Defining the environmental sector is not straightforward, as it overlaps with more ‘traditional’ sectors. The diversity of products and services that can be directly, or indirectly, categorised environmental technology goes well beyond the realm of environmental infrastructure. The definition of the sector has grown to match the rising awareness and concerns relating to the environment. Francinia Protti-Alvarez reports

There is a common misconception that environmental investment means solar or wind farms and perhaps the components required to build and run these. However, environmental technology and investments go well beyond the seemingly obvious.

Take, for instance, Climate Change Capital Private Equity's (CPE) two most recent investments. Climate Energy, an energy efficiency services firm, received £7.5m in acquisition finance to build up the range of services to reduce energy bills and cut carbon emissions. Meanwhile, Nualight Ltd, a manufacturer of energy saving LED lighting solutions for the retail sector, raised a €9.1m round.

"Generally people associate environmental technology with asset-backed investments, often project finance, or with early-stage technologies that have not yet been proven, and thus are still building up its client portfolio and are pre-revenue," noted Ed Lascelles, partner at VCT investor Albion Ventures.

Another example is software manufacturer Helveta, backed by Albion Ventures, Oxford Capital Partners and Succès Europe recently raised a £5m round from BeCapital and the Carbon Trust.

Helveta is a provider of supply chain intelligence software. Its product, CI World^TM, is a software solution enabling public and private sector users in the forest and food products industries to provide full traceability and compliance verification capability for assets moving along global supply chains. It is currently being used to monitor in excess of 2.7 million hectares of forest across the Congo and Amazon basins and in South East Asia.

"The impact deforestation and illegal logging have on the livelihoods of indigenous peoples has long been part of the social agenda, but it was not until 2008 when momentum picked up due to deforestation being incorporated into the climate change debate. Indeed, not only does logging contribute significantly to carbon emissions; 40% of deforestation results from illegal logging," notes Lascelles.

He continues, "Therefore, there were several crucial elements making Helveta an interesting investment. Not only was the company already reporting a turnover - albeit small but with a strong pipeline - but it had also succeeded in developing a unique software solution that answered a growing market need."

Critics may say this new found interest in the environment is exploitative, but the sector presents a great opportunity to find niche markets, generate jobs and returns while contributing profitable solutions to the climate change question; one just needs to think outside the box.