Ideas for investing in a greener world

What roles do investment and entrepreneurship have in the future of renewable energy and how do we overcome the conflicts at play? Discussing these issues with Esade sustainability experts Davide Rovera and Suzanne Jenkins were Marc Miralles (head of sustainability at Suma Capital), and Greentech co-founders and COOs Alfredo Saenger (Electrogenos Ltd) and Alba Forns (Climatize) during a panel at 4YFN. 

The struggle for investment

Forns kicked off the discussion by explaining why small startups can struggle to secure capital. US-based investment platform Climatize has raised over $2.3 million for smaller projects, with clients able to invest as little as $10. Investors range from climate-conscious university students to pensioners who want to diversify their portfolios.  

“Small projects really struggle to raise capital,” she explained. “Banks would rather go for a $100 million portfolio and earn a percentage on that rather than spend time on a deal that’s worth maybe half a million or $5 million. We give smaller projects — a lot of them sourced through a partnership with the US Department of Energy — an opportunity to raise that capital at very flexible terms.”  

The liquidity crunch and very niche nature of the technology mean investors require a lot of assurance

Saenger, whose company Electrogenos focuses on making green hydrogen more efficient and cost-effective, added a producer’s perspective. The liquidity crunch and very niche nature of the technology mean investors require a lot of assurance, he said – particularly when it comes to start-ups.  

“The good news is investors are committed to green energy, but they require a lot of analysis and due diligence,” he said. “I have to invest a lot into very detailed validations of technology before I can even start conversations.”  

Be flexible but firm

Another issue Saenger faced was the differing requirements of investors. As well as the transfer of technology involved by investors sending in their own expert assessors, they often want a say in the business model.  

“Investors have their own idea on what you should do, whether it’s manufacture and sell our technology, or become hydrogen producers ourselves, or develop a co-financing model,” he explained.  

Investors send in their own expert assessors, who often want a say in the business model

While he agreed investors should pressure founders to validate their technology, he stressed the importance of setting boundaries. “Founders need to understand what they're doing. It has to be a balance.”  

Viable investments

Speaking as an investor, Suma Capital’s Miralles took up Saenger’s point. The Barcelona-based company manages sustainable investments worth around €850 million.  

“When we evaluate the models and opportunities, we really need to understand how the business is going to be profitable and return the capital invested,” he agreed. “That includes the viability of the opportunity, the scalability, the potential interest it’s going to have for investors, the returns it's going to bring and how long it's going to take those returns to materialize.”  

The amount of sustainable impact funds are growing on a double-digit scale year by year

Another issue for asset managers, Miralles added, is the differing requirements of public and private investors, each of whom have their own priorities.  

“Private wealth investors want to commit capital, get a return and generate a positive, long-lasting impact,” he said. “But we also have public investors such as the European Investment Fund or the regional investment institutions that want to promote the impact of sustainability on their regional economies.”  

Despite the difficulties, Miralles stressed the market is growing: “The amount of sustainable impact funds are growing on a double-digit scale year by year,” he said — not least because savvy investors are looking beyond short-term financial returns and embracing long-term opportunities.  

Global competition

The panel acknowledged that national differences in attitudes and regulations can be an issue, but Forns believes we can learn from both approaches.  

“In Europe, the problems I had with regulation when I entered the market have changed and enabled us to expand across borders,” she said. “And in the US, they’re giving public funding to companies that need to scale. Neither approach is perfect by any means, but they’re learning from each other and making progress.”  

Europe's problem is that, although it has the intention and the funds, it does not have the infrastructure

As a producer of technology, Saenger offered an alternative view: “I think that the problem with Europe is that we do have the intention and the funds, but we don't have the infrastructure,” he explained. “There’s a lot of bureaucracy, so unless you come from academia and have a salary and a job while you're working on these very big, very lengthy applications, it's very difficult, particularly for entrepreneurs.  

“Every country is different and for each one you’re looking at, you have to meet a lot of people and do a lot of work. And that just doesn't happen in America. Ultimately, it should be one market, one regulation.”  

For investor Miralles, this presents a conundrum. As an investor, he suggested, regulations are a positive. “I understand from your point of view,” he said. “But for me as an investor, I don't want to lose my money. If you start in the States, you won’t have much public money but you’ll have less regulation.”  

Develop talent to attract investment

For Forns, the answer lies in a combination of public and private capital with a strong focus on developing more talent. 

“I think it's a little problematic because it's kind of a chicken and egg problem right now,” she acknowledged. “We need a lot of talent, we need a lot of people to go to those higher risk but very high return areas because that's how we would actually move the needle.  

“But then we need public funding and private capital to follow, because without capital we can’t pursue those kinds of solutions.”  

In response, Miralles said: “That’s something that we can solve by bringing in entrepreneurs, by bringing in capital, by making investors more interested in sustainable green solutions.  

“By showing that there’s actually a lot of talent here in Europe, we can support and foster that transition.”