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Cleantech investment: a key component for Europe’s sustainable future

24/01/2011

  • Europe
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Young entrepreneurial companies in the clean technology sector require better support to thrive, according to the European Private Equity and Venture Capital Association (EVCA).

In a report published in December 2010, the EVCA identified the critical role of venture capital in delivering Europe’s low-carbon goals and supporting the creation of new jobs. It also outlined the additional support required for entrepreneurial cleantech small and medium-sized enterprises (SMEs).

Europe has been at the cutting edge on the international stage. From electric vehicles to software applications for environmental-quality monitoring, Europe is a leading investor in cleantech. However, maintaining this high level of leadership requires even greater commitment, given the increasing performance of other players, such as in the USA and China. This is where venture capital can provide support to commercialise technologies and create jobs in high-tech growth industries.

The EU has set ambitious targets to reduce carbon emissions, increase use of renewable energy and improve energy efficiency. Meeting these targets requires new businesses and technologies, and intelligent use of capital. Indeed, venture capital is already investing in innovative technologies, services and support infrastructure. In 2009 alone, venture and growth capital investments in Europe totalled more than €1 billion in over 300 European cleantech companies.

Moreover, as the EVCA points out, approximately 85% of the capital required to provide Europe with low-carbon growth came from the private sector. Europe would benefit even more from an effective policy framework allowing for increased and accelerated investment across the full cleantech spectrum.

The EVCA report highlights the following priorities:

  • Use of public-sector finance to launch a multi-annual programme for private sector managed funds of funds;
  • Adopting measures to harness the power of public procurement for SME research and development – public procurement in the EU accounts for 17% of EU gross domestic product (GDP), facilitating the involvement of young entrepreneurial companies would increase their growth potential;
  • Reducing regulatory uncertainty – for instance, the creation of a robust solar-panel manufacturing industry in Germany has been partly achieved through predictable policy mechanisms designed to stimulate demand; and
  • Making the EU 2020 smart growth strategy target for energy efficiency binding – this would help motivate many of Europe’s venture-capital- backed cleantech companies.

Europe’s historical leadership in eco-innovation field gave it an early lead in cleantech investment. Although the sector has rapidly developed over the last decade, there are always new challenges and prospects, with venture capital having a central role.