Venture capital investments in Germany’s green start-ups fall in 2022

Venture capital investments in Germany’s start-ups specialising in climate protection technologies fell to the second highest level ever last year, according to public development bank KfW. Total investments decreased to 1.6 billion euros in 2022 from a record 2.6 billion euros in 2021. “The most recent decline is primarily due to the gloomier general conditions as a result of the shift in interest rates and the overall economic slowdown,” KfW said, adding it did not expect an increase this year. Yet, the bank stressed that “investments are clearly on the rise” in the longer-term, pointing to the mere 53 million euros in venture capital the climate tech start-ups collected in 2009.

The term "climate tech" covers technologies that aim to avoid or reduce greenhouse gas emissions or help to adapt to the effects of climate change. This includes, for example, low greenhouse gas energy solutions including storage, or more efficient use of resources. Climate tech investments in Germany have a comparatively high importance for the venture capital market, KfW said. In the period 2019-2022, those investments represented more than 13 percent of the total venture capital market, compared to around 8 percent in the UK and the US. However, Germany’s total venture capital market remains comparatively small when measured against its economic output. “Against this backdrop, it remains a major challenge to ensure the financing of ‘green’ start-ups, which are already characterised by above-average capital requirements in the development phase,” KfW added.