Executive Summary

The ClimateTech industry is set to grow threefold, reaching a market size of EUR600bn by 2030. However, Europe’s position in this emerging market cannot be taken for granted – without further efforts, Europe is likely to lose the race against the US and China.

The mismatch between reality and expectations is alarming. To reach its own climate targets, Europe needs to increase its annual investments in ClimateTech to the tune of EUR140bn in the public sector and EUR560bn in the private sector, compared to the last decade. The current investment gap in the European energy sector alone is as high as EUR200bn per year, with EUR40bn and EUR160bn of missing public and private funding, respectively.

Investments in ClimateTech start-ups by venture capital and private equity have boomed in the last few years, reaching almost USD100bn in 2022 worldwide; Europe accounts for around 30% of this. However, funding of sub-sectors is rather uneven: The sectors with the highest emissions (particularly manufacturing, the agrifood sector and the building sector) – and therefore the greatest potential to decarbonize – do not receive the most funding (which goes into the energy and transport sectors).

Beside funding and subsidies, there is a long list of measures that would improve conditions for Europe’s ClimateTech industry: reducing red tape, clearing the jungle of funding schemes and streamlining application processes; updating procurement policies to favor start-ups; increasing collaboration between investors and universities building research ecosystems; facilitating the use of institutional capital for ClimateTech investments and improving capital market conditions.

It is not too late for European policymakers, investors and scientific institutions to speed up. But fast, targeted and impactful measures are required to create an environment for European ClimateTech to thrive and become global category leaders. The time to act is now.

Arne Holzhausen

Allianz SE

Markus Zimmer

Allianz SE