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22 Jan 2020, 13:31
Benjamin Wehrmann

Venture capital providers agree sustainability clause to green Germany's start-up scene

Clean Energy Wire

Twenty-odd venture capital providers active in Germany have teamed up to introduce a sustainability clause in new financing contracts that would oblige borrowing start-ups to actively support climate action in their business activities. In cooperation with the Leaders for Climate Action (LFCA) initiative, private equity companies like Holtzbrinck Ventures, Tengelmann Ventures or Earlybird agreed on the clause that compels newly financed companies to measure their CO2 output and implement emission reduction strategies. "Start-ups get a lot of attention and are seen as beacons due to their innovative strength. We want to use this attention to endorse a more sustainable economy," Alexander Samwer of investor Picus Capital said. LFCA said it hopes to initiate a "domino-effect" that will spill over from the sphere of digital start-ups to other sectors of the economy. According to the initiative, the participating venture capital providers have raised funds exceeding five billion euros in the past and helped launch hundreds of companies.
Johannes Teyssen, CEO of energy company E.ON, said at a conference organised by the business daily Handelsblatt that demand for its new green bonds far exceeded supply, meaning the company was able to borrow money at lower interest rates with the financial instrument aimed at favouring more sustainable projects. Teyssen said this showed that green finance is no longer "lip service" but that investors are serious about it. The company's recent issuing showed that green bonds are around 5 basis points (0.05 percent) cheaper and more oversubscribed than conventional papers.

Sustainable finance criteria increasingly dominate the agenda of financial companies in Germany and the government is working on a comprehensive strategy to prepare for forthcoming EU regulation to better align finance with climate and environmental policy. Asset managers and other financial market actors expect the volume of sustainably managed funds to grow quickly in the next years and this is likely to be spurred by the EU's stated commitment to invest in a carbon-neutral economy by 2050.

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