Green business gathers pace

Green business has become good business in recent years. No longer the preserve of woolly-headed dreamers, it now has the potential to become one of Europe’s main growth industries.

With innovations such as solar energy on the cusp of mainstream take-up, venture capitalists are beginning to show strong interest in the sector.

"The wind and solar industries are going to grow very fast. The next wave might be companies with activities centred on energy conservation," says Patrick Sheehan, a founding partner of London-based venture capital fund the Environmental Technologies Fund (ETF). According to Sheehan, boom time is just around the corner.

Much of the gains will be made in Europe, if the Impax ET50 index is anything to go by. The index, which lists the world’s top cleantech (sic) companies is mainly made up of European players, such as Spanish windpower company Gamesa and Irish insulation company Kingspan.

"Frankly, there are huge opportunities," says Sheehan. "It’s the one area where Europe has a global lead. We’re getting approached by North American players that want to enter the EU market."

The industry is growing despite the dearth of venture capital opportunities. ETF, which was set up last year by a group of experienced venture capitalists, is a new player on a relatively uncluttered market. According to Sheehan, there are around 20 other investment funds specialising in matters green in Europe.

The market may fill fast. According to a report published by the European Social Investment Fund this year, the ‘venture capital for sustainability’ sector, which encompasses the cleantech industry, is now one of the fastest growing sectors of Europe’s financial industry. In 2006, says the report, venture capitalists invested around €1.25 billion in sustainable industry, a fraction of the €72bn invested in the wider market, but a promising start.

Consolidation of the EU internal market will encourage further investment. Small- and-medium-sized cleantech companies, for example, would benefit greatly from more open and transparent public procurement markets. "If we want a knowledge-driven vibrant economy, we ought to be thinking of creating the right type of environment that allows these investments to flourish," says Sheehan.

Adoption of new technologies will be crucial, says Barbara Helfferich, environment spokeswoman at the European Commission. "Not only is the sector promising in terms of new employment opportunities, it is also a sector that leads to innovation which will in turn improve competitiveness," she says. "But whether it will guarantee the high returns that some say it will, has yet to be seen, as [its adoption] is costly. Green technologies may no longer seem as pie-in-the-sky as they once did, but they still have a few small but crucial steps to take before entering the mainstream.

Green business has become good business in recent years. No longer the preserve of woolly-headed dreamers, it now has the potential to become one of Europe’s main growth industries.