SAN FRANCISCO — Venture capitalists are seeing green in clean technologies.

The amount of North American venture capital invested in environmentally friendly technologies jumped 35 percent last year to more than $1.6 billion, according to a report to be released Wednesday by the Cleantech Venture Network.

"Cleantech" investments by venture capital firms rose to a record $502 million during the fourth quarter of 2005 — 18 percent more than the previous quarter and 60 percent more than the same period a year earlier.

"We saw consistent upward growth in the amount of investment, the number of investors and the range of things invested in," said Nicholas Parker, chairman and co-founder of the Ann Arbor, Mich.-based Cleantech Capital Group.

The cleantech sector encompasses a wide range of technologies related to water purification, air quality nanotechnology, alternative fuels, manufacturing, recycling and renewable energy such as solar, wind and hydrogen.

In last year's fourth quarter, cleantech companies attracted 10 percent of all North American venture capital, making it the fifth most popular sector behind biotechnology, software, medical technology and telecommunications, the report said.

Energy-related ventures focused on efficiency, generation, infrastructure and storage accounted for 34 of the 73 deals last quarter, attracting $179 million in venture investment.

In the fourth quarter, companies in the Northeast attracted $164 million, followed by the West Coast at $123 million and the Southwest at $64 million, the report said.

Parker predicted that venture capital investment in technologies that conserve resources or contribute to a cleaner environment could reach $2.5 billion to $3 billion in each of the next three years.

Parker attributed the growing interest in clean technology to the rising cost of fuel and other natural resources, driven largely by rapidly expanding economies in Asia.

"Being much more efficient with natural resources is now an economic imperative," Parker said. "The rise of China and India and other emerging market economies is forcing up prices of natural resources of all kinds."

Investors are also seeing better prospects for returns as technologies advance, more seasoned managers and entrepreneurs enter the field and cleantech companies book higher sales.

"These markets are maturing," said Rob Day of Expansion Capital Partners, a San Francisco-based venture capital firm. "We're starting to see clean energy technologies and clean water technologies gain traction in the marketplace."

Expansion Capital last year invested in three cleantech companies: Agile Systems, which develops energy efficient technologies for electric motors; Biorem Technologies, which makes air filtration systems; and Tiger Optics, which makes air monitoring sensors.

The firm is now raising a second venture fund focused on clean technologies, Day said.

"All of this is being driven by the recognition of the increasing shortages of natural resources," he said.

On the Net:

Cleantech Venture Network: http://cleantech.com/