The climate fintechs are getting VC attention
Fintech – traditionally Europe’s best-funded sector – has not been immune to the latest downturn. The sector collected $2 billion in the first quarter of this year, just a fifth of what it managed in the same period a year ago. But there is one subsector that investors say can weather the storm better than others: climate fintech.
So far in 2023, Europe’s climate fintech startups, which tend to offer some form of climate-based risk or accounting software, have raised around 144 million euros across 24 startups, according to Dealroom data. On a year-over-year basis, it would suggest that funding has slowed as much as it has for fintech as a whole, but it comes after the subsector posted a record year in 2022 – at $1.4 billion – despite an overall decline in VC investment .
The UK led the way in funding, with six companies drumming up €64 million, bolstered by carbon credit exchange Carbonplace’s €41 million round. Denmark came second, but only has one start-up to thank for the silver: Agreena. The farmer incentive startup raised 46 million euros, the year’s highest climate fintech round so far.
The rise in climate fintechs comes as climate investment has remained solid despite the global tech rout: European climate tech startups raised 10% more funding in 2022 than 2021, a strong position given the 24% decline in funding seen across the continent’s tech sector overall in last year.
Why are VCs interested in climate fintechs?
Sustainability is at the forefront of everyone’s mind now, and investors are no different — even if the attention is a result of LP pressure to add impact investing to their portfolios. Lorenz Hering, senior associate at German VC CommerzVentures, says that to meet these quotas emerging solutions require “substantial investment on a massive scale”, but that the first step to achieving the global goal of keeping global warming below 1.5C is to “establish effective mechanisms to channel investment”.
One such mechanism, he suggests, is the voluntary carbon market, which makes it possible to trade carbon credits (as opposed to the mandatory credits imposed by bodies such as the EU) – but at the moment that sector faces problems of “greenwashing, limited transparency, extensive fragmentation and formidable access barriers’.
Companies that manage to solve these problems and bypass any questionable trades are therefore gold for VCs – because, as Hering points out, they “have the potential to become very valuable businesses”.
11 climate fintechs that have raised VC funding in 2023
Agreed
What: Financial incentives for farmers to adopt carbon friendly practices
HQ: Denmark
Last raised: €45.5 million Series B round
Who invested: HV Capital, Kinnevik, Anthemis Group, Giant Ventures, Gullspång Re:food, AENU and Denmark’s Export and Investment Fund (formerly Danish Growth Foundation)
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Agriculture is responsible for almost a third of global greenhouse gas emissions – but for farmers, adopting new environmental practices entails additional costs. Agreena’s platform helps farmers plan and track their green transitions – once the company has confirmed that changes have been made and the impact has been made, farmers are issued carbon credits. Agreena then helps them sell these credits to voluntary carbon markets as a revenue stream.
👉 Read more: ‘Farmers’ fintechs’ are turning Europe’s farms into carbon sinks
Carbonplace
What: Blockchain-enabled carbon credit transactions
HQ: Great Britain
Last raised: $45 million seed round
Who invested: UBS, National Australia Bank, BNP Paribas, Sumitomo Mitsui Banking Corporation (SMBC Group), BBVA, Itaú Unibanco, Standard Chartered, Canadian Imperial Bank of Commerce (CIBC) and NatWest
A network for secure global carbon credit transactions, Carbonplace was formed through a collaboration between nine global banks. Its blockchain-enabled distribution technology wants to simplify the process of buying, managing and trading credits.
Abatable
What: Market place for carbon credits
HQ: Great Britain
Last raised: $13.5 million early VC round
Who invested: Capital of Azora
Abatable is a platform for companies to trade, buy and compare carbon credits. It assesses the quality of its credits against a set of requirements, including the measurability of impact, the long-term viability of climate initiatives on offer and external risks that projects may face.
Greenomy
What: ESG reporting software
HQ: Belgium
Last raised: €6 million debt
Who invested: Euroclear
Companies, investors and lenders alike must report their sustainability and ESG performance. As an alternative to doing this process in-house, Greenomy handles the measurement and reporting of ESG data, and indicates which European Sustainability Reporting Standards (ESRS) apply to each company.
Atlas Metrics
What: ESG measurement and reporting platform
HQ: Germany
Last raised: 5.2 million euro seed round
Who invested: Global Founders Capital, Redstone, Cherry Ventures, b2venture (formerly btov Partners), VR Ventures, another.vc, Rivus Capital and angel investors
Atlas Metrics provides an automated platform for VC and PE fund managers to track the environmental performance of portfolio companies, and for companies to prove these metrics to stakeholders. It also incorporates leading global frameworks in data collection to ensure regulatory compliance.
Connect to earth
What: Climate tracking for transactions
HQ: Great Britain
Last raised: $5.6 million seed round
Who invested: Venista Ventures, Global Brain, Portfolio Ventures, Market One Capital, The Norinchukin Bank, Gresham House Ventures, Mustard Seed MAZE, Love Ventures and Super Capital
Connect Earth helps financial institutions embed carbon tracking into their products to help customers understand the climate impact of their transactions. The software can estimate the carbon data for each transaction, offering customers a way to see the impact of their spending and institutions a way to measure the impact of the SMEs they finance.
Green-Got
What: Payment provider that finances environmental projects
HQ: France
Last raised: €5m seed round (which includes €2m in crowdfunding)
Who invested: Pale blue dot
An alternative to traditional banks that often finance fossil fuel companies, the French payment provider Green-Got collaborates with impact and environmental projects for a more environmentally friendly banking experience. Users can track their carbon footprint on the app alongside regular banking features by measuring the carbon savings of the projects funded by their money.
Kita
What: Insurance for carbon removal solutions
HQ: Great Britain
Last raised: £4 million round
Who invested: Octopus Ventures, Insurtech Gateway, Hartree Partners, Chaucer Group and Carbon13
Kita offers insurance for carbon removal solutions. Companies often shy away from carbon credit options because of the uncertainty of getting a return, so Kita covers any potential underperformance of credits – if a company buys a carbon credit but doesn’t deliver all the carbon it paid for, Kita’s insurance would pay for the loss.
Tanso
What: Carbon accounting for industrial companies
HQ: Germany
Last raised: 4 million euro seed round
Who invested: Capnamic Ventures and UVC Partners
Tanso offers the industrial sector an automated platform to manage carbon accounting and reporting. The platform also offers analyzes of where emissions can be reduced, overviews of emissions over time or places and allows companies to track progress in decarbonisation.
The climate election
What: A platform to decarbonize companies and supply chains
Headquarters: Germany
Last raised: $2 million seed round
Who invested: WestTech Ventures, Possibilian Ventures and Gutter Capital
The Climate Choice offers software to assess how ready a company is to adopt climate-friendly practices, and what steps it needs to take to become closer to climate neutral. It also encourages companies to add supplier data to the platform to calculate emissions in the supply chain, and the climate performance assessments highlight potential risks or opportunities to reduce the impact on the planet and fall in line with international regulations.
Grünfine
What: Investment platform for sustainable portfolios
HQ: Estonia
Last raised: 2 million euro seed round
Who invested: Norrsken VC, Lemonade Stand, Sie Ventures, Honey Badger Capital and Specialist VC
Grünfin is a platform for impact investments — users can choose a focus between climate, gender and health and set their own investment frameworks and risk levels. The platform then calculates the impact of a user’s investments, whether through CO2 savings, achieved equality or health improvement.
