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From 44 to 1,505 million kroner invested in five years. Interest in green investing has exploded, with both individuals and the biggest funds joining the wave, where the green bottom line has become as important as the financial one.

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From an office in the centre of Aarhus, Morten Stahl is raising money for an investment fund. It takes time, but he has dedicated both time and money to the task. A task that is very important to him – almost a calling.

The fund will invest in companies that search for and extract naturally occurring hydrogen. A cheap, non-polluting type of hydrogen, which he believes can become an important factor in the green transition.

»I expect future generations to ask my generation: you knew about the climate crisis, but what did you do about it? I want to be able to give my children a proper answer to that question, and one of the things I’m doing is taking my money out of green stocks and investing it in climate-change companies at an earlier stage. This offers greater risk, but also much greater potential for impact and return,« says Morten Stahl.

He believes that startups and their radical new ideas are where the biggest changes are born. Of course, if they are to make a real difference, they need capital – and preferably a lot of it. That’s why others should also have the opportunity to invest alongside him through the fund.

»Investing for the climate feels like the right thing to do. It may sound blue-eyed, but I also believe it offers the best return. I see the green transition as the biggest megatrend ever, and that means there are huge investment opportunities in it. And I think investors should think about what companies do with their money; I’d rather invest in climate tech than an app that delivers a pizza five minutes faster,« he says.

Both green and economic

Morten Stahl is far from the only investor acting on the green trend. While venture funds invested 44 million in green Danish startups in 2017, they have invested 1,505 million in the first three quarters of this year alone.

The trend is also clear among public investment funds: in the first half of 2022, The Danish Growth Fund and The Danish Green Investment Fund have a combined activity within the green future fund mandate of DKK 4,3 billion out of the funds’ total mandate of DKK 10 billion.

»There is so much potential in this, and it is also the right thing to do. Sustainable investments are obviously a good fit for a sovereign wealth fund like ours because we have several parallel purposes. It has been shown that green investments can easily be financially good while creating a social impact – in this context a climate impact,« says Erik Balck, who is responsible for the Growth Fund’s direct investments.

Just a few years ago, investments were made with either financial or impact returns in mind. Today, Balck calls that thinking old-fashioned: startup investments no longer have to be a trade-off between financial and impact returns.

»The market is almost turned upside down. There is a huge demand from consumers for green. This has created a cross-pollination between entrepreneurs and capital which means we now have a number of companies presenting models that achieve both. There’s something sexy about companies that deliver returns beyond the financial; something that can also help save the world,« he says.

In fact, the green focus has become so ingrained today that even startups that don’t have impact as their main agenda need to be able to account for their climate ambitions. A software company that is first and foremost looking to solve a business problem must also be able to account for how much CO2 their server park emits – because customers demand it.
In that way, Balck doesn’t think it looks like a trend we’ve seen in the investment market before.

»The maturation of other verticals in the ecosystem – e.g. fintech in Denmark – is a reflection that over the years, expertise has been built into how to operate and support that ecosystem. Conversely, the green paradigm is very much demand-driven,« he says.

A green unicorn?

The world is hungry for green solutions, making green transformation the most interesting investment area right now. With huge potential.

The Danish Growth Fund is particularly interested in startups in areas where Denmark already has strengths – such as energy technology and food. And although the new wave of green entrepreneurs is not yet as mature as classic tech startups, Erik Balck has no doubt that we will soon see the first green unicorn.

“I will be very, very surprised if we don’t see a green unicorn.”

»That’s the easiest question to answer: I will be very, very surprised if we don’t see a green unicorn. We’re going to have one. Denmark is in the right place for this, and as a stakeholder, we must support the development. Despite the slightly sour macro-trends and geopolitical challenges: We are going to have a green unicorn from Denmark.«