Our perspectives on the US have been dominated by the recent election and the implications of Donald Trump’s win on global policies and markets, particularly regarding climate change and climate tech. The strident events of the past months have served as a stark reminder that climate tech sectors can experience hype cycles influenced by public discourse and political shifts.
We are among the funds that have consistently avoided overhyped sectors, where nascent macro tailwinds seem fully priced into valuations. Instead, we focus on the fundamentals of investment themes, companies, and business models, grounded in the current market reality. As such, it seems fitting to step back from the recent US election and consider the fundamental strengths of both the EU and the US as they relate to climate tech investing—well beyond these specific election results.
European ecosystem strengths
- A stronger climate tech science base: European academia has long produced more patents and PhDs in climate tech fields compared to the US. This trend has been sustained for several decades, creating a strong foundation for science-based climate tech companies in Europe.
- Lower early-stage valuations: We expect climate (hard) tech companies to have a higher success rate, albeit with more modest exit values and a tendency toward trade sales rather than IPOs, compared to other tech sectors. For these investments to be attractive, entry valuations need to be correspondingly modest—a feature more common in Europe than in the US.
- More stable policies: Although policies in the EU tend to develop and be implemented more slowly, they generally have long-term stability. This is also true for climate-related policies. In contrast, US climate-related policies are often introduced with bold initiatives at the beginning of a presidential term but are at higher risk of being reversed by successive governments, making them much less stable.
US ecosystem strengths
- Better growth equity and IPO markets: The US excels in the commercialization of technologies, supported by strong growth equity availability and more attractive IPO pathways. This makes the US market appealing for European companies seeking to benefit from its financial advantages.
- Bolder policies: Policies like the Inflation Reduction Act (IRA) have been highly effective in driving climate-focused investments through attractive tax credits, accelerating key projects, and significantly increasing renewable energy capacity.
To tackle climate change and close the funding gap that remains in both regions, we need to pursue solutions across both sides of the Atlantic and support the global propagation of the most promising ones. Collaborating and leveraging the unique strengths of each region will enhance the resilience and success of leading companies.
This post was originally published on here
