Climate Tech in Israel and the Nordics – connecting innovation ecosystems

Warming 1.5 times quicker than the world average, and suffering from climate change in many ways, the Middle East is definitely a climate hot spot. The region is also likely to have a major impact on solutions tackling climate change. Israel has long been highly regarded for its thriving innovation ecosystem and entrepreneurial capabilities. Lately, entrepreneurial activity and investment interest in climate tech have skyrocketed, bringing growing market opportunities for new and existing technologies. In the new edition of Israel Desks Magazine, our Nordic partners Salla Tuominen, Jens Krogh Petersen and Siren Skalstad Ellensen take a dive into the world of climate tech, the evolution of Israel’s climate tech landscape and the numerous possibilities for collaboration in business between the Nordic countries and Israel. 

With a range of innovative industries holding great potential for collaborations, Israel and the Nordic countries have much to gain and learn from one another.
 

There are close to 1,200 companies in Israel that offer solutions to climate challenges, and in 2021, Israeli climate tech companies raised USD 2.2 billion, 57% more than in 2020. Ag tech, food tech, water tech, clean tech and electric vehicles are well-established fields in Israel, all operating in the climate-tech ecosystem. However, the sector faces vital challenges. Main issues include access to capital, regulatory, and the difficulties of market scale up opportunities. One key issue is how to encourage banks, pension funds and other financial institutions to invest in green projects and technologies to increase the amount of private capital in climate tech companies.

There are plenty of similarities between Israeli and Nordic economies that facilitate partnership between the countries. As a result of the successful combination of free market economy and welfare state, the Nordic countries now enjoy high economic productivity while social equality and social trust are at a high level. Both Israel and the Nordic countries have a knowledge-based economy built on a social democratic foundation. The countries have invested heavily in research and development and champion new knowledge and innovation. “Both Finland and Israel provide a good environment for start-ups and share passion for entrepreneurship and creativity. This is based on the excellent educational systems and encouraging attitudes towards higher education in both countries,” says Salla Tuominen, partner at DLA Piper in Helsinki.

The Nordic countries form a financially prosperous region that is inhabited by 27 million people and shares values, cutting-edge innovation, VC interest and common business objectives. “The Nordic region is rich in natural resources and in the forefront of specific sectors such as maritime, life sciences and technology,” says Jens Krogh Petersen, Head of Corporate in DLA Piper’s Copenhagen office. “A vast and vibrant start-up scene gives a possibility to find upcoming tech innovations and an ability to share best practices. Environmental awareness is high in the region which drives focus on renewable energy such as wind, solar, and hydro power. The Nordic governments support innovation through a range of measures and support schemes are available for start-ups”, Jens Krogh Petersen adds.

“In Finland, the cleantech industry is advanced especially in the field of renewable energy, recycling, food solutions and clean water. Many Finnish companies are pioneers in the cleantech sector, for example Neste, Fortum, or even more traditional steel companies like Outokumpu. This is partly because of the Finnish Government’s ambitious climate policy, supported by the economic life of Finland,” says Salla Tuominen. Finland also ranks among the strongest markets in healthcare technology in the world, with digital health among its largest high tech exports. “The Finnish biotechnology and especially health technology sector have grown in the recent years, which can be partly explained by the Covid-19 pandemic. The biotechnology sector has great prerequisites in Finland because of the rich natural resources and encouraging atmosphere for research,” Salla Tuominen adds. Finland and Israel share a similar structure in their healthcare systems: world class, universal, centralized, digitalized and public sector driven. A digital health innovation collaboration between Finland and Israel was launched in 2019 with the aim of facilitating collaboration between Israeli and Finnish companies. The initiative is led by Israel Innovation Authority and Helsinki Business Hub.

Denmark has has made remarkable investments in sustainability and sustainable projects. “We believe that Israel and Denmark have a lot in common. Danes value strong business relationships and are known as Europe’s easiest place for doing business. We have a productive, motivated workforce and a cost-efficient and flexible labour market. Besides that we have a favourable tax climate, well-connected infrastructure and a world-class R&D and innovative environment”, says Jens Krogh Petersen.

In Norway, the political focus is on development of new legislation to meet new industries such as offshore wind, hydrogen, solar, batteries, and data centres, in order to reduce emission of CO2. Huge opportunities exist in this, though the challenge is that changes need to be implemented fast,” says Siren Skalstad Ellensen, partner at DLA Piper in Oslo. Norway’s priority is to increase cooperation with Israel. The value of Norway’s exports to Israel has increased over the years. “It is a stated priority by the Norwegian Government to increase cooperation with Israel, within trade, science, tech, innovation and development. The Norwegian Pension Fund Global, Norway’s sovereign wealth fund, has invested NOK 11.9 billion (appx. USD 1.3 billion) in shares (84 companies) in Israel, and an additional NOK 1 billion is invested in fixed income (as per early 2020). These are the fund’s largest investments in Middle East. In particular, the tech and R&D environment in Norway, including telecom, biotech, maritime and cleantech have attracted Israeli investors and entrepreneurs,” Siren Skalstad Ellensen points out.

DLA Piper has represented Israeli companies in major renewable energy deals, including:

• Advising Enlight, a Tel Aviv public company, as it invested in the ready-to-build Björnberget wind park project in central Sweden, one of the largest wind projects in Europe. The project reached financial close in May 2021. Meanwhile, Israeli wave energy company, Eco Wave Power, which has developed technology to convert wave power into electricity, is traded in Sweden on the NASDAQ First North Stock Exchange.
• Representing Azrieli Group, Israel's largest real estate company, with a market cap of some NIS 30 billion, bought Green Mountain for NIS 2.3 billion. Green Mountain operates three server farms in Norway, with the Norwegian data centres market enjoying high rates of growth thanks to the availability of electricity produced from environmentally friendly sources, as well as electricity costs that are among the lowest in Europe.

At DLA Piper we believe that our greatest contribution to a sustainable environment is the advice and support we provide to our clients – both in managing their own environmental impacts and assessing and responding to climate-related risks and opportunities. We also make an active contribution to international climate policy discussions and the development of investments in low-carbon technology and infrastructure.

For more insights on the climate tech landscape and collaboration possibilities for the Nordics and Israel, please read the full interview with Salla Tuominen, Jens Krogh Petersen and Siren Skalstad Ellensen, as well as other professionals in the field, in Israel Desks February 2022 edition: Israel and Nordic region to reach new economic heights?