Searching for the missing link in sustainability and entrepreneurship

RSM’s Prof. Dirk Schoenmaker and Mark Weustink, head of ING Sustainable Investments, discuss the issues of sustainability, sustainable finance and sustainable investment and their role in the scaling up of smaller businesses.

Mark Weustink

Head of sustainable investments at ING

Prof. Dirk Schoenmaker

Professor of Banking and Finance at RSM


Scalability is in itself desirable, even essential, and a growing number of people appreciate that. Take Dame Ellen MacArthur, for instance, the round-the-world lone yachtswoman. Her charitable foundation will only invest in circular businesses that are scalable. Hers is a striking example.

Mark Sustainability is at the forefront for many institutions, financial and otherwise. Since 2015 sustainability and digitisation have become top priorities for ING, reflecting the broader changes in perception in society in recent years. We have reached a point that is similar to where we were with offshore wind power perhaps 20 years ago. By which I mean that what was once pioneering with unproven technologies – and occasionally even subject to scepticism regarding economic feasibility – is now firmly embedded in the mainstream.


The offshore wind farm sector has advanced so much in recent years in terms of technological improvement, scale and reduction of costs that the cost of a megawatt-hour of power generated by offshore wind farms is less than a third of what it was less than a decade ago. Currently the first wind farms are now being constructed in the North Sea without government subsidy. That is real, tangible, measurable success, but there is some way to go and the financial industry will be at the heart of future development.


In this context, it is important to make a distinction between sustainable financing via various forms of senior/bank debt and sustainable investments offering risk-bearing capital. The requirements of lenders and investors are quite different.

“Despite the progress, we in Europe are still lagging behind the US, where there is a strong venture capital culture with large and specialised funds.”
Dirk Schoenmaker, professor of banking and finance, RSM

Banks have to ensure that they take on acceptable risk by participating in established proven business models, and more unproven or innovative technologies will be taken up by equity investors who are willing to accept a higher probability of losing their investment. In principle, a lender that is offering financing will always focus on: “when will I get it back?” as the lender only receives a capped return. Entrepreneurial and early stage investors will venture where banks are cautious, but scaling-up remains one of the more difficult stages of the life cycle of a company.


"There is an undeniable point of fact here. Despite the progress, we in Europe are still lagging behind the US, where there is a strong venture capital culture with large and specialised funds. In Europe there is an ample market for loans and bonds and relatively less risk capital. We do not have sufficient risk capital available for ambitious entrepreneurs. We want to help

advance the entrepreneurial spirit and in that context it is worth noting that one of the hottest topics of recent times, the Oxford-AstraZeneca Covid-19 vaccination was developed by the Vaccitech start-up business that was spun out of the University of Oxford in 2016. Why is there this disparity between the availability of risk capital in Europe and the USA? It is very much a cultural issue, arguably dating back to the western frontier days, which bred a certain mindset based on bravery, courage and daring. At the risk of sounding simplistic, people in the US are often more economically and commercially aware than their counterparts elsewhere, and more disposed to assuming risk, where for others the preference is to play safe.

Once a business is proven, investors will invest. But when a business is still in the building stage, when risk is high and the business needs to scale up, investors shy away from financial involvement.

Perhaps this is why the USA has Apple and Microsoft and Amazon and Google and Tesla, while in Europe we have, mmm, let me think… Mark

I concur, in that venture capital in the US is much more mature and much more readily available than it is in Europe. What I find highly encouraging, however, is the growing appetite for much that is associated with the notion and practice of sustainability. Nowadays all major banks are into green. Green bonds and loans are very tradable. Pension funds want to invest in green and companies are happy to promise that their loans will be used for green purposes, and green finance can be cheaper and more attractive than the alternatives. In this context, sustainability is taking off like a rocket going to the moon. Dirk

"The missing link in finance is scaling up capital. To change the underlying reality, we need to change the global mindset. We need to think differently. It is very much a supply side issue. There is plenty of demand for financing, but there is no question that while plentiful capital is available in broad terms, the holders of capital remain somewhat reluctant to commit it to more risky scale-ups. This is where we have an issue of perception. One side of the capital coin sees investment life very differently to the other."


"ING as a group has nearly a quarter of a century of a track record in sustainability. ING Sustainable Investments was launched in 2019 receiving €100m of capital. It is a separate division within the bank, using the bank’s own capital. It offers all forms of risks bearing capital ranging from junior debt to straight equity to help clients transition to more sustainable business models, whether they be a large utility or power company, or a small business trying to scale up. Start-ups inevitably also come into the equation, presenting their own challenges.

We focus on scale-ups, building and developing our knowledge and experience of this niche sector. For debt, our sweet spot would be tickets up to €10m, and for equity up to €5m. To date, we have put over a quarter of the capital to work, in companies ranging from solar energy to the recycling of tyres and plastics and the making of batteries. They are doing as well as one might expect in their niches, but to have a significant impact on a global scale, they will need to scale up. And as Dirk says, scaling-up financing is crucial to create sustainability solutions."

Looking to the future "Ideas to build a better world need to come from entrepreneurs and need to be based on solid underlying business models. Take batteries as an example, an industry of the future. If all goes to plan, one of our portfolio companies, Northvolt, will prove that scaling up can reduce costs dramatically. It is developing an independent giga-battery plant in Skelleftea in Sweden which, when operational in 2023, will have an initial capacity of 16 GWH per annum. ING played a critical role in structuring the complex ring-fenced project financing for this first factory of its kind in Europe and ING Sustainable Investments participated in a second lien facility that formed part of that financing.

“To date, we have put over a quarter of the capital to work, in companies ranging from solar energy to the recycling of tyres and plastics and the making of batteries.”
Mark Weustink, head of ING Sustainable Investments


We need public/private financial partnerships, to co-invent, to power up. People often overlook the simple fact that even Apple once benefitted from a Californian state subsidy. Mark

I agree. Where there is a good idea that is not currently economically viable, there is a strong argument that government should step in and introduce suitable tax or regulatory incentives to make it economically viable and attractive. In a Platonic ideal world, governments can steer the private sector to make things work. It is not just a question of finance per se. Consumers and producers can also be nudged by regulation. Look at the impact that the levy for plastic bags had on the use of plastic bags in supermarkets. It plummeted by over 75 per cent. A tiny financial disincentive brought about a huge change in customer behaviour, almost literally overnight. In conclusion - Dirk

"We need to build a sustainability ecosystem, in which different elements drive one another and thrive upon one another, and this will only work if we can scale up. In an eco-optimist’s view of the future, we will all be driving electric cars in 20 to 30 years, but we need to scale up, and finance can contribute to that.

I am very excited about the ING Sustainable Investments fund and its potential to provide the missing link in the capital structure. Its ‘lasagne’ or layered solution means that different types of financial instruments from senior bank loans and growth capital are available from a single source, to enable companies to go from seed capital to grown-up capital. There is much scope for co-designing more sustainable finance solutions to accelerate the sustainability transition, which is much needed. RSM is also happy to educate the new generation of sustainable bankers that work at ING."


"Sustainability is here to stay and represents good business from an environmental and an economic standpoint. To make the transition, scale-up capital needs to be provided by parties with complementary skill sets that will make a difference. While change can sometimes be scary, I firmly believe that mankind is creative and, despite all the historical evidence of the enduring idiocy of at least some of the species, is smart enough to ensure that it will always find technical solutions."

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