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From the May 2005 issue of Investment Advisor • Subscribe!
May 1, 2005
The Clean Alternative
You're probably quite familiar with a previously alternative investing option called socially responsible investing which went mainstream some time ago (see page 94 for a spotlight of the original SRI mutual fund).You may not have heard yet, however, of another way of judging an investment, called "cleantech," short for clean technology. The Cleantech Venture Network LLC is a three-year-old Ann Arbor, Michigan-based organization with 500 member investors (including institutions and individuals) that monitors the amount of venture capital being placed into cleantech, and seeks to increase the number of such deals by bringing together entrepreneurs looking to commercialize their technologies and venture investors through an online service and a series of forums in North America and Europe. It defines cleantech as "any product or service that improves operational performance, productivity, or efficiency; while at the same time reducing costs, inputs, energy consumption, waste, or pollution." Cleantech is not specific to a particular industry, points out Cleantech Venture cofounder and chairman Nicholas Parker, encompassing as it does air and water purification, advanced materials, distributed power generation, renewable energy, and process controls. Parker says that unlike its more narrowly defined "environmental technology" antecedent that calls to mind smokestack scrubbers and a "save-the-world mentality," these days the entrepreneurs looking for backing for their technologies are much more focused on the bottom line. In fact, he says, clean technologies are being developed now primarily to meet an economic need rather than a regulatory one; the environmental benefits, while significant, are secondary. Furthermore, Parker says the technology has moved from the "end of the pipeline - such as the scrubber technology that cleans up pollutants just before they're released into the atmosphere via smokestack, to the beginning of the pipeline - fixing the polluting problems before they ever get into the pipeline." That changed focus helps provide greater liquidity for venture investors, Parker says, and has helped spur a significant rise in cleantech dealflow. Parker says Cleantech Venture's research shows that about $3.5 billion in venture capital was invested in cleantech since the beginning of 2002, or "about $3.4 billion more than most people would think," jokes Parker, accounting for about 7% of all VC dollars invested during that period. Of that amount, says Parker, 40% to 50% of the deals are energy-related. Of course, venture capital investing is not for everyone, and Parker is quick to point out that venture capital is a high-risk asset class. But for clients who may be clamoring to put a portion of their investing money into venture capital, and who also want to put their money where their principles are, you may want to consider the cleantech option.--James J. Green