‘Deepwashing’ risks dampening progress in European climate tech investing

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Craig Douglas Contributor

Craig Douglas is a partner at World Fund and an adviser to the EU Commission on Energy policy. World Fund invests in climate technologies with significant climate performance potential (CPP).

Today, deep tech companies — companies creating cutting-edge, transformative technologies based on scientific breakthroughs and R&D, and bringing them to market — are finally garnering more attention from the VC community. From synthetic biology to quantum computing and battery recycling technology, the most innovative deep tech companies today are creating solutions that have the potential to transform entire industries and address pressing global challenges.

Thousands of these exciting deep tech startups are based in Europe, and their founders are finally finding capital more readily available on home turf. European investment into deep tech remains strong, despite broader funding level drop-offs. Dealroom’s most recent European Deep Tech Report indicates a 60% increase in funding levels over the last 24 months, compared to 2020. This boom is also reflected in patents pending and R&D spending on moonshot technologies.

This is what we mean by “deepwashing”: companies without much evidence of meaningful R&D or any real science pitching their product as transformative.

Europe’s climate-focused deep tech companies form a crucial part of this growing sector, and increasing investor interest is a big net positive. However, deep tech hitting the zeitgeist has been accompanied by a disturbing rise in climate-focused startups positioning themselves as more “deep tech” than they actually are. This is what we mean by “deepwashing”: companies without much evidence of meaningful R&D or any real science pitching their product as transformative. This is a problem, because it leads to vital funding being directed toward startups that will never fundamentally shift the dial.

By contrast, true climate deep techs are raising funding to enable them to deliver technologies with the capacity to decarbonise the global economy. And they’re needed. As outlined in a recent International Energy Agency (IEA) report, almost half of emissions reduction solutions in 2050 will come from technologies that are currently at the demonstration or prototype phase — and major innovation efforts must take place this decade in order to bring these new technologies to market in time. This is a mammoth task, but Europe is ready to take it on: In 2022, 42% of all climate tech dollars were raised on the continent, with investment into the sector growing 26% faster than the U.S.

Founders need to stop deepwashing

As specialist European climate tech investors, we are receiving “deepwashing” pitches from some solar, heat pump and micromobility startups, as well as from a few food tech companies.

We’re regularly seeing teams using a lot of words about their tech, but when you actually examine their company’s product, there is no fundamental technology innovation. The product is maybe a slightly better application of tech that’s already on the market today, or a series of minute changes that might sound impressive packaged up together, but in reality the business is not shifting the dial.

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