Scaling Up Cleantech in Europe: Bridging the Financing Gap
Scaling up the cleantech industry is essential to decarbonising Europe’s economy and reindustrialising key sectors. These technologies include everything from renewables to carbon capture and energy storage. To meet growing demand and achieve meaningful impact, cleantech projects must expand rapidly. But doing so requires substantial and well-structured financing. According to Cleantech for Europe, banks remain the dominant financial institutions on the continent. Their involvement is crucial to support the growth and rollout of innovative climate solutions.
The critical stages of investment
There are two primary stages in cleantech development: Early-Stage Investment: includes research and development (R&D), building operational capacity, and acquiring talent. These activities are typically funded through equity capital, including venture capital and private equity. Once the technology is proven, additional funding is needed for commercialisation and large-scale deployment. This stage, referred to as Scale-Up Financing, relies more heavily on debt financing, which offers a lower cost of capital compared to early equity.
The rise of clean investment in Europe
In recent years, there has been a significant growth in cleantech investment: In 2023, over €11 billion in venture and growth capital was invested across the EU—a fifteenfold increase since 2011. In 2024, debt financing surged from €7.9 billion to €23.4 billion. Despite this progress, Europe still faces a significant cleantech investment gap. Cleantech for Europe warns that both early-stage equity and scale-up financing remain insufficient.
What’s required for the cleantech industry in Europe
To close the financing gap, the report outlines several priorities: Early and Growth-Stage Financing is a top priority. Europe needs to attract more equity capital to support the development phase. Key actions include:
Replicate national measures like Germany’s WIN to encourage institutional investment.
Reform insurance rules under Solvency II to strengthen long-term equity investment in unlisted businesses.
Combine small pension funds to achieve scale and investment expertise.
Promote retail savings products that enable individuals to invest in assets like private equity and infrastructure.
Scaling and Deployment (FOAK Projects)
As technologies reach the deployment stage—especially First-of-a-Kind (FOAK) projects—they need access to debt and private capital. Recommendations include:
Using European Investment Bank (EIB) guarantees to reduce the risk perception of cleantech projects among banks.
Strengthening Europe’s private credit market to provide loans that traditional banks may avoid due to risk profiles.
Investigating why insurers and pension funds are hesitant to invest in non-investment-grade debt.
Reviewing and reforming the EU’s STS securitisation framework to expand financing for consumer-level green technologies (e.g., solar panels, heat pumps, home batteries).
Public and Private Sectors Must Collaborate
The report emphasises that public support is essential for creating favourable conditions for private investment. Public financing mechanisms can:
Reduce risk for private investors
Signal long-term policy direction
Help create new markets and demand for clean technologies
Banks should also evolve their role, not just providing loans, but participating in equity and investment fund activities that support cleantech startups and scale-ups.
A Need for Capital Market Reform
To reach Europe’s climate and industrial goals, the cleantech sector needs a profound transformation of capital markets. Key goals include:
Securing more private investment
Strengthening investor confidence through policy clarity
Making clean technologies economically competitive and accessible
Progress of the transition to a net-zero economy requires Europe to align its regulatory, financial, and industrial measures to enable cleantech innovation at every stage, from the conceptual phase to commercial success.