'The sentiment has changed': Why top European VC views 'unloved' industries as key for climate tech

To get an idea of what Zurich-based Verve Ventures is looking for in a climate tech investment these days, just look at a recent addition to its portfolio: Metafuels, a Swiss startup aiming to make sustainable aviation fuel more affordable.

The company was featured in a Forbes article this month, highlighting its potential to disrupt the aviation industry. However, the people behind Metafuels had been on Verve’s radar long before the company spun out of the Paul Scherrer Institute, one of Switzerland’s leading research centres.

“That's often a blueprint of how we operate,” Verve co-founder Steffen Wagner says in an interview with Impact Loop. “We try to be very close to academia and spot the ideas that could be disruptive in the climate tech field. We had been monitoring the Metafuels team for quite a while. … But Metafuels is also interesting because it represents kind of the new way we have been thinking about climate tech lately.”

Shifting towards "unloved" industries

So what is that “new way”?

For Verve, it means becoming less dogmatic and focusing more on some of the industries that are currently the biggest polluters when it comes to carbon emissions.

"When we started investing in climate tech and the impact fields more than 10 years ago, we mostly invested in companies that were in the renewable energy space or direct air capture – so pretty much what people consider the mainstream of the transformation towards electrification and decarbonisation," Wagner explains.

"Lately, we have been looking more at some of the unloved industries, or avoided industries, such as concrete and steel but also nuclear and aviation. Metafuels is exactly in this field that we love personally where we take a very undogmatic view and say: look, we’re going to keep flying, so let’s make flying greener."

Lately, we have been looking more at some of the unloved industries

Moving upstream in the value chain

Another focus area for Verve is to look for better ways of using – and reusing – limited resources like precious metals that will remain instrumental even in a greener economy.

"We try to look a bit more upstream in the value chain, which is something we’ve been doing for the last two or three years but hasn’t hit the mainstream of venture investing yet," he says.

"In this transition to a more electric and decarbonised economy, we need a lot of input factors such as rare earths, lithium, copper, nickel and silicon. And there are a lot of interesting companies that try to make these resources available cheaper and greener."

Material on the radar

Recent investments in this space include Tozero, a lithium-ion battery recycling company that aims to recover critical materials such as lithium, nickel, and cobalt and reintroduce them back into the supply chain.

Infrastructure-related materials such as concrete and steel are also on the company’s radar, with investments that include Neustark, a Swiss startup that stores CO2 in concrete.

"Because we will continue to need these materials, it makes no sense to pretend that we can do without them. So we need to make sure we make them more CO2 neutral," Wagner emphasises.

"To make a long story short, the latest trend that we see is to move a bit more upstream in the value chain, look at all these input factors, and find smart ways to get them at high volumes but much more cheaply and much greener."

An investor-friendly model

This pragmatic approach appears to be attracting increasing interest from private investors, despite an overall decline in venture capital investments in climate tech over the last two years.

"In our case, we see more investors coming in now. And I’m also wondering a little bit why that is," he says. "But I can only guess that it has a bit to do with our, let’s say, less ideological or non-dogmatic view of doing green investing. Because I do think that the sentiment has changed in the impact investing community from 'green premium' plays to 'green discount' plays – meaning focusing on solutions that are more sustainable and economically better at the same time.”

Another factor driving Verve’s success is its investor-friendly model. The firm allows individual investors to either contribute to its fund or cherry-pick companies to build custom portfolios. This flexibility has helped Verve build a network of investors across Europe and beyond.

Its current fund, with a target size of €100m–€150m, spans seed to later-stage investments and supports a diverse portfolio that includes industrial tech, health and bio, and future computing alongside climate tech.

Cause for hope

Looking ahead, Wagner is optimistic about Europe’s ability to scale up startups, even as he acknowledges the continent’s historical delays in mobilising capital.

"The sad truth is that we have been sleeping for too long,” he says. "It’s not like we can’t turn it around, but we should have started 10 years earlier in mobilising all the capital. … The reason why I’m optimistic goes more back to the talent and the excellent research that our universities and research organisations across Europe actually produce. Because they are really world class, and that is one area where we don’t need to shy away from comparing us with the U.S. or any other country."

With growing government funding and early signs of European pension funds allocating more to deep tech, Wagner sees cause for hope.

"There is a clear agreement among all parties and political flavours in Europe that we need to move a lot of capital into key technologies," he says. "Five years ago, we didn’t have that. We now have a credible economic background and political support to make it work."