A golden decade opens up for environmental start-ups

Swiss cleantechs develop in high-tech niches such as Agrofly in precision agriculture. Source: Agrofly

Switzerland has seen a wave of new cleantech start-ups being established with record levels of investment being poured into the sector.

That’s according to the third edition of the Cleantech Report, produced by the CleantechAlps association. Whereas between 2006 and 2016 these investments averaged CHF 20m per year, they increased by a factor of 10 between 2016 and 2019 to reach CHF 395m that year. The authors expect a similar level to be achieved in 2020, despite the Covid crisis, and which will accelerate further with the adoption of binding legal frameworks related to decarbonisation targets.

Why this is credible. After the shock of Fukushima in 2011 and the Energy Act in 2017, the CO2 law adopted by Switzerland last September should, subject to a referendum, pave the way for further expansion of companies in the cleantech sector. All the more so as with the return of the United States to the Paris agreement under Biden or the adoption of a €1 trillion Green deal by the European Union. Their main export markets (23 per cent and 43 per cent respectively) need new technical solutions in addition to measures to reduce or offset CO2 emissions.

The context. Global turnover in environmental technologies is expected to reach 5.9 trillion in 2025, growing by 6.9 per cent per year.

  • According to the Wall Street Journal, in 2020, half of the investments in energy production capacity worldwide will have gone to renewable projects.

  • The shares of traditional energy companies such as oil and gas fell by 40 per cent last year, while those active in renewable energies rose by more than 100 per cent.

  • At $145bn, the market capitalisation of the main wind and solar operator in the United States, NextEra is close to those of oil giants Exxon ($175bn) and Chevron ($163bn).

  • Admittedly, the price of black gold is expected to rebound in 2021, but the implementation of gigantic green stimulus plans (1000 billion euros in Europe, 2000 billion dollars in the United States and 500 billion dollars in China) are presenting opportunities for numerous technologies not only in energy but also in agriculture, transport, construction or water.

The Swiss ecosystem. The Cleantech Report notes an acceleration of the sector in Switzerland, particularly since 2016.

  • Between 2011 and 2017, Switzerland saw the number of start-ups in the cleantech sector increase by 50 per cent compared to the period 2006-2010. This was followed by a further 30 per cent increase between 2017 and 2020.

  • On average, 30 new cleantech start-ups are created in Switzerland every year.

  • There has also been strong growth in financing. Collectively, Swiss cleantech start-ups had raised CHF 200m between 2006 and 2016. Since then, these figures have accelerated sharply to CHF 375m in 2019 alone.

  • Despite the Covid crisis, it will probably be more in 2020 with record investments such as the CHF 62m raised by the trader Trafigura in the hydrogen pioneer H2 Energy or the CHF 100m raised by Climeworks for its CO2 capture technology.

According to CleantechAlps general secretary Eric Plan:

"We've moved up a scale. Until 2016, the size of investments in these start-ups was typically CHF 3 million. Now, the average is around 10 million francs".

The characteristics. The Cleantech Report sheds light on the diversity, but also on the high degree of specialisation by field of activity of environmental start-ups in Switzerland.

A third are active in the field of renewable energies and a quarter in resource management. However, despite the fact that Switzerland has registered 727 patent families in the field of solar photovoltaics, it is not so much in this field that start-ups stand out. Even though the report analyses the development of Swiss energy policy, it does not contain a chapter on Swiss start-ups in the production of renewable energies, whereas this is the case for the many start-ups in mobility, smart cities or storage.

The report also notes the emergence of new areas, particularly in agriculture and food.

According to Éric Plan:

"We are increasingly witnessing a convergence of technologies with know-how developed in digital, electronic or biotechnologies that are finding uses in the environmental field".

Many Swiss companies are also active in niche markets, from waste recycling to the development of alternative materials to water protection, not forgetting sustainable finance.

According to the Swiss Sustainable Finance association, by the end of 2018, sustainable investments in Switzerland will reach CHF 716 billion, or 21 per cent of total assets under management in the country. This is almost twice the global average for sustainable investments, which McKinsey estimates at 11 per cent.

Unfortunately, this financial lead has not yet led to the emergence of cleantech venture capital funds in Switzerland. They would, however, be able to seize the momentum that is emerging for the coming decade.