Sustainability Landscape 2022
Introduction
Six of Germany’s leading VCs - Acton, Ananda Impact Ventures, Planet A, Plug and Play, Speedinvest and UVC Partners - have joined forces with the Climate Club of the CDTM to create the Sustainability Landscape 2022.
Together we created a roadmap designed to showcase the most promising areas for investment over the next decade in the area of sustainability, impact and climate, and highlight start-ups working on breakthrough solutions. We hope that it will provide inspiration and guidance to entrepreneurial students, founders, and other investors.
Methodology
Based on the European Green Deal, we have mapped out seven sustainability verticals. For each vertical, the investors identified those sub-categories in which they expect innovative throughputs. We then sorted them as short-term (1-2 years), mid-term (3-5 years) and moonshot (>5 years), based on the time the solutions or products will be at their maximal scalability potential, and hence an interesting investment opportunity for VCs. A selection of Europe-based start-ups accompanies each sub-category.
However, we do not style ourselves as having a crystal ball. We believe the value of the Sustainability Landscape is to set out what might be possible over the next decade. With time ticking away to reverse global CO2 emissions and halt the climate crisis, it is crucial that action is taken in the present as well as in the years ahead. As such, both scalable short-term solutions and moonshot opportunities are of equal importance.
Our Sustainability Landscape 2022 displays each Green Deal category based on its impact potential measured in CO2 emissions, with data sourced from PWC’s 2021 climate tech report. For each sector, we have chosen the three most promising categories and selected exemplary start-ups in each category that excite us today.
This overview is not pulled out of thin air, but was informed by a deep dive in each category, showing the investment areas, timeline, and most promising start-ups in each space. Sub-categories that are empty indicate those areas we believe have potential for innovation to come and entrepreneurs of tomorrow to get active.
However, having identified many incredible teams working on sustainable solutions, we also wanted to share our start-up longlist via an Airtable database.
Please bear in mind that these conclusions are inevitably subjective. We know that there are many more great purpose-driven innovators out there who have not been mentioned. Feel free to give us a heads-up on the ones missing!
If you want to be part of the long list (and potentially be highlighted in our Sustainability Landscape 2023), please click here.
Investment hypotheses
Food, Agriculture and Forestry
Since Food, Agriculture and Forestry are naturally conservative sectors, sustainable solutions offer huge possibilities. How we engage with our environment and what we eat will be re-defined.
Our investment hypothesis is driven by:
#1 Carbon removal
- Agritech & forestrytech offer high remediation potential with new natural carbon removal technologies and regenerative farming methods (38% of all land is used for agriculture and 31% for forestry) (carbon capture technologies are specified under remediation)
- Open space for enabling technologies and approaches such as monitoring & tracking systems based on advanced technological approaches eg. computer vision using satellites for forestry health improvements
#2 Alternative proteins
- In the food, agri and forestry space, we see the highest activity in the alternative protein subsegment
- Broad range of technological approaches with different levels of technological readiness
- Ranging from scaling plant-based approaches to rather long-term technologically and research-intense new products
- Trend: away from substitution to actual protein cultivation
#3 Alternative packaging and circular economy
- Need to reduce wasteful packaging addressed through reusable packaging, recycled or biodegradable materials
- Circular economy is taking first steps through reusable packaging solutions
- Many public initiatives regarding waste reduction open up space for alternative solutions
- Recycling and biodegradable materials compete regarding long-term prevailing impact based on ability to achieve technological mass scalability
Mobility and Transport
Mobility, transportation and logistics account for around 16% of global Co2 emissions. With the further growth of global supply chains and e-commerce, emissions from logistics are bound to increase unless technological solutions help to mitigate this growth.
Our investment hypothesis is driven by:
#1 Personal mobility
- Main scepticism from consumers apart from the price of a new EV remains maximum driving range
- Charging infrastructure needs to be increased massively. Currently, there are only 330,000 chargepoints in the EU, compared to an expected 40m EVs by 2030
- There are many technological solutions to connect chargers from different providers and make the interaction as seamless as possible – however, the EU is lacking in installations
#2 Last mile & urban logistics:
- Last mile logistics account for 30-50% of delivery costs of B2C parcels and is a major driver of carbon emitted in logistics. Making the last mile more efficient is both an economic and ecological imperative
- Make delivery more sustainable by introducing low carbon modes of transportation for last mile logistics such as EVs, e-bicycles etc.
- Reduce mileage through better routing, higher delivery rates, bundling routes etc.
- Reduce the footprint of urban personal mobility by increasing use of public transport and shared (micro-) mobility
#3 Long-distance transportation
- Hydrogen technology could be key to making trucking & shipping more sustainable, though more R&D is needed in this area
- EU introduced an obligation to increase the share of sustainable aviation fuel used from 2025 onwards
- Multimodal transport can increase sustainability by combining various modes such as trains, trucks & ships. However this requires further digitization of logistics
Energy
Generating energy for residential homes, industry, transportation etc. accounts for around 73% of global CO2 emissions. Decarbonisation of energy production, storage and transportation is one of the key bottlenecks for a net zero economy.
Our investment hypothesis is driven by:
#1 Solar energy:
- In order to reach the goals set by the European Green Deal, the EU needs to increase its solar energy production from 160GW to 870GW by 2030
- According to Lazards’ levelized cost of energy calculation, solar energy is already cost-competitive with conventional generation methods such as gas, coal and nuclear (min $29/kWh vs. min $65/kWh for coal)
- The main bottlenecks currently are sourcing solar panels (80% of solar panels are built in China), finding suitable areas for installation (rooftops or underutilized land area) and maintaining existing assets to keep optimal performance levels
#2 Energy storage:
- Renewable energy sources such as wind and solar are often subject to fluctuations (daytime/night time, summer/winter). Energy must be storable with minimal waste in both the short- and long-term
- There are various storage technologies (lithium-ion batteries, flywheels, heat storage, pumped-storage, hydrogen etc.), each with its set of advantages, disadvantages and different technological readiness levels
- Lithium-ion batteries have become ubiquitous mainly for short-term and limited capacity storage use cases. However the efficiency and sustainability of these batteries can still be increased by improving the longevity of batteries and developing end of life/recycling solutions
#3 Hydrogen:
- Converting sustainable energy into hydrogen could play a major role in the future by making fluctuating energy production plannable, transportable and enabling long-term storage
- Hydrogen could also play a huge role in decarbonizing logistics as it can be transported and used as a fuel in large vessels such as ships and trucks
- Currently, the conversion from energy to hydrogen and back is quite inefficient and thus not economically viable. More research and investments need to be done in this area
Water & Waste
Water is a resource humans cannot live without. However, by 2025, half of the population might not have sufficient access to clean water. Additionally, more waste is produced every year which pollutes our seas, landscapes and cities. Finding solutions to manage these issues will be essential.
Our investment hypothesis is driven by:
#1 Waste management & sorting
- Waste management is a $2.1 trillion industry with inefficiencies that have an environmental and financial impact
- Out of 2 billion tons of solid waste, only 13% is reprocessed and less than 0.1% is audited
- To increase this percentage and automate the process, start-ups are leveraging machine vision and deep learning models to efficiently sort, audit and manage waste
#2 Chemical recycling
- Globally, around 250 million metric tons of plastic waste are generated annually, of which only 20% is recycled
- Chemical recycling processes can increase overall recycling rates and significantly reduce energy rates
- Significant developments are depolymerisation (or chemolysis), where plastic waste is broken down into monomers to be fed back into plastic production, and conversion (or hydrothermal), where mixed plastic waste is broken down into oil- or gas-like feedstock that is then used to produce chemicals including plastics
#3 Desalination
- As 97.5% of available water is salt water, effective desalination will be essential to deal with our water crisis. Today, the process of removing salts and other materials from salt water to produce freshwater requires a high consumption of energy, making it expensive and environmentally harmful
- New technologies are being tested including electro-chemical-, forward osmosis-, and membrane distillation-desalination, which all have scale-up potential because they reduce energy and operational costs
Remediation
Remediation efforts touch upon all other industries and origins of carbon emissions, because the focus is on reducing, offsetting or sequestering emissions. For example, reforestation or regenerative agriculture projects offer the potential for carbon credits, sequestered carbon can be used in the building industry etc. These innovations and the companies pursuing them could therefore have an industry-spanning impact.
Our investment hypothesis is driven by:
#1 Carbon data management tools:
- Currently, the highest investment activity is in software solutions to capture, calculate and report carbon-related data
- A broad set of solutions exist that enable Scope 1 & 2 emission tracing and other regulatorily required data, trending towards more automation
- Importantly, there are increasingly more solutions for Scope 3 emission tracing of the whole supply chain
#2 Automated offsets:
- As emission data becomes more available, automated and mostly transaction-based carbon offsetting affects an increasing number of industries
- The initial spark of this trend has clearly been in e-commerce and retail, but it could also spread into heavy B2B industries
- With carbon offsetting being a valuable short-term solution, automated offsets will greatly increase potential impact until we are able to reduce emissions and sequester carbon more efficiently
#3 Carbon sequestration and direct air capture:
- Capturing emitted carbon at source and storing it (carbon sequestration) as well as direct air capture (DAC) can have a substantial impact in the years to come
- Carbon sequestration is still mainly in the development phase to ensure environmentally acceptable, safe, verifiable and economically viable solutions. Slowly, a number of projects are being launched to market
- Direct air capture is still in the large-scale and prototype phase, is not yet ready for full commercial deployment, and remains very costly. Nevertheless, investment inflow is increasing because DAC will play an important role in future decades
#4 Regenerative economic systems:
- In the hopefully not so distant future, new (market-based) incentive systems could help realign our economies
- Treating our natural resources as assets could lead to new "natural resources-backed" currencies that drive demand for carbon credits
- Internalising external effects could lead us to "truer" and more transparent prices
Construction
In terms of its impact potential, construction and real estate is a heavily underfunded sector. While the construction industry is responsible for over 20% of global emissions, it only receives 4% of all climate tech investment. Start-up activity is focused on a few sectors with comparatively little investment going into hardware-driven models.
Our investment hypothesis is driven by:
#1 New buildings:
- Early design choices have a large impact on CO2 emissions. Driven by regulation, low carbon design is a huge lever for reducing embodied carbon emissions
- Automated construction and prefab offer promising pathways to deliver affordable and sustainable houses at scale
- Climate risk analytics is becoming increasingly important as large asset managers want to assess the climate-related risk profile of their portfolios
#2 Existing buildings:
- New EU energy efficiency norms put pressure on 35-40M buildings until 2030, which offers a big opportunity for serial renovation and retrofitting actions such as insulation
- Managing heating, ventilation and air conditioning (HVAC) is moving on from analytics to automation and optimisation, offering large potential for energy savings
#3 Building materials:
- Cement is responsible for 8% of global greenhouse gases. Increasing the efficiency of cement production, sequestering CO2 in cement, and developing cement alternatives are all promising pathways for addressing this issue
- Timber-based construction and bio-based materials are also promising pathways in the longer-term
Manufacturing and Industry
Manufacturing generates 30% of global anthropogenic CO2 emissions, with the top three emitting industries – iron & steel, non-metallic minerals (cement, glass, lime), and chemicals & plastics – accounting for 70% of these. There is a high correlation between energy consumption and production across the mentioned industries, and often electrification will not work on a large scale.
Our investment hypothesis is driven by:
#1 Digitization
Without adopting "smart manufacturing" practices, hard-to-abate industrial sectors will not be able to reach their emission reduction targets. Therefore, digitization and sustainability are interlinked
- Companies integrating digital and sustainable transformations into their operations and value chains are 2.5x more likely to be among the best-performing businesses in the future than those that don’t
- Every aspect is part of the digital strategy e.g. optimising energy and resource use, improving supply chain management, and allowing for differentiation of products based on environmental attributes
#2 Product-as-a-service
● To ensure competitiveness, manufacturers must rethink their business model, their value proposition and their operational efficiency
● Besides more predictable revenue streams and increased customer loyalty, product-as-a-service business models excel through a more client-focused value perspective and improved product uptime, and thus, resource efficiencies
#3 Green chemistry and synthetic biology
- Green chemistry and synthetic biology technologies are on their way to becoming a disruptive force for manufacturing and industry, and are expected to be used extensively by the end of the decade
- Start-ups in the area are focused on engineering new products and processes, and enhancing existing ones across a broad spectrum of industries
- Using this new method of manufacturing, products will require fewer resources, dispense with fossil fuels, while being more durable, healthier, cost-effective and scalable.
About the participants:
Acton
Acton Capital is a leading international growth capital provider based in Munich. Since 1999, the Acton team has been investing in technology-driven business models in Europe and North America in areas such as HealthCare, Future of Work, FinTech, Platforms, Digital Marketplaces, and Software-as-a-Service. The team has successfully invested more than €700 million in almost 100 startups worldwide and supported companies such as Etsy (US), HomeToGo (GER), Mambu (GER), and AlphaSights (UK) on their way to becoming global market leaders.
Ananda Impact Ventures
Ananda Impact Ventures is the leading impact venture capital fund with a pan-European investment remit, managing ca. €200 million in four Core Impact Funds, with backing from notable institutional and private investors. Ananda backs technology businesses committed to having a positive impact that answers the most pressing social and ecological challenges of our time, in a way that is both scalable and sustainable. The active portfolio includes Klim (Carbon Farming), Open Bionics (bionic prostheses for children), IESO Digital Health (online psychotherapy) and Ororatech (which uses satellite technology to combat forest fires).
Let’s drive more impact, together. At Ananda, we are always looking for exceptional founders creating the game-changing impact companies of tomorrow.
Planet A
Planet A is an investment fund partnering with European green tech start-ups that have a significant positive impact on our planet while building scalable businesses globally. Our mission is to contribute to an economy within the planetary boundaries. We support innovation in four key areas: climate mitigation, waste reduction, resource savings and biodiversity protection. First in the European VC world we offer scientific impact assessments to support our investment decisions and empower founders to manage and improve their impact. A wide network of experienced founders and experts support our portfolio companies. Investments include Traceless, Ineratec, C1, GoodCarbon and Makersite.
Plug and Play
About Plug and Play: Plug and Play is a global innovation platform. Headquartered in Silicon Valley, we offer corporate innovation services, and an in-house VC to make technological advancement progress faster than ever before. Since inception in 2006, our programs have expanded worldwide to include a presence in over 30 locations globally, giving startups the necessary resources to succeed in Silicon Valley and beyond. With over 30,000 startups and 500 official corporate partners, we have created the ultimate startup ecosystem in many industries. Companies in our community have raised over $9 billion in funding, with successful portfolio exits including Danger, Dropbox, Lending Club and PayPal.
Speedinvest
Speedinvest is a leading early-stage venture capital firm with more than €1bn AuM and 40 investors based in Berlin, London, Munich, Paris, and Vienna. Our dedicated sector-focused teams are the first to fund Europe's most innovative technology startups and our in-house operational experts are on-hand to offer founders ongoing support with growth, HR, market expansion, and more. Wefox, Bitpanda, TIER Mobility, GoStudent, Wayflyer, Open, CoachHub, Schüttflix, TourRadar, Adverity, and Twaice are among our portfolio of 250+ companies.
UVC Partners
UVC Partners is a Munich- and Berlin-based early-stage venture capital firm that invests in European B2B startups in the areas of enterprise software, industrial technologies, and mobility. The fund typically invests between € 0.5m - 10m initially and up to € 30m in total per company. Portfolio companies benefit from the extensive investment and exit experience of the management team as well as from the close cooperation with UnternehmerTUM, Europe’s leading innovation, and business creation center. With over 300 employees and more than 100 industry partners, UnternehmerTUM can draw from many years of experience in establishing young companies. This cooperation enables UVC Partners to offer startups unique access to talent, industry customers, and other financial partners.
CDTM
The Center for Digital Technology and Management (CDTM) was founded in 1998 by Ludwig-Maximilians-Universität and Technische Universität München and is an institution for interdisciplinary teaching and research. The CDTM is a member of the Elite Network Bavaria and a center for innovative teaching, applied research, and entrepreneurship with about 75 active students and more than 900 alumni. It offers postgraduate studies at the intersection of digital technology, management, and entrepreneurship. From a pool of more than 300 interdisciplinary applicants, up to 25 highly qualified and ambitious students are recruited each semester for the additional study program, "Technologist Management", at the end of which they receive an honors degree.
