Green Growth Venture Capital Funds Surge in Europe Amid Climate Tech Boom

The importance of green growth venture capital funds in Europe is on the rise, with a surge in large funding rounds for climate tech startups in the first quarter of 2024. According to recent data, Q1 2024 saw the highest number of funding rounds over €100 million for climate tech companies since Q2 2022, signaling a growing interest in sustainable investments.

Climate tech startups are increasingly turning to innovative financing options, such as debt vehicles like asset-backed securities, to fund their hardware supply. However, despite the growth in private investments, state support for deeptech in Europe still lags behind the United States and Asia, as noted by the co-founder of Planted, a sustainability startup.

Regions outside of Spain's major tech hubs are also showing promise in the sustainability sector, with the Basque Country, Valencia, and Málaga demonstrating innovation in green technologies. Additionally, startups in Germany, the United Kingdom, and France have emerged to address the labor shortage in green energy installations, offering solutions to support the growing demand for renewable energy infrastructure.

Several notable investments and initiatives have taken place in the green growth venture capital space. Caret Capital and Ev2 Ventures have launched a new $50 million India-focused fund called Caret Capital Fund II, which will invest in early-stage Indian startups across the mobility, distribution, and employment sectors. The Green Climate Fund (GCF), the world's largest dedicated fund for helping developing countries respond to climate change, has a mandate to maintain a balance between mitigation and adaptation investments, with about 34% of its portfolio committed to Asia.

Major oil companies are also diversifying their portfolios to include renewable energy technologies. Chevron Corporation's venture capital arm has launched its third $500 million, fund to invest in technologies such as fusion, direct air capture, and battery storage. This move comes as oil companies face pressure to reduce emissions and transition to cleaner energy sources.

Why this matters: The surge in green growth venture capital funds and investments in climate tech startups highlights the growing importance of sustainable technologies in addressing climate change. As Europe aims to meet its Paris Agreement targets and transition to a low-carbon economy, these investments will play a crucial role in driving innovation and scaling up climate solutions.

Despite the overall growth in green investments, the solar funding and financing sector experienced a decline in Q1 2024 compared to the previous year, with total corporate funding decreasing by 4% year-over-year. Venture capital investments in the solar sector also saw an 81% decline, reaching $406 million in 13 deals. Market conditions such as higher interest rates, inflation, trade disputes, tariffs, and cheap Chinese module prices have contributed to the slowdown in solar investments.

Key Takeaways

• Green growth VC funds in Europe surge, with record climate tech funding in Q1 2024.
• Climate tech startups turn to innovative financing like debt vehicles to fund hardware supply.
• Regions outside Spain's tech hubs show promise in sustainability, with Germany, UK, France addressing green energy labor shortage.
• Caret Capital and Ev2 Ventures launch $50M India-focused sustainability fund, GCF maintains balance between mitigation and adaptation.
• Solar funding and financing declined in Q1 2024 due to market conditions like higher interest rates, inflation, and cheap Chinese modules.