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Lack of risk-taking is slowing the green transition

Wednesday 08 Sep 21
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Marianne Thellersen
Senior Vice President - Innovation and Entrepreneurship
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This debate post was published in the media Børsen 6. September 2021.

There’s not enough willingness to invest early in green technology, and this is delaying efforts to market sustainable new solutions that can make a difference. To achieve our shared climate goals, we must find a new investment model that promotes bolder investments.

At this year’s People’s Meeting (Folkemødet), I took part in a panel debate titled: “What is Denmark’s next green adventure?” The debate was organized by the pension company PFA, whose representatives listened curiously to the panel’s proposals for tomorrow’s green business adventure: Sustainable construction, green fuels, carbon capture, and climate forests. The many good visions for a more sustainable future rose like balloons from the stage.

But just as I experience on a daily basis in DTU’s collaborations with the financial sector, that day I also noticed that the visions tend to deflate when the talk turns to early investments.

During the debate, PFA’s head of investment, Kasper Lorenzen, acknowledged that there is a lack of risk appetite when it comes to investing early in new green technology. As a consequence, innovative solutions are halted. This prevents us from achieving the next green breakthroughs. Moreover, it delays Denmark’s and the EU’s ambitious targets of reducing carbon emissions by 70 and 55 per cent respectively by 2030.

Urging boldness

When we talk about Denmark’s next green adventure, we must first talk about urging boldness among those who can make the adventure a reality.

Fortunately, there’s plenty of willingness to invest in green technologies. In 2019, the Danish Prime Minister, Mette Frederiksen, announced that, leading up to 2030, the pension industry would invest DKK 350 billion in the green transition from the overall pension assets totalling almost DKK 3,500 billion. Already a year later, the industry had put in the first 50 billion, and several of the major companies were able to reward their customers with a good return.

The signs are good. Nevertheless, we have to look at the figures with some scepticism. If we delve into the specific investments, most of them involve projects with known technologies and safe returns. This applies, for example, to the billion-kroner investment in Denmark’s first energy islands. This is a project based on wind energy that was developed almost 50 years ago. There’s a lack of bold investments in potential green innovations.

The model for early investments, called the venture model, is geared to raise money for quickly scalable companies that provide early returns. This doesn’t match the profile of green startups, which develop over time, which is why the capital companies stay away. The risk is too great.

This means we must develop a new investment model that reduces investor risk. And here businesses can make an important contribution.

Together we’re stronger

Maersk recently invested DKK 150 million in the pioneering Danish company Green Hydrogen Systems, which develops electrolysis equipment for the production of hydrogen for green fuels. With this investment, Green Hydrogen Systems can now expand its production and meet the large demand it’s experiencing—including from the pension industry, which according to the company itself is ‘keen to invest’.

This example shows that early collaborations between large, established companies and small startups can help lift new technology to another level and signal to other investors that the potential is great and the risk is worth taking.

Knowledge institutions can help boost this sense of security. At DTU, we work ambitiously to document the sustainability profile of new technologies, partly to reduce the widespread fear of greenwashing in the business sector. Using research-based data, we work to make the new technologies’ green profile visible and transparent. This gives companies more security and consumers greater confidence.

Through earlier and closer collaborations across the value chain, we can pave the way for a new green investment model and new technological breakthroughs. But this demands a commitment among those with the ability to make a difference. Right now, we’re doing what’s expected, and that won’t help us get where we need to.

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