Fintech — traditionally Europe’s best-funded sector — hasn’t been immune from the recent downturn. The sector raised $2bn in the first quarter of this year, just a fifth of what it managed in the same period a year ago. But there’s one subsector that investors say may 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 €144m across 24 startups, according to Dealroom data. On an annualised basis, that would suggest 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 — with $1.4bn — despite an overall dip in VC investment.
The UK led the way for funding, with six companies drumming up €64m, boosted by carbon credit exchange Carbonplace’s €41m seed round. Denmark came in second, but has just one startup to thank for its silver: Agreena. The farmer incentivisation startup raised €46m, the highest climate fintech round of the year so far.
The rise in climate fintechs comes as climate investment more widely 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% dip in funding seen across the continent’s tech sector overall last year.
Why are VCs interested in climate fintechs?
Sustainability is at the forefront of everyone’s minds now, and investors are no different — even if the attention is a result of LP pressure to add impact investments to the portfolio. Lorenz Hering, senior associate at German VC CommerzVentures, says that to meet these quotas, budding solutions require “substantial investments on a massive scale”, but that the first step to reach the global target of keeping global warming below 1.5C is “establishing efficient mechanisms to channel investment”.
One such mechanism, he suggests, is the voluntary carbon market, which allows carbon credits to be traded (as opposed to the mandatory credits imposed by bodies like the EU) — but currently, that sector faces issues of “greenwashing, limited transparency, extensive fragmentation, and formidable access barriers”.
Companies that manage to solve these issues and sidestep any dubious dealings, therefore, are gold for VCs — because, as Hering highlights, they “have the potential to become highly valuable enterprises”.
11 climate fintechs that have raised VC funding in 2023
What: Financial incentives for farmers to adopt carbon-friendly practices
Last raised: €45.5m 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)
Agriculture is responsible for almost a third of global greenhouse gas emissions — but for farmers, adopting new environmental practices incurs extra costs. Agreena’s platform helps farmers plan and track their green transitions — once the company has verified that changes have been made and impact has been actioned, the farmers are issued carbon credits. Agreena then helps them sell those credits to voluntary carbon markets as a revenue stream.
What: Blockchain-enabled carbon credit transactions
Last raised: $45m 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.
What: Carbon credits marketplace
Last raised: $13.5m early VC round
Who invested: Azora Capital
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 offered and external risks that projects might face.
What: ESG reporting software
Last raised: €6m debt
Who invested: Euroclear
Companies, investors and lenders alike have to report their sustainability and ESG performance. As an alternative to doing this process in-house, Greenomy handles the measuring and reporting of ESG data, and deciphers which European Sustainability Reporting Standards (ESRS) apply to each company.
What: ESG measuring and reporting platform
Last raised: €5.2m 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 offers an automated platform for VC and PE fund managers to track the environmental performance of portfolio companies, and for companies to prove those metrics to stakeholders. It also incorporates leading global frameworks into its data collection to ensure compliance with regulations.
What: Climate tracking for transactions
Last raised: $5.6m 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 of every 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.
What: Payments provider that finances environmental projects
Last raised: €5m seed round (which includes €2m in crowdfunding)
Who invested: Pale Blue Dot
An alternative to traditional banks which often finance fossil fuel companies, French payment provider Green-Got partners with impact and environmental projects for a more eco-friendly banking experience. Users can track their carbon impact on the app alongside normal banking functions by measuring the CO2 saved by the projects financed by their money.
What: Insurance for carbon removal solutions
Last raised: £4m seed round
Who invested: Octopus Ventures, Insurtech Gateway, Hartree Partners, Chaucer Group and Carbon13
Kita provides 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 under-performance of credits — if a company buys a carbon credit but doesn’t deliver all of the carbon it paid for, Kita’s insurance would pay out for the loss.
What: Carbon accounting for industrial companies
Last raised: €4m 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 analytics on where emissions can be reduced, overviews of emissions over time or locations and lets companies track decarbonisation progress.
The Climate Choice
What: A platform to decarbonise companies and supply chains
Last raised: $2m 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 supply chain emissions, and the Climate Performance Assessments produced highlight any potential risks or opportunities to reduce impact on the planet and fall in line with international regulations.
What: Investment platform for sustainable portfolios
Last raised: €2m 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 limits and risk levels. The platform then calculates the impact of a user’s investments, whether through the CO2 saved, gender equality achieved or healthcare progress made.