Startups and Sustainability: trends and insights as told by European investors

The unfortunate reality is that the environmental crisis we are currently living in is not going away anytime soon. As we all try to bring carbon emissions and the planet’s temperature down, sustainability startups and investments are heating up as one of the fastest-growing spaces.

We spoke to European investors across the continent to hear more about their insights into what areas they are watching in sustainability and about which European startups they are most excited about. We are expecting that funding into sustainability startups will reach a record high this year. In 2021, €8.8 billion was invested in European sustainability startups versus in 2020 when €4.7billion was invested. As investors increasingly will be putting money into sustainability, impact measurements will also be an increasingly important component in the investment process.

Amongst the investors we spoke to, they are focused on a myriad of solutions to help different functions within our society with being more sustainable: from foodtech solutions to improve farming practices and reducing meat consumption, production of sustainable materials to produce textiles and packaging, carbon accounting for corporations, to waste management and recycling and more.

So, without further ado, here are the key sustainability trends and insights as told by European investors:

Tim Schumacher, World Fund

“Sustainability is not a trend but something that is here to stay. The IPCC report states that the earth will continue to warm up until 2050 and the consequences will be more severe from year to year. Only solutions that can reduce the concentration of greenhouse gases in the atmosphere will help. That’s why climate tech startups will receive even more funding this year than last because more and more investors will realise that they could be among the most valuable companies of the next decade.”

Tim is most excited about the startups with the highest Climate Performance Potential (CPP):

  • Space Forge (UK) – Looking to lead the clean industrial revolution by harnessing space. They are developing fully reusable satellites that are designed for manufacturing next-generation super materials in space for return to Earth to be used to help move to low carbon technologies.
  • QOA Company (Germany) – World’s first 100% cocoa-free chocolate, it is future-proof chocolate using fermentation processes. 10x more sustainable than conventional chocolate and 20% cheaper than conventional chocolate.
  • JuicyMarbles (Slovenia) – They produce proprietary protein texturing technology that enables them to produce plant-based whole cuts.

Nayreen Akhtar, 2150

“The shift towards sustainability will fundamentally transform industries. Trillions are estimated to be invested into the energy transition to reach net-zero carbon emissions. These investment projections are increasing day by day as the startup ecosystem continues to develop sustainable technologies which will be central to the fight against climate change. Companies will increasingly be held accountable to regulatory standards to ensure that they’re operating with ESG objectives in mind, and from a venture perspective due diligence, risk management processes and stress tests are increasingly commonplace to assess climate risks and enhance governance.”

Some startups that Nayreen is excited about (both 2150 portfolio companies):

  • Normative (Sweden) – Normative is a carbon accounting engine helping businesses calculate their climate footprint and reduce their greenhouse gas emissions while setting a new standard in scientific accuracy in emissions accountancy.
  • Nodes & Links (UK) – Enabling sustainable infrastructure projects to be delivered on time and with less waste.

Adrian Friederich, Astanor Ventures

“As part of an AgriFood Impact VC, I’m clearly biased towards technology supporting the transition of our global food system from an extractive system to a regenerative one. Specifically, we see a lot of promising ventures developing in the precision fermentation, soil quality / carbon sequestration as well as the biomanufacturing space.”

Some startups that Adrian is excited about (the following are Astanor Ventures portfolio companies):

  • Ynsect (France) – Leader in the production of protein and natural insect fertilizers. They process insects into high-end, high-value ingredients for pets, fish, plants and humans. The company got €20 million EU backing in 2020.
  • Infarm (Germany) – Global vertical farming company that revolutionises the food supply chain and helps make cities self-sufficient in their food production. We chatted to the founders in 2018 about their global agtech movement.
  • Notpla (UK) – Sustainable packaging startup. A revolutionary material made from seaweed and plants that biodegrades in weeks, naturally. The company caught our attention in 2021.

And some more startups that Adrian is excited about that are not Astanor Ventures portfolio companies:

  • Einride (Sweden) – They develop and provide freight mobility solutions based on electric and autonomous vehicles. World’s first company to operate an autonomous, all-electric freight vehicle on a commercial route on a public road. Einride also made it onto our list of mobility startups to watch this year.
  • Plan A (Germany) – They developed science-driven certified SaaS platform for automated carbon accounting, decarbonisation, ESG management and reporting, that serves customers across the globe.

Shruti Iyengar, Sustainable Ventures

“Off the back of COP26, an increasing number of companies have been setting targets through the Science-Based Targets initiative to reach their net-zero/climate positive goals for 2050. In addition to regulatory and disclosures-related changes (e.g. the Green Claims Code checklist), is likely to expand the focus from purely tracing and measuring impact across the supply chain, to actually implementing sustainable sourcing strategies and integrating next-gen raw materials into traditional and large supply chains. We’re seeing this upstream in the clothing/textile industry’s increasing focus on regenerative practices (from dyes to fibres), and further downstream in the packaging materials where scalable and affordable bio-based materials are becoming a common alternative to single-use and micro plastic. Another theme we expect to be key this year is decarbonizing transportation – especially with the emissions reduction target set by the shipping industry. Sustainable battery production, zero-carbon fuels, and public transport electrification are likely to gain significant momentum this year across Europe. We are particularly excited about innovations that enable affordable data collection and analysis for decision-making on things like efficient fuel use and route optimization, remote monitoring and adaptive maintenance of fleets, and sustainable vessel selection in shipping.

There also seems to be increasing recognition of the value that lies in our oceans and the blue economy – we’re seeing growth in seaweed and algae-based solutions, sustainable aquaculture, as well as new uses for seafood wastes (e.g biopolymers from shellfish).

Lastly, impact measurement is going to become more deeply embedded in the investing process – not just post-investment – this would include using impact calculation tools for due diligence and portfolio monitoring, implementing lean data collection methods for early-stage companies with limited resources, and potentially even tying GP carried interest calculations to impact targets achieved.”

Some startups that Shruti is excited about (the following are Sustainable Ventures portfolio companies):

  • Biophilica (UK) – Biophilica converts green waste into a leather-like material which is fully recyclable and compostable, with its first alternative leather product range called Treekind™. The leather-like aesthetic and material is non-toxic and contains zero plastic (PU or PVC), and can be used for a variety of product applications, starting with accessories, such as bags, watch straps and wallets.
  • Sunswap (UK) – Sunswap offer a zero-emission alternative to diesel Transport Refrigeration Units (TRUs) with energy prediction, Adaptive Battery CapacityTM and solar power, replacing diesel powered refrigeration.

And some more startups that Shruti is excited about that are not Sustainable Ventures portfolio companies:

  • Grey Parrot (UK) – AI Waste Recognition System is deployed globally on moving conveyor belts in sorting facilities, to automate waste composition analysis to monitor, audit, and sort large waste flows at scale.
  • Matter (UK) – An innovation company pioneering technology solutions for capturing, harvesting and recycling microplastics. Matter began 2022 with a €442k boost
  • Ankeri (Iceland) – provides a cloud-based software platform for ship owners and charterers to manage and share ship data and collaborate for improved performance.

Dr. Nadia Danhash, InnovationRCA. InnovationRCA (IRCA) is the start-up incubation and entrepreneurship arm of the Royal College of Art.

“We invest in very early-stage ventures and we see a lot of quite disruptive ideas for-profit ideas emerging focused on sustainability and impact.   The air quality space, agriculture and food and new materials to replace polluting materials seem to be very hot areas in terms of innovation.  I expect this trend to continue and investment into this space to grow in 2022.”    

Some startups that Nadia is excited about (the following are InnovationRCA portfolio companies):

  • ZELP (UK) – ZELP is working on reducing the environmental impact of the livestock industry methane. Their methane reduction wearable targets cattle methane eructations and exhalations, they have already achieved over 60% methane reduction.
  • Ananas Anam (UK) They are developing, Piñatex, a vegan textile and leather replacement made from the waste leaves of pineapple plants that is being embraced by fashion, footwear, upholstery and car makers alike.
  • Jiva Materials (UK) – They are making a fully recyclable and non-toxic Printed Circuit Board (PCB) that is already being trialled in several household consumer electronic brands’ products. 50 million tonnes of Waste Electrical and Electronic Equipment are produced each year globally, the option of safely recovering precious metals and recycling PCBs from our old gadgets and equipment is very attractive.

And some more startups that Nadia is excited about that are not InnovationRCA portfolio companies:

  • Recycleye (UK) – They are developing intelligent sorting technology to improve waste sorting and the economics of recycling. We also put Recycleye on our list of social impact startups to watch this year.
  • Jollie Socks (UK)They are making sustainable socks. For each pair of socks sold, they also donate a pair to a homeless shelter. They work with FibreLab for localised textile shredding and recycling.

By the way: If you’re a corporate or investor looking for exciting startups in a specific market for a potential investment or acquisition, check out our Startup Sourcing Service!