Despite the economic downturn and precarious situation in which many startups find themselves, some industries are seeing continued momentum in terms of inward investment – one such industry is climate technology.
In 2021 alone, about $40 billion was invested across more than 600 deals, a trend that appears to continue into 2022 with significant capital investment in startups battling the climate crisis. In parallel, we’ve seen the emergence of a slew of new funds dedicated to the cause, well positioning climate-focused startups to thrive on the back of layoffs elsewhere in the startup world.
The latest chest back on the scene is Clementum Capitalwhich today announced the first closing of its inaugural fund of 150 million euros ($157 million), which is designed to help reduce carbon dioxide emissions and “accelerate Europe’s green transition,” the company said.
TechCrunch met the co-founder Yuan Berno For information on what Climentum strives to achieve, and how it differentiates itself from incumbents in the space.
The driving force behind Climentum’s investment philosophy is Europe’s new Sustainable Financial Disclosure Regulation (SFDR) which came into effect last year. SFDR is designed to improve transparency in sustainable investing, so that finance companies are more accountable for specific claims they make about their own sustainability credentials – partly to prevent greenwashing. Climentum, specifically, focuses on being a so-called “Article 9 fund,” meaning that it makes sustainable investments and lowering carbon emissions an essential investment objective. In the process, it gives fund backers access to all the relevant data they need to report on ESG’s (Environmental, Social and Governance) goals.
Climentum’s operations are spread across three core northern European hubs in Denmark (Copenhagen), Sweden (Stockholm) and Germany (Berlin), supported by a combination of Nordic pension funds and European-based conglomerates. This includes the venture capital arm of chemical giant BASF, which sees Climentum as a conduit for achieving its own climate-focused goals.
“We are backed by BASF who sees us as a strategic investment to move closer to decarbonization goals, and a source of information to guide corporate strategy in the next decade,” Perno continued.
Perno was also keen to stress that two of Clementum’s founding general partners are female (one has yet to be officially announced), which he sees as a positive discrimination factor in a male-dominated industry.
“We are 40% female, which is good as in the industry – [it’s] Perno explained, “We are still not completely equal, but we will continue to advance our gender equality agenda.
Climentum has currently secured about half of its €150 million target for its first closing, but expects to close the fund entirely by the end of the year. In the longer term, it is looking to make around 25 investments across Europe from the initial late stage to the first stage, with single figures ranging from around €1 million to €5 million. The six primary focus categories that Climentum will target for CO2 reduction will be next-generation renewables; food and agriculture; Industry and Manufacturing Buildings and Architecture. transportation and mobility; waste and materials.
Clementum said it is already close to finalizing three investments that are currently in the due diligence phase, which focus on material recycling, alternative protein production and insect breeding.
So far, so good. But in a field teeming with climate-conscious investors and a seemingly insatiable appetite for startups promising to help fix the planet, Climentum is touting strict thresholds in terms of How The team benefits financially from their collective investment. In essence, it has to overcome two strict hurdles as part of what it calls a “dual” investment model.
“The first hurdle is financial with a target of a competitive return of three times over the life of the fund,” said Perno. “Second [hurdle] he is [climate] Impact hurdle with an ambitious CO2 emissions reduction target, which will be measured at the portfolio level at the end of the fund.”
In other words, Climentum measures success not just on how much return they get to their supporters, but how much their investments impact their climate goals.
It is also important not to lose sight of the strategic locations that Climentum focused on. The company will not just go Where policies and attitudes toward green technologies are among the strongest anywhere else in the worldbut also where there is already an important climate-focused emerging tech community.
“Sweden, Germany and Denmark are among the top five countries in the world in terms of advanced environmental regulations and public mandate to accelerate the green transition,” Berno explained. “[And] The three capitals are some of the most active startup hubs in Europe, with a disproportionate number of climate technology startups.”
Climate of change
It is also worth looking at the file timing From the launch of the Climentum Fund, which looks very good from myriad points of view. With the war in Ukraine increasing pressure on energy markets, and many countries trying to reduce their dependence on Russian gas, this bodes well for “alternative” energy sources, as well as technologies that promise to help countries reduce their energy consumption. Moreover, supply chain issues cause trouble Lack of food such as proteinWhich puts startups focused on insect farming, for example, in a strong position.
Moreover, the The broader economic downturn also puts investors like Climentum in a good position, including on terms they may now be able to agree with the startups.
“The current economic slowdown has halted the euphoria in the venture capital market and caused a significant drop in startup valuations and published amounts,” Pernod said. “As an investor, we are the liquidity provider to a market that desperately needs more liquidity to continue financing fast-evolving innovation.”
When everything is gathered together in a giant melting pot, it seems clear that now is as good a time as ever for climate tech startups to thrive. There is a demand from consumers and businesses alike, while governments create policies that make green philosophies at the community level much more than a “beautiful thing” – any business that wants to operate in today’s world needs to take its climate responsibilities seriously.
“Climate technology companies that have a real solution to some of the world’s biggest problems already have pent-up demand from consumers, businesses and governments,” Perno said. “This phenomenon justifies some high valuations that will be inflated by the demand for acquisitions from companies desperate to meet 2030 emissions targets. “