ABN AMRO invests 1 billion euros to tackle carbon emissions

Obtaining financing is relatively easy for profitable companies with an established track record. But what if yours is a younger company with a slightly different, less traditional approach, one that is developing and growing in accordance with a new business model in order to contribute to a better world? Such businesses often fail to turn a profit in their first few years, which can make it hard for them to access conventional financing.

Early-stage capital – capital supplied by professional investors to young, growing companies – caters precisely for this type of venture. As part of its climate plan, ABN AMRO is making 1 billion euros available up to 2030 to help accelerate the transition to a decarbonised economy with its investments in promising, innovative companies. Although they already have a proven business model and are generating revenue, these young companies are looking to scale up while facing above-average risk.

Decarbonising the economy

“We support innovative climate and environmental technologies,” says Maarten Blomme, head of Corporate Investments. “By ‘climate’, we obviously mean decarbonising the economy. We invest in clean energy generation, energy storage and conservation technologies, and in sectors generating high carbon emissions like the construction, food and clothing industries. While these companies often face a higher level of risk, they’re also the ones developing the technologies and products needed to tackle the climate problem.”

Corporate Investments makes its early-stage capital investments in three categories: direct equity from ABN AMRO’s Sustainable Impact Fund (i.e. direct investment in a company), investments in external complementary equity funds (funds operating in sustainable niche markets) and hybrid loans. This third category involves subordinated loans which have characteristics of both debt and equity. Being a new initiative, these hybrid loans are still small-scale, but are poised for growth in the coming years. ABN AMRO has currently invested over 500 million euros across these three categories, a sum that is expected to reach 1 billion euros.

Bio-based plastics

Before ABN AMRO makes an investment, the bank does extensive research, enlisting the services of internal and external specialists. The company founders and management team play a crucial role here, Maarten says: “The founders have all the ideas, but we have to believe they can make them a reality. Plus we have to be sure the technology and products they bring to market will have a measurable impact.”

One of the companies in which ABN AMRO is investing via a hybrid loan is Avantium, a developer of bio-based plastics and chemicals. Together, a consortium of lenders is making a total of 90 million euros available. ABN AMRO, for its part, is contributing 15 million euros. Avantium will be using the funds to build the world’s first plant to manufacture furandicarboxylic acid, the main ingredient in the fully plant-based recyclable plastic PEF. This sustainable alternative to polyethylene terephthalate, or PET, which is made from fossil raw materials, will thus reduce carbon emissions.

Another example is the Sustainable Impact Fund’s investment in Colibri Energy, which supplies lithium-ion batteries for use in airport and industrial logistics vehicles, thereby helping these companies reduce their carbon footprint.

Discovery and innovation

Money isn’t the only thing driving the decarbonisation of the economy, though – ABN AMRO is also sharing its knowledge and network. “The transition is all about moving into new, uncharted territory,” says Maarten, “and that means discovery and innovation, which in turn require knowledge and expertise. The bank takes its responsibility here very seriously, relying on its own sector specialists and the Sustainability Centre of Excellence, where we pool our knowledge of sustainability. We also collaborate with the Impact Institute to assess and quantify the impact of our investments and proactively share this expertise with businesses.”

Maarten says the investments are obviously expected to yield a profit: “We’re looking to make an impact on the planet and on society, but we’re also hoping to make a healthy return. Those aims are by no means mutually exclusive. I mean, it stands to reason that the companies making a real impact are also the best to invest in.”