An analysis of venture capital investment in ‘clean teach’ shows that while environmentally-led companies still make up a small proportion of the market, their slice of the action is rapidly increasing.

The figures released by Dow Jones VentureOne and Ernst & Young show that investment in these companies based in the USA, Europe, Israel and China was US$664.1 in 2005 but had almost doubled in 2006 when investment was US$1.28 billion.

The criteria for companies covered in the analysis were that they had to directly enable the efficient use of natural resources and reduce the ecological impact of production.

Areas of focus included energy, water, agriculture, transportation, and manufacturing where the technology creates less waste or toxicity.

“Global climate change, high oil prices, accelerated growth in emerging markets, energy security and the finite nature of resources are some of the key drivers of global demand for clean technologies in energy and water,” said Gil Forer, global director of Ernst & Young’s venture capital advisory group told the media.

“In addition, the increased willingness of consumers and governments to pay for and use green technologies combined with the positive exit environment of the last couple of years has provided venture capitalists with the confidence to invest in emerging clean technology companies around the globe.”

Although growing rapidly, clean technologies only received around 3% of the total venture capital investment in the regions studied last year, but analysts believe that is set to change.

“Although small, the impressive growth rate over the past year shows it is not an insignificant portion of the market.,” said Stephen Harmston, Director of Global Research for VentureOne.

“The increased attention to environmental concerns is causing venture capital investors to recognize and support the entrepreneurial companies that are focused on making a difference and aiming to find market opportunities in this industry.”

“And certainly, that is the foundation of the venture capital model — to locate and sustain the next wave of innovation in the global marketplace.”

David Gibbs

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