How Is Covid-19 Impacting Greentech Investment?

The economic cost of the Covid-19 restriction measures which countries implemented worldwide has been severe. The IMF’s World Economic Outlook paints the picture in bleak terms: the global economy is set for a 4.9% contraction - signalling a recession much worse than the 2008 crisis.

For entrepreneurs, startup founders fighting to get their business into full swing, and investors, this is daunting news indeed. At all levels, the industry is seeking answers to the million-dollar question: how is the current predicament impacting the greentech landscape? 

Like many other sectors, greentech has witnessed its fair share of losses. In the U.S., the renewable energy sector is licking its wounds after 600,000 jobs were slashed since the pandemic hit. 

But there’s a very different mood at play in Europe, where the EU has hit back against the economic climate with a renewed determination to drive the green agenda. Its ambitious green recovery package pumps resources into a clean comeback like never before, heralding the creation of a million green jobs.

In the U.S., Donald Trump has chosen to cut green economy protections, while China gives the world mixed signals as to just how far and how much it intends to back the green transition. 

In short: the outlook for greentech investment and sector growth is dramatically different depending on where you are in the world. 

Sarah Nolet, Co-founder of Australia’s first agrifood tech venture capital firm, Tenacious Ventures, explained in April that fundraising had become “tough for startups” because “investors are focused on their existing portfolio companies and making sure they have enough money. They’re playing things out and focusing on what they need to do to survive. So investors are distracted, to say the least.”

Meanwhile, in Germany, Samuel Beck, Investment and Development Manager of Pacifico Energy Partner - an investment firm which focuses on European wind and solar enterprise, said that “renewable investment portfolios have turned out to be extremely resilient in the face of COVID-19. 

“A great example is that our strategic partner company, Pacifico Renewables Yield AG, a new and rapidly growing IPP, has successfully closed a €17.5 million capital increase in April 2020 despite a volatile market environment. Most portfolios have bounced back quickly after the initial shock and have now gained in value compared to pre-Covid-19 levels.”

And while the U.S. solar industry takes a nosedive, within Europe, Beck has witnessed “an increasing number of floating solar projects realized in the market.

 Amidst the Covid-19 turbulence, Beck says, there are also some positive signals coming from the market: “Latest developments point towards a recovery in the greentech investing space. Investors are increasingly deploying bi-facial solar modules which yield higher returns for their portfolio,” Beck says.

“Recently, Zero Mass Water raised $50 million in new funding from BlackRock amongst others. The startup creates solar panels that generate pure, drinkable water instead of electricity.”

“In the long-term, land scarcity will inevitably push investors towards developing large scale PV and wind projects in the deserts and open sea. It is in this context that I see the potential for green hydrogen as a medium of energy storage and transportation.”

Beyond solar and wind, there’s evidence that startups of all shapes and sizes continue to attract substantial investment.

Investors remain bullish on the electric vehicles (EV) market: managed-fleet charging specialist Amply raised $13.6 million, and HEVO Power raised $5.5 million to develop an EV wireless charging pad. 

 Apeel Sciences achieved unicorn status with a $250 million funding round. The Californian startup uses a plant-based solution to add an extra “peel” to the surface of fruits and vegetables to extend shelf life - potentially signalling a long-awaited solution to plastic-wrapped groceries.

Nolet explained that while the pandemic “may speed up the adoption of autonomous technologies,” some trends “may or may not stick around long-term, such as people cooking more at home, eating healthier, and buying more local food. But those are great opportunities for sustainability-oriented entrepreneurs.”

The optimistic view, she says, is that “current trends could catalyze a transition into using more renewables and greener technologies.” 

The global economy has taken a beating. Many greentech jobs have been and are likely yet to be lost, and some startups are finding it significantly more challenging to gain the traction needed to take off. But a wide-angle lens offers plenty of reasons to be cheerful. Fuelled by the urgency of the climate crisis, the impetus set by global governments and business and the dedication of community organizations: the green revolution has already snowballed. And while a lot may hinge on upcoming U.S. elections, around the world, the green new deal gathers pace.