Many of the largest industries are heavily dependent on natural resources, including energy, water, transportation, and manufacturing. Increased competition, fueled by such factors as deregulation, privatization, globalization, and resource constraints, is expected to intensify. As a result, corporations are seeking technologies that can increase materials efficiency and resource productivity, as they strengthen their competitive position.

The Fund’s Managers define Clean Technology as those technologies that:
•Use energy, water and other raw materials more efficiently and productively,
•Deliver equal or superior performance,
•Improve customer profitability, through cost reduction and/or increased revenues, and create less waste or toxicity

Several factors contribute to making Clean Technology a compelling investment opportunity today:
•Clean Technologies represent large, fast growth markets;
•There is a compelling deal flow of expansion-stage and early stage companies;
•Advances in scientific innovation have reduced costs of Clean Technologies, making them competitive with incumbent technologies;
•Clean Technology companies are run by increasingly high-quality management teams;
•The exit history of the Clean Technology sector demonstrates competitive venture capital returns are achievable, which are getting stronger over time;
•Clean Technology is underinvested relative to deal flow in the sector and relative to capital being deployed in other areas (e.g. IT and Life Sciences);

Scientific Innovation
Scientific innovation in engineering, physics, chemistry, physical sciences, communication systems, earth sciences, materials science and IT have created numerous new opportunities in many of the world’s largest industries. Another important and emerging area of scientific innovation is “biomimicry” – the development of technologies and products that replicate processes from nature, and thus reduce waste and toxicity.

Clean Technologies – from advanced materials to alternative power generation – have benefited from billions of dollars of research and development investment in the 1980s and 1990s, coming from government agencies, academic institutions and large corporations. The National Renewable Energy Lab estimates that, in the 1990s, the US Government alone spent an estimated $5-$10 billion a year to further develop renewable energy and energy efficiency technologies.

The above referenced investment in R&D has resulted in significant cost reductions in a broad array of Clean Technologies, making many technologies competitive on price and performance, and spurring adoption by an increasing number of commercial customers.

Large and Fast Growth Markets
Clean Technology represents many multi-billion dollar markets. These markets are experiencing rapid expansion, in many cases double digit annual growth rates.

For example, the market for Information Technologies that increase the efficiency of energy management is currently valued at $2-$5 billion . Global wind energy markets, valued at $5 billion in the year 2000 are expected to grow to $50 billion by 2012, with solar energy moving from $3.5 billion to $28 billion in the same time period . The market for advanced catalysts that can reduce manufacturing costs of automobiles and power systems, while also improving environmental performance is $4 billion .

The US EPA estimates that $3 billion is spent each year on repairing and upgrading the water infrastructure to stop the billions of gallons of water loss from old pipes. The industrial demand for clean water is driving the growth of water technologies, currently a $6B market, and expected to grow into a $20B market by 2012 . Furthermore, the maturation of membrane technologies has reduced the cost of desalination from $6 per thousand gallons in 1990 to $2-3 per thousand gallons today. This has played an important role in growing the desalination market, with an installed base valued at $45 billion worldwide .