Norrsken VC: 75% of European investors plan new impact investments – Sweden leads the charge

Recent years of geopolitical unrest and a shaky global market have not been positive for the view on investments in the impact sector.

Impact startups have bemoaned the difficulty of raising capital and investors have become more cautious. Private funding for European climate tech specifically dropped 40% in H1 2025, compared to the same period last year.

But its not all doom and gloom, according to a new report from the Norrsken Foundation's investment arm, Norrsken VC, seen by Impact Loop.

"Of course, the road hasn't been straightforward," says Tove Larsson, partner at Norrsken VC in the report.

"Just like all groundbreaking areas, impact sectors like climate tech have gone through their hype cycles. But after each correction comes maturity, usage, and renewed momentum. And that's exactly what we're seeing now."

Sweden is an impact hotbed

The report, titled the European Impact Index 2025, and is based on a recent survey of 660 founders and investors. Within it are several signs that Europe's impact industry is heading towards brighter times.

Sweden takes top spot as the most interesting country for both investors and founders to operate in, according to the people surveyed.

Germany and the UK take second and third place, respectively, while Spain comes in at fourth and the Netherlands at fifth position.

More investments expected

Six out of ten respondents in the survey have a positive outlook on the future of impact companies in Europe. The group expressing the most optimism is founders, with nearly one in five, 18% of respondents describing the future for European impact companies as "very bright."

Three out of four investors plan to invest more money in the impact sector over the next five years compared to today. Just over one in five investors indicate that they are likely to invest "much more."

Only 6% of investors surveyed plan to invest less in impact over the next five years.

The decisive reason for the positive outlook on new impact investments in Europe, according to a majority of investors, is technological development, particularly in the field of AI.

According to the report, technology is no longer just an enabler but the engine driving growth across the entire impact sector. Just over half of investors rank energy and electrification as the most attractive sectors right now.

Regulations and attitudes highlighted as obstacles

The biggest obstacle for impact companies wanting to grow in Europe is, according to the report, the EU's fragmented regulatory framework – and here the report's authors urge politicians to make decisions that level the differences between various European countries.

The greatest challenge for investors injecting capital into impact companies is uncertainty about how long it will take to see returns.

The biggest challenge founders point out in the report is prioritisation and attitude towards the impact market and their own company.