"There's a newfound strength in the impact sector," says Nordic green bank

"It's the first time in ages that things feel this hopeful. There's a newfound strength in the impact sector," says Fredrik Larsson, investment adviser at the Nordic financing institution Nefco.

He's speaking from Almedalen, the political gathering on the Swedish island of Gotland, where he's been meeting numerous scale-up companies from the environmental and impact sectors. After several years marked by pandemic fallout, war, and soaring costs, he says optimism is gradually returning to climate and impact firms.

Despite recent chatter about a "green bubble" and a political shift from sustainability towards competitiveness – both within the EU and Swedish politics– Fredrik Larsson remains upbeat.

"Everything points to increased activity amongst these companies," he says.

Rising exports signal recovery

He highlights growing exports amongst small and medium-sized enterprises compared to 2024, which was already a robust year for exports.

Several major Swedish projects that stalled in 2022 have now resumed, particularly essential reference facilities, according to Fredrik Larsson. He adds that the renewed focus on competitiveness isn't necessarily detrimental to the impact sector.

"Many impact companies are built to be independent – and if they want to scale internationally, they need to stand on their own two feet," he explains.

Bridging the funding gap

Nefco specialises in supporting environmental technology companies looking to expand internationally. They primarily offer loans with higher risk profiles than traditional banks, often at earlier stages of development.

"We step in where others hesitate – when the technology is proven but banks aren't yet ready to provide financing. However, we only do so when there are clear environmental benefits," Fredrik Larsson explains.

Nefco's mission is accelerating the global spread of Nordic environmental technology across all sectors, though in practice they tend to focus on hardware. They don't rule out software companies entirely, but require clear evidence of environmental impact.

Their funding approach is decidedly long-term, typically maintaining involvement for five to ten years.

"Building hardware takes time, and we're seeing more investors becoming realistic about that," he notes.

Autumn optimism

Fredrik Larsson expects a busy autumn ahead for Nefco. He's noticed that companies approaching them now have more modest ambitions but are also fundamentally better prepared than before.

"Some investors are holding back, others have disappeared entirely, which means companies are finding alternative routes to international growth," he says.

"We're seeing strong demand for our funding across the portfolio and we've got excellent capacity to meet it. I genuinely think things are about to take off."