This pension fund has €1bn pot for climate tech startups. Here's the thesis behind its latest investment

The Netherlands’ largest climate tech funding round of this year was led by a pension fund.

PGGM Investments, which manages several Dutch pension funds with a combined €255bn in assets, has led a €83m Series B into RIFT.

The Dutch startup, which spun-out of Eindhoven University of Technology, is developing what it calls "iron fuel".

"What makes it really unique is the fact that you need very little amenities and infrastructure to actually make it work," Tim van den Brule, investor director at PGGM, tells Impact Loop in an interview.

Essentially it's a technology that burns fine particles of iron powder. The tech is designed to supplement industrial gas boilers – but with zero carbon emissions.

In addition to the private equity, RIFT has also secured a €30.7m grant from the EU Innovation Fund (EIF).

The startup now plans to build its first commercial plant where it will make iron fuel boilers to sell to industrial customers. RIFT’s first off-take offtake agreement is already inked with construction and insulation firm Kingspan Unidek.

All that growth though will require patient capital, which is where PGGM is poised to deliver.

€1bn for climate tech

The backing comes from PGGM’s Climate and Energy Transition Solutions (CETS) fund.

Launched in 2024, CETS has an allocation of €1bn to invest in European climate tech scaleups and VC funds.

After two decades of direct infrastructure bets across Europe and the Americas, PGGM setup CETS after identifying "a little bit of a gap between the infrastructure realm and private equity does... especially [for] things that make a lot of impact," Brule says.

For companies, it's ticket sizes range from €50m-€200m. Recent investments from the fund include grid flexibility software provider Sympower, who's CEO we interviewed last year, and EV charging scaleup Electra.

The fund also has 20% of its allocation set aside for LP investments. So far it has backed two Stockholm-based impact investors: Verdane and Altor.

The CETS vehicle targets riskier venture and early growth stage bets that pension funds have long avoided.

Bridging Europe's scale-up gap

PGGM’s investment arrives at a crucial moment in European climate and deep tech.

Around five years ago, there was a boom in funding for climate tech. Hoards of new startups emerged. Many inevitably didn't succeed. But some did, and are now maturing. Naturally they now need scale-up capital to grow. Finding it, though, especially in Europe, can prove difficult.

Between 2020-2024, European startups had a funding shortfall of €13.5bn at the Series B stage – also known as the “valley of death,” according to a recent report by World Fund. It estimates almost 40 climate tech scale-ups on the continent fail as a result of this deficit.

A key problem, the report finds, is the lack of institutional money flowing into venture capital and startups. European pension funds allocate just 0.018% of their assets to venture capital, compared with 1.9% in the US – a more than 100-fold difference.

Van den Brule acknowledges the gap but points to a structural challenge for most pension funds. "From a size perspective, it is relatively difficult to invest at the early stage," he says. "Pension funds need to invest vast amounts of money, and if you do that in small tickets, it just doesn't really work."

Nevertheless, PGGM has invested both directly into climate tech companies and as an LP into early-stage climate funds. ABP, the Netherlands' largest pension fund, has built similar vehicles.

"Having someone like us on board helps bridge the gap between a stable, long-term infrastructure investor and the VCs," Van den Brule says. "There is just inherently a bit more capital backing that we can use to do these kinds of things."

Still, Van den Brule says he thinks pension funds should invest more at the early stage. If they do, it could mean make or break for hardware-heavy startups.