Impact Investor talks to Nysnø’s investment director about the organisation’s role in the energy transition and the challenges and opportunities for investment in climate tech.
Nysnø is a climate impact investment fund, investing in both companies and investment funds focusing on tech solutions to the climate crisis that have a clear link to Norway. The company is wholly owned by the Norwegian government and the team reports directly to the country’ Ministry of Trade, Industry and Fisheries.
Investment director Joe Eliston speaks to Impact Investor about the sectors Nysnø is targeting and the challenges and opportunities the energy transition offers for investment into climate tech companies in Norway today.
Karolina Adamkiewicz: How would you describe Nysnø’s purpose and how this has evolved?
Joe Eliston: Nysnø originally launched as the Renewables Fund in 2017 in response to the Paris Agreement to mobilise capital for the green transition and we were initially allocated 200m NOK (€17m) by the Norwegian government. Our name was changed to Nysnø, meaning freshly fallen snow in Norwegian, shortly after to reflect our desire to invest across a much wider investment universe. This was also to plug what was then seen as a large funding gap in climate technologies, with a dearth of investors willing to invest in what was considered a high risk sector given the very early stage nature of most companies operating in the space.
We made our first investment in Otovo, a retail marketplace for solar installations, in 2018 and the company is now listed on the Norwegian Stock Exchange.
Today, there are far more VCs and private equity funds investing in climate technology but as one of the early adopters of climate tech investments, we like to think we had a hand in building Norway’s climate tech ecosystem.
KA: What are the key focus areas and aims of Nysnø?
JE: Our aim is to invest directly into early stage climate tech companies to help them scale as well as in investment funds, which enable us to diversify our portfolio and invest in earlier and later stage growth companies. Our fund investments also give us an edge as a source of great investment opportunities, and through the specialised knowledge they bring. Recent fund investments include Antler, a very active early stage technology investor in Europe, and Arctern Ventures, a North American-European climate tech investor with over 10 years of experience.
Although we have a very broad sector focus, with the key aim being climate impact and the generation of CO2 savings, we try to prioritize those areas where Norway has an edge, where there is not a lot of funding available and where our capital can be catalytic. We also conduct standard bottom-up analysis of all our investments including of the management team, business model, financial metrics and how the climate impact can be significantly scaled.
Our three objectives are positive returns, reduction in GHG emissions and a positive impact, be it through job creation, attracting investors to Norway or any other ripple effects generated by the investment.
KA: How do you select your investments?
JE: As we are 100% funded by the state, the companies and funds we invest in should have a clear link to Norway, for example they could be Norway-based companies or funds or employ Norwegian staff. When we assess a company for investment, one of the things we look for is its ability to scale on a global basis. We also look at how it compares to similar companies elsewhere in the world, to make sure it can maintain a competitive edge.
At the moment, we are seeing a huge funding gap in industrial and other hard tech ventures. We cannot solve the climate crisis by investing in software solutions alone and Nysnø is currently looking at opportunities in green steel and battery cell technology, among other areas. These are very capital intensive industries that desperately need funding and in which we would invest between 70m-200m NOK (€6m-€17m) compared to the 30m -100m NOK (€2.6m-€8.7m) we would typically invest in a traditional software venture.
We recently managed to complete our first exit from Greenbird, a data company helping utilities simplify the complexity of Big Data integration as part of the transition to smarter more sustainable energy. We sold our shares to General Electric, which demonstrates our ability to identify and scale successful climate tech investments.
KA: What are the investment challenges facing Nysnø?
JE: Unlike the general partners in a typical venture capital fund who have to go out and raise capital from investors, the money Nysnø has at its disposal is determined by the yearly state budget, from which it is allocated funds each year.
When you have to rely on the state budget it can make it difficult to plan ahead as you have less visibility with regards to how much you will have to invest and therefore how much you can allocate to any given company or fund in your portfolio. Every year, we have to compete for funds with other public spending budgets, such as in education or in healthcare.
Today, we are also limited in our impact by the need to invest in companies and funds that that have a clear link to Norway. The climate crisis does not have state boundaries and although we do have exposure to funds outside Norway, such as AP Ventures in the UK and Energy Impact Partners in the US, both of whom have a presence in Norway, we would like to extend our mandate to a broader range of companies and funds.
KA: With oil and gas still the largest sector in Norway, how is the energy transition changing the shape of the Norwegian economy and what role does Nysnø have to play in the transition and in overcoming the challenges in the adoption of climate tech?
JE: The energy transition will not happen overnight and the oil and gas sector still has a role to play. But we need to acknowledge that the oil and gas industry has had to be heavily subsidised to get to where it is today and the same dynamics are now needed for clean tech and climate impact technologies.
Looking ahead, at Nysnø we see our role as derisking the investment arena to allow private capital to be deployed into climate tech, including bridging the risk gap for international investors.
We have also been heavily involved in Project Frame, an international non-profit programme looking to improve Impact Measurement and Management (IMM) standards for climate-driven investments, where we have been spearheading a project to build a framework that will accurately measure and assign avoided emissions to various actors within a given value chain, helping to do away with greenwashing and exaggerated claims of impact.
This year, the Norwegian government announced it would allocate an additional 1.85bn NOK (€161m) to Nysnø, bringing our total assets under management to 5.35bn NOK (€466m), underscoring their trust in us and our ability to play a pivotal role in the energy transition.