“We are financing the innovative technologies of the future”

APG is investing €75 million on behalf of its pension fund clients, ABP and bpfBOUW, into Innovation Industries Fund III. The Dutch investment company provides capital to so-called deep tech start-ups and scale-ups, offering solutions in the fields of industrial, medical, and food and agricultural technology. Carlos Garcia Rivas (private equity investor at APG) discusses the importance of this investment.

This investment is part of the impact mandate of ABP and bpfBOUW. “These are new, relatively small companies working with new technologies to develop solutions for issues such as climate and biodiversity,” says Garcia Rivas. “Ultimately, the aim is for at least 70% of the capital to be invested in the Netherlands, including tech companies in the Eindhoven region.”

Currently, the fund includes five companies, with this number expected to grow to about twenty. What makes these companies, and thus this fund, so attractive to APG?
“Innovation Industries has provided us with very detailed information on each of these enterprises. As a result, we understand the applied technologies and their potential impact on the climate and society. Prior to the investment, we developed a 'Theory of Change' (ToC), describing how the capital provided by our clients ultimately leads to sustainability outcomes. This ToC makes it plausible that the technologies developed by start-ups or scale-ups indeed bring about positive changes. If this capital results in an actual reduction of CO2 emissions, for example, we can classify it as an impact investment.”

Can you give a concrete example of a technology that meets the ‘Theory of Change’ criteria?
“One of the companies is working on a technique where a light switch or small device can ‘harvest’ energy from its environment, such as movement, light, or temperature differences. This eliminates the need for a battery or connection to the power grid, which collectively can save a significant amount of energy consumption. Moreover, a major advantage of this company is the reduction in battery waste. As investors, we are kept informed of the performance indicators, ensuring we always know the impact.”

What can APG as an investor contribute to these types of start-ups and scale-ups?
“Above all, it is crucial that we invest in this area, thereby contributing to the Dutch tech ecosystem. These start-ups and scale-ups rely on investors, and there is still a gap between what these companies need and what is offered in terms of financing to support their growth ambitions. Companies like ASML and NXP started small a few decades ago and have now become very important to the Dutch economy. With this investment in Innovation Industries, we are financing the innovative technologies of the future on behalf of our pension fund clients. Additionally, our pension fund clients highly value these types of investments that can make an impact, especially when the impact is made in the Netherlands. We have been in talks with Innovation Industries for about six months, discussing whether their approach to impact aligns with the ambitions and requirements of our clients regarding risk and return. We also support Innovation Industries in improving their reporting methods and the framework they use to measure impact. APG is a significant investor in the fund and, together with other investors, we can be an influential partner to Innovation Industries.”

What are the main risks of this investment?
“These deep tech companies have usually just invented a new technology that often still needs to prove itself in the market. The main risk lies in scaling up production. This requires capital and a convincing technology. As investors, we have high expectations for the direction of these companies, but it is, of course, never certain that they will be successful.”

Read the press release of Innovation Industries.