It wasn’t the brightest venture capital firms or dedicated decarbonization funds that were the busiest in investing in climate technology this fall. It was a Swiss conglomerate that manufactured circuit breakers, light switches and electric vehicle chargers.
ABB Technology Ventures, the investment arm of ABB, was one of the most active investors in the climate technology business in the third quarter, according to Bloomberg NEF, a clean energy research group. It’s an unusual name to top this list, and its executives say the heavy spending will continue.
Andreas Wenzel, head of corporate strategy and mergers and acquisitions at ABB, said investments in this area are “definitely getting more and more attention”. “I hope it continues.”
ABB has cut 10 checks for startups totaling $100 million in 2022. This is a record amount for an industry giant who has invested only $250 million in the last 11 years. Early investments were primarily directed towards robotics or industrial automation.
Most recently, ABB is looking for a startup to complement its electric vehicle charging equipment manufacturing business. And it branches into software. Last month, ABB backed Tallarna, a UK data analytics company that helps companies manage energy projects.
European industrial companies like ABB are racing to curb greenhouse gas emissions and address the continent’s energy crisis.
In the early days of the pandemic, industrial demand surged as labor-starved factories, power plants and other customers sought to automate more operations. But inflation and a slowing economy have dampened that growth and heightened the urgency to find new markets, said Bloomberg Intelligence analyst Omid Vasili.
Few markets today are as promising as electric vehicles and renewable energy. ABB is a minor player behind large funds and the oil and gas industry. Still, the Swiss company is involved in bigger deals. In July, ABB participated in a massive $1.1 billion funding round for Swedish battery maker Northvolt.
Wenzel said there will be more late-stage deals like this. He described the investment strategy as generating “VC-like returns.” However, unlike venture capitalists, ABB’s primary interest is in finding companies that it can partner with or ultimately acquire.
“We don’t invest purely in terms of money,” Wenzel said.
One of ABB’s most recent investments was in existing business partner Hydrogen Optimized, a division of Canadian energy company Key DH Technologies. Hydrogen Optimized manufactures electrolysers, a key component in green hydrogen production. ABB manufactures rectifiers, electrical devices that power hydrogen energy.
Hydrogen Optimized CEO Andrew Stuart described the deal as a corporate marriage rather than a financial investment.
“For us, 1 plus 1 is 800,” he said. “It’s just amazing.”
Stuart said ABB has a minority stake in his company and board seats, but declined to share details of the investment.
Since replacing its chief executive in 2020, ABB has been shedding tears of restructuring, cutting fledgling divisions and going deeper into mobility. It will soon spin out $2.6 billion worth of electric vehicle charging units.
“Cleantech investments are definitely the place to be,” said analyst Vasili. “The danger is that ABB may fall behind its peers in seizing this opportunity.”
ABB isn’t the only industrial conglomerate trying to become a cleantech heavyweight. In November, Schneider Electric’s investment arm, SE Ventures, announced its second €500 million ($527 million) fund for industrial automation and climate technology startups.
Like ABB, we are already helping companies in electrification, hydrogen and energy management software. Amit Chaturvedy, his managing partner at SE Ventures, said the company has a “good and solid pipeline” of new companies for a second fund that launches next month.
Most investors welcome this rebellion by stocky companies.
Bain Capital Ventures partner Sarah Hinkfuss said: “We are increasing the size of the tent.”
But there are concerns that big companies will tie up startups to exclusivity deals when they invest. Hinkfuss said simply taking money from a company could make a start-up lose money in a tie-up or sell an investor to a competitor.
“This could jeopardize our status as Switzerland,” she said.
Both ABB and SE Ventures say they do not hamper companies in this way when it comes to investing.
Updated: December 10, 2022, 5:00 AM
