Los Angeles, Calif.-based Craton Equity Partners announced on Wednesday that it had finalized the third and final closing of its $191.5 million cleantech fund. The firm plans on investing in small, undercapitalized companies with robust emerging growth prospects; the sectors it will target include: renewable energy, alternative fuels, green building, water remediation and solid waste reduction and conversion technologies.

Craton’s team includes several heavy-hitters, including former Kohlberg Kravis Roberts CFO John Gerson and well-known actor and environmental advocate Ed Begley, Jr. Other board members include Tom Valenzuela, the founder and president of Valenzuela Capital Partners, and Danny Villanueva, the founder of Bastion Capital. The firm plans on forming several close partnerships with industry experts to identify new opportunities and influence the strategic direction of portfolio companies.

As we reported a few days ago, Craton led EnLink Geoenergy Services$30 million funding round. Last year, the firm committed $3.5 million to GigaCrete, a Scottsdale, Arizona-based green building startup that sells carbon neutral, mineral cement-based products.

Craton expects to benefit from the continued growth in the green building market, which, according to a study by McGraw-Hill Construction, is projected to be worth $10.2 – $20.5 billion by 2010. The study estimates that 5 – 10 percent of all new non-residential construction starts will be designed using green building materials.

Despite mounting concerns over a looming cleantech bubble, investment in the sector remains strong; Clean Wave Partners, a Cincinnati, Ohio-based firm, is raising $100 million for a fund focused on the Midwest while Capricorn Venture Capital, a Belgian firm, recently closed its €100 million, roughly $157 million, cleantech fund.