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Investment Trends in UK Clean Technology 2000 – 2004

From an investor's perspective the last few years have seen the clean technology sector begin to emerge as a discrete investment category. Not only has the number of new technology businesses coming forward for investment grown, but recently there has also been an increase in interest from public markets in clean technology both in the UK and continental Europe, the report commissioned by The Carbon Trust found. The sector is also being driven by a number of macro factors coming together - from the ratification of the Kyoto Protocol to the perceived long term upswing in hydrocarbon prices and the arrival of a range of serial entrepreneurs bringing in expertise from other technology sectors.

This report provides the key findings of this survey on the ongoing investment trends within the clean technology industry sector. The data within this work highlights a number of initial indicators that the clean technology market has matured during the five years from 2000 to 2004:

• There has been over £1 billion of investment across 223 transactions in UK clean technology companies since 2000 (excluding grants and private donations).
• Half of the total investment in clean technology during this period has been provided by venture capital investors.
• From an initially low base, the value of the annual external investment has grown at a compound growth rate of 30 % per annum over the period.
• The growth in clean technology investment has occurred against a backdrop of general falling levels of venture capital investment in the technology space.
• The potential for the investors to exit these investments exists via a growing trade sale market and a smaller but important IPO market.
• Few venture capital investors have made clean technology a significant part of their investment strategy, with only 11 investors making three or more different clean technology investments.
• The historic funding indicates that existing high technology clusters helped to provide a constructive setting for early stage clean technology companies to evolve, and
• The dispersal of clean technology businesses is starting to grow away from a few locally driven regions to a wider dispersal of businesses across the UK, congregated around traditionally active technology hot spots.

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The Carbon Trust works with UK business and the public sector to cut carbon emissions and develop commercial low carbon technologies. An independent company set up by Government to help the UK meet its climate change obligations, the Carbon Trust creates practical business-focused solutions to carbon emission reduction on energy efficiency, carbon management, and investment. The Carbon Trust's annual funding is in excess of £65m in grants from the Department for Environment, Food and Rural Affairs (Defra), the Scottish Executive, the Welsh Assembly Government and Invest NI. The Carbon Trust also promotes the Enhanced Capital Allowance (ECA) Scheme for energy saving investments on behalf of Defra and manages the associated Energy Technology List. This ECA scheme is a tax relief that enables businesses to claim 100% first-year capital allowances on investments in energy saving equipment listed on the approved Energy Technology List. Further details on qualifying products and ECAs are available at http://www.eca.gov.uk.