pioneering sustainable aviation fuel initiatives that turn sugarcane waste into jet fuel. The growth in the clean tech space has been driven by accelerating investment in clean energy, with $12.7 billion invested in clean energy in 2024.[1]
Deals in this space are often complex. They often involve joint ventures, staged capital raising, and multi-party shareholder arrangements, each requiring careful navigation of competing interests and complex governance structures. Unlike traditional financial investors, many clean tech investors are strategic players—corporates, utilities, superannuation funds, and government-backed entities—whose priorities extend beyond financial returns to include access to critical IP or technology assets, decarbonisation targets, and supply chain resilience. This makes the legal work particularly intricate, as it demands bridging diverse investment horizons, risk appetites, and governance expectations to craft agreements that are both commercially viable and strategically aligned.
2. Investor motivations
Clean tech investors can be more hands-on than investors in other industries because of the capital intensity, long development timelines and strong focus on regulation and technology. There are a number of ways this plays out – investors will often push for a board seat or at least observer rights and voting rights over major corporate actions and strategic decisions. Intellectual property will also be a key diligence item for investors as this will be important to the value ascribed to the clean tech business, and to its ability to scale the business going forward.
- Board seat
In the clean tech space, investors commonly ask for board seats given the unique risks and complexities of the industry. Clean tech businesses are usually faced with long development timelines, capital-intensive scale up requirements, reliance on government policy or subsidies and difficult regulatory hurdles. Given these complexities, investors typically want rights in relation to shaping strategy and oversight, to ensure that key project milestones are met and their investment is deployed effectively over the long term.
Not every investor will push for a board seat – some may prefer observer or information rights, however we note that this is more common if they hold a minority stake and are purely financial investors rather than strategic investors. Observers have access to the information of a business without the investor taking on fiduciary responsibility.
From the company’s perspective, whether a board seat is granted to an investor depends on a number of factors, including the size of the investment, the stage of the company, the appetite of the founders to accommodate investor oversight without diluting their own control and whether the investor is a strategic partner or purely a financial investor. It is important for the company to assess the credentials of any proposed director including whether they have relevant technical, commercial or regulatory expertise, as well as whether they align with the company values and goals. Companies need to carefully balance the desire for incoming capital against governance considerations, including whether a leaner board composition may help preserve agility and reduce the risk of deadlock in decision-making.
- Voting rights
Clean tech investors often push for veto or consent rights to safeguard their capital and influence key project decisions.
This will generally always include consent rights over issuing further shares or options. Due to the capital intensive nature of clean tech companies, these companies often require multiple funding rounds. Therefore it is important for investors to have rights that protect their ownership position in future rounds. This can be achieved in a number of ways, as set out below.
- Pre-emptive rights in shareholders agreements are common, giving investors the ability to participate pro rata in new equity issues to avoid dilution.
- Some investors may wish to seek a stronger position by asking for a right of first refusal (ROFR), which requires a company to first negotiate a deal with a third party and then present the investor with the option to take up those securities on the same terms. While a ROFR gives an investor control over future investment, it is a heavy handed right that can slow down future investment and deter new investors.
- A softer alternative is a right of first offer (ROFO), which requires a company to first offer new securities to the investor and if the investor declines, the company can then approach third party on the same terms.
Often clean tech investors settle for pre-emptive rights, with larger or more strategic investors pushing for a ROFR or, in some cases, parties land on a ROFO to balance protection for the investors and flexibility in raising money for the company.
Other corporate actions that investors will commonly require the right to approve include:
- new financings, mergers and acquisitions, changes to the capital structure or the sale of substantial assets; and
- strategic decisions that could affect the company’s technology, intellectual property or regulatory compliance, entry into material contracts such as major offtake and supply contracts, or material changes to business plans or budgets.
Given these asks from the investor often conflict with the desire for the owners of the business to maintain control, it is important to carefully draft the shareholders agreement such that there is clearly defined reserved matters (so the parties are clear on which decisions require investor consent versus routine operational approvals), exit triggers (when a party can force a sale, drag/tag provisions), robust deadlock and dispute resolution provisions to ensure that any conflict is appropriately managed and an investment remains workable throughout the life of the project.
- Intellectual property
For investors in the clean tech space, robust intellectual property protection is paramount. Businesses who are looking to raise capital must ensure that they hold clear title to their IP – not only through formal registration on relevant IP registers, but also by securing ownership of any underlying copyright and other unregistered rights.
During investor due diligence, there are certain themes which are raised as red flags on a recurring basis. A primary concern for investors is where the company’s R&D collaborations result in an unclear IP ownership position, particularly where those collaborations involve independent contractors and other external partners. R&D partnerships can be critical for clean tech ventures, particularly in the early stages of the business when the business is reliant on external expertise to supplement its in-house technical skillsets or to validate its technology on a larger scale. However, without proper assignment agreements transferring title in R&D outputs from collaborators to the business, ownership can remain ambiguous or even vest in the external party. Investors will scrutinise whether these kinds of historical ownership arrangements need remediation, which can be a costly and time-consuming exercise (and, at its worst, can derail a prospective investment).
Employee-generated inventions forming the basis of patents can present another critical consideration for investors. Under Australian common law, an implied term is generally recognised in employment contracts that inventions created by an employee in the course of their employment are owned by the employer. However, this requires the employee to have ‘a duty to invent’ – that is, it is generally not sufficient that the employee created an invention on the employer’s time and using the employer’s resources. Therefore, where the core value of a business is in its patent portfolio, the business may again need to take remedial or confirmatory steps to ensure that the relevant corporate entity has clear title to those patents.
Investors will also want to have confidence that the business has a clear runway to scale, and that there are not any third party IP rights which will limit the business’ growth strategy. In this regard, investors will at times want to see freedom-to-operate searches before committing funding. These searches provide assurance in two ways: first, they provide confidence that commercialisation of the business’ IP will not infringe third-party rights; and second, they can point to a clear gap in the IP landscape which the business will be able to protect and own (and, ultimately, commercialise through the intended channels).
In summary, it is critical that a clean tech venture seeking to raise investment can show clear IP ownership; proper assignments of IP title where relevant; and (ideally) evidence of its freedom to operate, so that the business can gain investors’ confidence and capitalise on funding opportunities. Proactive IP management is essential for successful capital raising in this sector.
3. Form of investment
Clean tech investors are increasingly favouring hybrid structures such as convertible notes and preference shares to account for the capital-intensive and higher risk profile of clean tech projects. This approach is more favourable for investors for the following reasons.
- Funding tied to milestones – Investors can deploy funds progressively by linking contributions to the achievement of technical or regulatory milestones. Milestones should be drafted carefully so that they are expressed objectively to reduce the potential for future disputes.
- Preference shares – Often include liquidation preferences, dividend entitlements, and anti-dilution
- Convertible notes – Common in early-stage Australian clean tech start-ups because they allow investors and founders to defer agreeing on a valuation until a later funding round, reduce upfront negotiation friction, and bridge to strategic milestones. Convertible notes will often be structured as follows:
- Conversion into shares on a material equity investment or liquidity event; and
- Voting rights on reserved matters as if the investor is a shareholder, on a deemed conversion basis on a predetermined price, to ensure the investor’s position is protected before conversion.
Hybrid structures also help reconcile differing investor objectives, allowing one investor seeking long-term involvement to coexist with another who prefers staged exits or milestone-based de-risking.
Investment through ordinary shares is more common for later-stage investments with reduced valuation uncertainty and a lower risk profile than early-stage clean tech projects, or joint ventures where parties are contributing non-cash assets such as technology or land.
Of course, investor objectives differ depending on the type of investor. Superannuation funds and listed corporates often seek stable, predictable returns, whereas early-stage venture funds may prioritise rapid growth and liquidity events. Because these objectives differ, it is critical for companies to align investor interests with the structure of the investment.
Conclusion
Investing in clean tech requires a nuanced understanding of the sector’s unique challenges and opportunities. From governance rights like board seats and voting protections to the strategic use of hybrid investment structures, clean tech investors are deeply engaged in shaping the trajectory of the businesses they back. Their motivations often go beyond financial returns, encompassing long-term sustainability goals, technological innovation, and regulatory alignment. For clean tech companies, aligning investor expectations with the right investment structure and governance framework is critical—not only to secure capital, but to build resilient partnerships that can support growth through the complex and capital-intensive journey of clean tech development.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.
[1] Clean Energy Council, Clean Energy Australia 2025 report, (Web Page, 28 May 2025) < https://cleanenergycouncil.org.au/getmedia/f40cd064-1427-4b87-afb0-7e89f4e1b3b4/clean-energy-australia-report-2025.pdf>.
