Over nearly four years, SmartCap’s Green Fund has supported the growth of 23 innovative companies developing solutions to environmental and climate challenges. The fund has made 16 direct investments in companies and three fund investments, which channel capital to a broader range of research-intensive green technology businesses.
Preparations for the Green Fund began in autumn 2021. A study commissioned by SmartCap and conducted by consultancy EY found that public support was needed to help the sector grow. Research-intensive green technologies and products and services designed to address environmental and climate challenges often require long development cycles and involve a high degree of technological risk.
“Developing new, research-intensive ideas and solutions requires patient capital and sector-specific expertise. A state-backed fund has an important responsibility to identify capable private fund managers with experience in green investment and help develop the market,” Sille Pettai, then a member of SmartCap’s management board and fund manager, said at the time.
The Green Fund opened for fund investment applications in September 2022 and for direct company investments in November of the same year. The companies supported through the Green Fund now employ more than 500 people and generate approximately €38 million in annual revenue. Last year, they paid around €12.9 million in taxes in Estonia, compared with €11 million the previous year.
These figures include both companies that received direct investments from the Green Fund and Estonian companies backed by funds in the Green Fund’s portfolio.
Companies in the portfolio have reached several significant milestones in recent years. UP Catalyst has moved from its laboratory on Akadeemia Road to a production facility in Maardu, where it is developing sustainable carbon materials made from CO₂ emissions. Following SmartCap’s investment, Stargate Hydrogen opened an electrolyser factory, and its technology is now used both at hydrogen refuelling stations in Estonia and in projects operated by international energy groups. eAgronom has become one of the first companies in Europe to have a soil carbon project validated under the Verra standard.
According to Robert Martin, Investment Director at SmartCap, the progress of the portfolio companies demonstrates the strong international growth potential of Estonia’s green technology sector.
“From the outset, the Green Fund has focused on companies whose solutions address environmental and climate challenges, but whose growth is capital-intensive and requires long-term financing. We can now see these companies moving from laboratories to factories, from pilot projects to customers, and from Estonia to international markets,” Martin said.
In addition to its direct investments, the Green Fund made three fund investments to improve green technology companies’ access to capital. It invested in 2C Ventures Fund I, Taaleri SolarWind III and Norrsken Evolve Fund II. All three contribute to the Green Fund’s main objective by investing in innovative, research-intensive green technology companies and infrastructure projects.
“We deliberately built a diverse portfolio. Alongside an experienced Nordic fund manager such as Taaleri, we supported emerging managers including 2C Ventures and Norrsken Evolve, which are developing one of the most promising green technology deal pipelines in the Baltic and Nordic region. This combination helps build a resilient ecosystem in which green technology companies continue to have access to capital despite changes in the global environment,” Martin said.
According to Hendrik Reimand, Partner at 2C Ventures, SmartCap’s Green Fund was instrumental in launching the fund. “2C Ventures Fund I invests in strong early-stage teams developing novel technologies that not only have a clear positive environmental impact but also carry outsized commercial potential. The Fund has completed 12 investments to date and as still in the active investment phase, targeting a portfolio of 20-25 investments by 2028. As an anchor investor, SmartCap’s Green Fund played a critical role in establishing the Fund and crowding in private capital which is now being invested into the most promising cleantech startups in Estonia and across the New Nordics region”.
The Green Fund’s investment period has now ended, but its work will continue through the management of the existing portfolio and support for the companies’ development. This marks an important stage for the fund, which has helped improve green technology companies’ access to capital, strengthen the regional deal pipeline and attract additional private investment to the sector.
SmartCap Green Fund is financed by the European Union NextGenerationEU Recovery and Resilience Facility funds.
