EU venture arms set new investment record in cleantech innovation

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More than €7 billion ($8.2 billion) of venture capital has been invested in cleantech innovation in the European Union during the first half of 2021, a new report released by Cleantech for Europe has revealed. This marks a new annual record in venture capital directed towards cleantech innovation within the bloc with six months still remaining in 2021. In 2020, venture capital for cleantech innovation reached €4.7 billion ($5.5 billion).

Referring to the report, EU Quarterly Cleantech Briefing, Ann Mettler, Vice President Europe at Breakthrough Energy, an organisation founded by Bill Gates to support the innovations that will lead the world to net-zero emissions, said: “This analysis illustrates the extraordinary progress of the EU’s cleantech ecosystem – and the mountain of urgent work that lies ahead, particularly around helping build an EU policy framework that prioritizes and supports cleantech innovation.” 

Other key report findings include:

  • Megadeals in EV batteries are behind the all-time record (Northvolt – €2.3 billion ($2.7 billion), electric mobility (Polestar – €450 million) $533.4 million, circularity (Back Market – €280 million ($331.1 million), Vinted – €250 million ($296.2 million), shared mobility (Blablacar, Flixbus). For the first time in the EU, these megadeals are rivaling amounts invested in North American and Asian deals.
  • Deals are happening across a majority of member states with 18 of the 27 members states experiencing the signing of deals, underscoring the fact that cleantech innovation presents opportunities for the whole bloc.
  • By amounts, energy & power remains a dominant force in the EU evidenced by an increase in funding in expanding the bloc’s battery ecosystem, hydrogen economy, smart grids, energy efficiency and other renewable energy solutions. Within the hydrogen sector, compared to previous years, 2021 is seeing an increase in funding for the development of industrial clusters, in cross border collaboration on distribution and generation and in end-use applications and integrated solutions by the transport sector.

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The report recommends the enactment of policies that would encourage a continuous growth of the venture capital market for EU startups, following realisation that these companies have in the past few years often failed to scale up across the continent due to lack of funding and adequate support.

The immaturity of the EU venture capital market in the past few years has led to startups seeking financial aid and growth opportunities elsewhere especially in Asia and North America where policies encourage tech adoption and increase access to funding.

Despite the massive growth experienced within the EU venture capital sector this year, Cleantech for Europe predicts that the investments made may still fall short of what is needed to ensure EU start-ups can scale up.

The ability of startups to expand across the bloc and to launch global operations will help Europe to accelerate its net-zero transition and ensure a just energy transition is achieved across the region.

Specifically, the Cleantech for Europe initiative calls on the EU to:

  • Create a demand shock for green solutions. Create sectoral transition plans. Implement a predictable and progressive price on carbon. Accelerate green public procurement.
  • Support the creation of at least 10 EU scale-up funds. Increase non-dilutive funding. Leverage public-private instruments such as carbon contracts for difference.
  • Support cross-border scaling. Harmonize regulations and standards to allow innovative companies scale from one country to the continent. Develop integrated value chains across all member states.

Jules Besnainou, director at Cleantech Group, a research and consulting company that is helping organize the new group and author the quarterly briefings. “We want the bloc to capitalize on opportunities to build and expand clean industries, ensure a just transition, and mount a stronger response to a climate crisis which grows more urgent by the day.”

Find out more about the EU Quarterly Cleantech Briefing.