An industry specialist has praised the EU Scale-Up Fund ahead of a widely anticipated announcement on the appointment of a manager for the entity.
Announced last year, the Scale-Up Fund is an initiative of the European Commission and European Investment Bank, with potential founding investors including APG Asset Management on behalf of Dutch pension fund ABP.
It is due to be a multi-billion-euro late-stage and growth fund, aimed at investing in the most promising European companies in strategic technology areas such as artificial intelligence, semiconductor technologies, energy technologies, and agritech.
The fund manager that has been selected to run the fund is expected to be announced imminently.
According to media reports, the shortlist has included Sweden’s EQT and Northzone, France’s Eurazeo, and Atomico and Vitruvian Partners from the UK.
Speaking about energy policy in Europe at IPE’s Transition conference in The Hague last week, Victor van Hoorn, director of trade body Clean Tech Europe, said late-stage equity was the main funding gap in the European capital stack that needed to be closed.
“As long as you don’t get that, project finance and debt don’t want to come on the back of it because they want equity to cover the tech risk,” he said. “That’s the conundrum we need to solve.”
Van Hoorn said the late-stage equity funding gap was a problem well-diagnosed by European policymakers and that the Scale-Up Fund was being set up in a “very un-Brussels way”, with those involved having moved very quickly and listened to investors and the market.
“So watch that space,” he said.
However, he said that although there was interest from pension funds, it was predominantly from very large European pension funds, meaning there was still a question of scale and the subsequent need for public de-risking.
“A more proper response would have been to leave the effects of the fossil fuel crisis to be felt”
Ioannis Tyraskis, head of carbon molecules analysis at the Energy Transitions Commission
Speaking during a panel on the energy mix of the future, Luke Sussams, head of sustainability and transition strategy, EMEA, at Jefferies, said that when his team travelled to Brussels, policymakers were very keen to stress the amount of fiscal support that was available for earlier stage projects as well as the number of mechanisms and different pools of capital, and that while the totality of this looked impressive “to put it together and make sense of it you need a PhD, and good luck getting access to it”.
Agreeing with Sussams, van Hoorn said the EU needed to step up in this regard and that capital providers had a role to play, too, in using their voice to “educate” policymakers in a more structured dialogue on tools to de-risk projects.
Feeling the fossil fuel crisis
Looking beyond the role of capital, Ioannis Tyraskis, head of carbon molecules analysis at the Energy Transitions Commission, said that EU policymakers also needed to appreciate that facilitating the energy transition wasn’t just about long-term policies.
Policymakers should be taking short-term decisions that preserve the signal being sent during energy security crises, like when Russia invaded Ukraine and the ongoing Hormuz crisis, Tyraskis argued.
“In 2022 the response of Europe was to rely on LNG and that cost around 1% of GDP in some European countries,” he said. “But a more proper response would have been very targeted policies that protect households or those that really need it, but leave the effects of the fossil fuel crisis to be felt and that way it will change, it will preserve the signals on things that demand to be electrified.”
