From code red to the hunt for green unicorns

CEO's message from Annual report 2022

We are looking for investment opportunities in companies that we believe are critical to reduce global greenhouse gas emissions, while we believe that the investment can give the public’s climate investor a good return. It's our job to hunt the green unicorns. In a net-zero scenario for 2050, approximately half of the emission cuts must come from new innovations that are not available today, while the other half requires the scaling of known technology.

At the end of 2022, we leave four full accounting years behind us. We are now delivering the best annual result in our short history of NOK 96.6 million. It is demanding to build up a completely new investment company, but in addition to the usual challenges of building organisation, capital and strategy, we have to say that the last five years has offered surprising challenges. That is why I am extra proud of what our organisation has achieved in 2022.

Steady course through crises on a tightrope

In 2018, Prof. Vaclav Smil's held the opening session at the Nysn? conference in Stavanger. The presentation was a wake-up call for the audience with messages about energy as the world's universal currency, and warnings about how vulnerable we are to a global pandemic. The pandemic came - and we were all surprised anyway. Among the problems the pandemic brought with it, the delays in global logistics chains had the most negative effect for our portfolio companies. Just as we began to see the end of these problems, a new crisis hit Europe. When Russia invaded Ukraine on 24 February 2022, a full-scale energy crisis also developed with global consequences that will be significant for many years to come.

We have continued the investment rate through volatile times, and we experience that our role as a stable and long-term public investor is even more valued in today's market.

Many feared that the situation would affect Europe's will and ability to deliver on its climate ambitions. Despite very demanding working conditions with war in Europe, on the contrary, I experience that Europe has shown both the will and the power to accelerate the transformation of energy supply and base it on renewable sources, new climate technology and European value chains. From the new year, the American legislative package 'Inflation Reduction Act' also came into force. It has really gained momentum in the development of low-carbon solutions in the American market.

Sailors steer by the stars, not to reach them, but to keep a steady course. I heard this quote from Professor Vilhelm Bjerknes. In Europe's interwar period in the 1920s, he built up Vervarslinga in Western Norway, which became the basis for modern meteorology. Nysn?'s guiding star is a good global climate. We have continued the investment rate through volatile times, and we experience that our role as a stable and long-term public investor is even more valued in today's market.

Putting shovels in the ground

At the end of last year, Nysn? had a portfolio of 32 companies and funds. In total, we are financing more than 185 companies that contribute to solving major societal challenges. Through our network of co-investors, and as an active fund shareholder, we have our finger on the capital pulse of the early-stage environment. We have noticed a change in the capital markets in recent years. What used to be the classic early-stage investor, the venture investor, is moving towards investments that were often reserved for later-stage players. At the same time as the actors within the traditional growth capital, private equity, graze in landscapes that previously belonged to the venture investor.

Here, I think both parties have a lot to learn from each other. Because now, we face a capital-intensive task. To reduce greenhouse gas emissions on a large scale, large investments in green industrial value chains are required. We cannot solve the climate challenge in the cloud. We must put our shovels in the ground and build the new green value chains. This includes building new hydrogen plants, factories with new battery technology, more efficient and cleaner ways of extracting rare minerals. New engines are to be tested and produced, and efficient high-temperature heat pumps are to be installed in existing factories and production lines. This type of climate technology is capital intensive.

Three business areas

In December, the Nysn? board adopted its new three-year strategy for the period 2023-2025. Here, three business areas were defined: venture investments, fund investments and industrial venture. The latter is a new investment area that we have explored over the past two years, but which we now clearly define. Here, there is now an increased need for an active public investor.

In 2022, Nysn? announced investments in, amongst others, the heat pump company Heaten, the battery factory Morrow and the mineral company REEtec. We call these investments industrial venture. But it is equally important to continue to focus on more traditional venture, which is what Nysn? started with when we made our very first investment in Otovo in 2018. In the past year, we have invested in the second-hand platform Tise, in Ducky, a company that mobilises for a smaller climate footprint, the software company Spoor AI, which provides increased knowledge and monitoring of birdlife related to wind power development, and the electric car charging company Amina. These investments are less capital intensive where software makes up a larger part of the business. In many cases, there are smooth transitions between our three business areas. Our investment in the offshore wind developer V?rgr?nn can be said to be a hybrid between a fund investment and an industrial venture investment. HitecVision is one of our new fund investments and we joined them in their plans to build V?rgr?nn as a new global offshore wind player. Our fund investments represent different phases of climate capital, where the HitecVision fund makes large and small investments and ArcTern III and Sandwater can be categorised as early phase investors.

In Nysn? we are now a solid team with varied backgrounds. To scale up climate technology, one must possess financial knowledge and know the investor craft. In addition, we must have good knowledge of technology and, not least, understand the climate and the energy system. We have become 15 employees with flair, drive, and care for the climate and each other. It has been extra rewarding to experience how the organization has included all the students we have had in the internship programs throughout the year. With the help of good planning, and efforts across the organisation, we have been able to obtain very useful deliveries from the students. And of course, thanks to the students themselves! They have impressed us. We will continue to develop Nysn? as a competent investor who shares competence and knowledge.

From unicorn to polar bear

The term unicorn is well known among private early-stage investors. The unicorn symbolises the dream of adventurous and rare growth - and represents the goal for entrepreneurs and investors in early stages. A lot has happened since the unicorn concept was embraced by the startup community in San Francisco. Now it is code red for the globe. The climate crisis, geopolitical uncertainty and economic turmoil urges a development and scale up of greenhouse gas-reducing technologies. Increased access to risk capital is therefore needed for what will become large new growth companies within climate technology. Currently, there are too few climate unicorns.

The new era requires us to foster growth companies that are both profitable and that solve the climate challenge.

To identify the green unicorns, we must be able to measure the climate effect from the companies' deliveries. When we as investors consider an investment, we calculate an expected financial return based on future cash flow and risk. Our goal is to encourage the global investor community to adopt a similar mindset for climate impact. When I look back on the past year, I am particularly proud of the work the organisation has put in to help develop a framework for calculating future greenhouse gas emissions. This will enable us to compare and prioritise the projects that offer the greatest benefit to the environment.

I think it is time for a new symbol of what investors dream of, a symbol for both high returns and large greenhouse gas reductions. The new era requires us to foster growth companies that are both profitable and that solve the climate challenge. Instead of hunting for unicorns from a bygone era, we should foster more polar bears - companies that are worth over a billion NOK and at the same time contribute to major reductions in greenhouse gas emissions.

Unicorn: The term originated in Silicon Valley in 2013 and describes a company that is not listed on the stock exchange and reaches a market value of USD 1 billion.

Polar bear: A company with a market value of NOK 1 billion, regardless of whether it is unlisted or listed, and which offers a product or service that helps reduce greenhouse gas emissions.

Read the full annual report 2022 here (NO): https://www.nysnoinvest.no/wp-content/uploads/2023/06/Arsrapport-2022-Endelig.pdf