Scaling Up Public Financial and Non‑Financial Support for SME Sustainability

2. SME innovators: Financial and non-financial support mechanisms

Abstract

This chapter examines the financial and non-financial support requirements of SME innovators that are driving the green transition. Drawing on a range of financing instruments such as R&D grants, concessional loans, blended finance, equity and quasi-equity mechanisms and innovation support programmes, it provides a comprehensive overview of how public institutions across OECD countries and beyond are adapting their financial support policies to meet the specific needs of green SMEs and start-ups. The chapter also showcases how non-financial measures such as mentorship through incubators and accelerators, advisory and technical assistance services, and access to collaborative innovation networks help to strengthen SMEs’ capacity to develop, test and commercialise sustainable technologies.

Innovative small business face significant opportunities but also challenges in the green transition. On the one hand, they are uniquely positioned to capitalise on the growing demand for sustainable solutions, as both consumers and governments increasingly prioritise environmental responsibility. Innovators can also take advantage of the changing regulatory and policy requirements which demand greater transparency with respect to environmental performance, both within businesses’ own operations and across their supply chains. On the other hand, green innovators face challenges related to limited access to funding, high research and development costs, long product development timelines, and navigating complex regulatory requirements. Due to their small size, they further face difficulties in scaling their innovations because of limited resources, competition from larger firms, and uncertain market demand, including, in some cases, the need to develop a specific product market and build consumer awareness.

Access to finance is an important challenge for SME green innovators. Developing and commercialising new green technologies involves significant risks, including uncertainties about technological feasibility, market acceptance, and regulatory approval, extensive research and development (R&D) and prototype testing before market readiness, and high upfront costs that private investors are often reluctant to bear alone (Owen and Vedanthachari, 2023[1]), (Harrer and Owen, 2022[2]), (Mukherjee et al., 2024[3]). Additionally, many green innovation projects are built around intangible assets, such as intellectual property, which are harder to evaluate and use as collateral, making them less attractive for traditional loans (Mina et al., 2021[4]). As a result, equity and quasi-equity financing, which allow for risk and reward sharing, are often better suited for these innovators. However, accessing equity financing presents its own challenges, as climate-related innovation receives a disproportionately low share of private capital, accounting for only 5.4% of total private market investments between 2017 and 2021 (Carvajal and Didier, 2024[5]).

Venture capital (VC) remains a limited source of finance for early-stage green innovation. While VC investment in climate tech has grown, most funds continue to prioritise projects with shorter-term commercial potential, leaving high-risk, capital-intensive climate technologies underfunded (Mašek and Plaček, 2024[6]). Persistent barriers include technological uncertainty, long development cycles, and regulatory risk, which reduce VC appetite for early-stage green ventures (Mukherjee et al., 2024[3]) (McKinsey, 2024[7]). Evidence from U.S. funding rounds suggests that environmental orientation (“green signals”) improves VC outcomes at early and later stages, but has little effect at the seed stage where financing gaps are greatest (Hossnofsky et al., 2025[8]). Market analyses similarly show that early-stage climate tech remains resilient but relies heavily on complementary public finance and mission-driven capital to offset risks and attract private investment (SVB, 2025[9]).

To address these gaps, public financial support is crucial, both through direct funding, such as grants and equity and quasi-equity from publicly managed funds, and through incentives that encourage private venture capital and private equity firms to invest in green innovation. Additional mechanisms such as blended finance instruments, and targeted risk-sharing initiatives can also help lower costs for innovators and de-risk projects.

Non-financial support also has a key role to play in aiding SME innovators, as they often face challenges related to research, capacity building and market access. Providing SMEs with access to research facilities, as well as capacity building support through incubators and accelerators, which provide mentorship and advice, can be very helpful in addressing gaps innovators face in terms of knowledge and technical expertise. Such support can also help SMEs address challenges in navigating complex regulatory requirements and standards and facilitate market entry. Research support to SME innovators can further be provided through granting them access to testbeds, where SMEs can test their solutions in real-world environments. Additionally, green innovators often lack access to networks and market opportunities, making it difficult to connect with potential partners, customers, and investors who could support their growth. Therefore, support in the form of networking platforms, market facilitations and trainings and capacity building for investment readiness can be invaluable for these enterprises.

2.1. Financial support for SME innovators

Key objectives of public financial support for SME innovators in the green transition include:

• Early-stage research and development (R&D): Developing novel technologies often requires substantial upfront investment while facing significant technical and market uncertainty, amplified by information asymmetries about future commercial potential (Bergset, 2018[10]). A KfW study on SME innovators found that high costs (34%) and high risks (31%) were the main financial barriers, followed by limited internal (25%) and external (19%) financing. (Zimmermann, 2022[11]). Similar patterns are observed in green and deep-tech innovation, where long development cycles and technological risk hinder access to private capital (Mukherjee et al., 2024[3]). Venture capital and private equity generally favour projects with shorter-term commercial potential, limiting their involvement in experimental or pre-commercial R&D (Mašek and Plaček, 2024[6]; McKinsey, 2024[7]). Public financing mechanisms—such as grants, R&D tax credits, and blended finance—are thus critical to support experimentation, prototyping, and proof-of-concept work and to help crowd in private investment as technologies mature.

• De-risking innovation: SMEs and start-ups face persistent risk and uncertainty when moving from R&D to early commercialisation. At this stage, the commercial viability of their products remains unclear, and investors lack sufficient data to assess feasibility—a gap often described as the “Valley of Death” (Mukherjee et al., 2024[3]). Public institutions can help mitigate these risks through targeted mechanisms such as grants and equity participation, as well as blended finance structures and guarantees, which absorb a portion of the financial risk and encourage private capital to participate.

• Market entry and scalability: Bringing green solutions to market often requires significant additional investments to build supply chains, scale production, and establish distribution channels. Regulatory uncertainty adds to investor hesitation (Demirel and Parris, 2015[12]). Laws and regulations were identified as a key barrier by 32% of SME innovators (Zimmermann, 2022[11]). Public financing mechanisms such as commercialisation grants, venture capital or concessionary loans can help SMEs cover these costs and de-risk market entry.

Financing instruments that can help address the challenges of SME green innovators include R&D grants, concessional and blended finance, equity and quasi equity financing, incubators and accelerators and innovation prizes (Table 2.1):

Table 2.1. Common financial support instruments for SME green innovators

Financial support instrument	Description	Examples
R&D grants	Direct financing in the form of grants to support innovative research and development projects focused on environmental sustainability, aiming to accelerate the creation and adoption of green technologies	R&D grants for upgrading energy systems Financing for developing clean energy technologies
Concessional loans	Credit offered to SMEs and start-ups at favourable terms, such as reduced interest rates or extended repayment periods, to support their green projects	Concessional loans for production of innovative green technologies
Blended finance	Strategic use of public or philanthropic capital to de-risk investments and attract private capital into projects that deliver environmental benefits	Blended funding programmes for innovative sustainable projects
Equity and quasi equity finance	Capital for green businesses in exchange for ownership stakes (equity) or rights linked to financial performance, such as profit-sharing or convertible debt (quasi-equity), often designed to support innovative or high-risk green ventures or projects.	Venture capital for development of green tech Convertible or subordinated loans Profit participation funding Mezzanine financing
Incubators and accelerators	Programmes that provide mentorship, resources, and funding opportunities to early-stage start-ups that are developing innovative green initiatives	Programmes offering seed funding for sustainability projects Funding & networking opportunities for green tech start ups
Innovation prizes	Initiatives that offer financial rewards or other incentives to SMEs developing disruptive, green technologies	Prizes for innovative clean energy solutions Rewards for improvements in circularity

R&D grants provide non-dilutive funding (i.e. capital that does not require giving up equity or ownership of the business), allowing innovative companies to invest in high-risk, high-reward research without having to give up part of the ownership or operational control. R&D grants can help cover costs associated with experimentation, prototype development, and feasibility studies. Additionally, these grants can act as a signal to private investors, increasing confidence and attracting follow-on funding. Box 2.1 showcases examples of R&D grant instruments including Norway’s grants for environmental technology innovation and implementation. Finland is also supporting SMEs who are developing innovative energy decarbonisation solutions which enhance grid flexibility (see case study in Annex A. Business Finland - Flexible Energy Systems programme).

Concessional finance enables green innovators to access affordable capital to develop, test, and scale innovative sustainable solutions. By offering preferential terms, public financial institutions help de-risk green innovation for SMEs and entrepreneurs and attract co-investment by private entities who may otherwise be reluctant to fund early-stage or experimental green technologies. Box 2.1 highlights examples of financial support, such as investment grants and interest rate subsidies available to German SMEs through the Environmental Innovation Programme. Additionally, the Global Innovation Lab for Climate Finance provides SMEs and start-ups in emerging and developing economies with access to over 78 innovative financing instruments such as blended finance facilities, guarantees, and risk management tools to support their innovative green ventures. In Malaysia, SMEs from the manufacturing and service sectors can access concessional loans for the development of innovative green technologies (see case study on High Tech and Green Facility from SME Bank Malaysia in Annex A).

Box 2.1.  Examples of direct and indirect financing instruments for green innovators

R&D grants

Denmark: The Innovation Fund Denmark offered grant funding to SMEs and start-ups carrying out industrial research for the green transition under its Missionbooster programme. Eligible projects included CO2 capture and storage, green fuels, circular economy, and green agriculture. Funding ranged from DKK 1.5 million to 5 million (EUR 195 000 to 650 000), covering up to 70% of total eligible costs, including material and equipment expenses, employee salaries, and services from external knowledge providers.

Finland: The Flexible Energy Systems Program in Finland offers R&D grants and loans to SMEs and start-ups developing decarbonisation solutions for energy systems. The funding supports research and early-stage commercialisation efforts. Eligible projects areas cover electricity, heating, cooling, and fuels, and can include innovations such as electrifying heating systems or integrating clean fuels. The programme further fosters collaboration with research institutions, providing strategic guidance, and networking opportunities to enhance market prospects and access to further funding. The programme is envisioned to be implemented over six years from 2024 to 2030.

Norway: Innovation Norway provides R&D grants for SMEs focused on developing and implementing innovative environmental technologies through its Environmental Technology scheme. Eligible technologies include those which align with the EU’s Sustainable Taxonomy. Target groups are suppliers who develop environmental technologies for sale. The funding aims to reduce the risk of the investment for SMEs and potential investors through the provision of grants. The grant covers all research and development activities, apart from feasibility studies, which must be completed by the SME prior to applying. Companies must demonstrate the environmental impact and scalability of their solutions using relevant metrics such as CO₂ reduction or energy efficiency improvements. In addition, the programme can partially cover demonstration costs and employee training, with grant coverage for small enterprises covering up to 70% of the costs.

Sweden: The LIGHTer SME programme from Vinnova provides support to SMEs who are developing innovative lightweight technology for Swedish industry. Key focus areas include optimisation of energy and resource efficiency, as well as circularity. The programme offers grants of up to SEK 500,000 (EUR 44 000) for small business projects, such as prototype development or demonstration of manufacturing techniques in collaboration with relevant partners. Deep tech projects, which includes research-intensive start-ups and SMEs are also eligible, and can receive can grant funding of up to SEK 750 000 (EUR 66 000). Priority is given to SMEs who have not previously received public research funding. All projects require co-financing to be eligible. Total programme budget amounts to SEK 6 million (EUR 528 000), and projects can be supported over a three-to-12-month timeline.

EU: The European Commission has raised EUR 93.5 billion for the 2021 to 2027 period for its Horizon Europe project to fund research and innovation through grants and equity investments. One of the key clusters which SMEs can access is climate change, energy and mobility. To access funding, SMEs must show how their projects align with the EU green priorities, their innovative potential, environmental impact and ability to scale. The first phase supports technical and commercial feasibility with grants of up to EUR 50 000, with a 70% co-financing rate. The second phase supports project development and demonstration, with grants of up to EUR 2.5 million. The EIC Accelerator, one of the subprogrammes, specifically targets SMEs and start-ups with innovative solutions, providing funding from the demonstration to market launch stage. SMEs can access a combination of grants and equity investments for their projects, with grants being earmarked for innovation activities, providing a 70% subsidy rate, whilst equity investments (ranging from EUR 500 000 to EUR 10 million) are intended to cover market deployment and scale up. The programme also provides SMEs with relevant non-financial support such as opportunities to engage in collaborative projects within the broader sustainability ecosystem.

Concessional finance

Germany: In Germany, SMEs are encouraged to participate in the Environmental Innovation Programme, offered by the public development bank KfW in collaboration with the Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection. The programme supports demonstration projects which reduce environmental impact in an innovative way, covering initiatives on circular economy, resource efficiency, and waste and water management, amongst others. Funding can be provided in two forms: investment grants of up to 30% or an interest rate subsidy to provide favourable financing conditions on KfW loans.

In Malaysia, the SME Bank’s High Tech & Green Facility Programme offers concessional loans to innovative SMEs and start-ups in the manufacturing and services sectors, as well as start-ups who are developing innovative green technologies. Loans of up to RM10 million (EUR 2 million) are available to SMEs through participating banks for a term of up to 10 years, covering 80% of CAPEX and 100% of working capital costs. The programme offers a 3.5% profit rate (for loans without a guarantee) or 5% (for loans with a provided guarantee). Flexibility is available for repayment challenges, with options for rescheduling and restructuring.

In Norway, SMEs can gain access to concessional financing through the Green Industry Financing Fund from Innovation Norway. The fund supports activities critical to the net-zero transition, including the production of clean energy technologies such as batteries, solar panels, and wind turbines, as well as the manufacturing of key inputs, including critical raw materials. To be eligible, SMEs must be registered in Norway. Loans are offered below market-rates with the potential for interest free periods and extended grace periods. The total budget of the Fund amounts to NOK 5 billion (EUR 438 million).

Loan guarantees

Switzerland: The Federal Office for the Environment (FOEN) in Switzerland provides loan guarantees to SMEs and start-ups developing innovative green solutions through its Technology Fund. The primary aim of the fund is to de-risk lending for cleantech SMEs working on projects that contribute to reducing CO₂ emissions, enhancing energy efficiency, utilising renewable energy sources, and promoting the efficient use of resources. This support enables businesses to secure financing more easily from banks or other financial institutions. The loan guarantee can cover up to 100% of the loan amount, with a maximum coverage of CHF 3 million (EUR 3.2 million) and the loan term can extend up to 10 years. By providing these guarantees, the Technology Fund bridges the financing gap between equity funding in a start-up’s early stages and standard corporate loans, enabling cleantech SMEs to access markets and scale their solutions.

Blended finance programmes

The Global Innovation Lab for Climate Finance is a public-private collaboration which supports entrepreneurs, start-ups and SMEs developing innovative solutions to address climate change challenges in emerging and developing countries. Since its creation in 2014, the Lab has launched over 78 innovative financing instruments. The instruments adopt a blended finance approach, utilising public or concessional financing to de-risk and attract private capital. Examples include the Climate Resilience and Adaptation Finance and Technology Transfer Facility (CRAFT), blending commercial and concessional capital into a private equity fund, as well as the Conexus Impact Fund, combining loans and guarantees with technical assistance. Call for ideas are launched, from which the most innovative and impactful projects are selected for funding. Participating entities can further benefit from networking opportunities and mentorship programmes. Funders include over 100 institutions from the public, private and philanthropic sector.

EU: The European Investment Bank (EIB) offered financing to SMEs developing innovative first-of-a-kind demonstration projects at the pre-commercial stage that contribute to the energy transition through its recently ended InnovFin Energy Demonstration Projects programme. The financing, ranging from EUR 7.5 million to 75 million, is available in the form of loans, loan guarantees, equity, or quasi-equity instruments, with a tenor of up to 15 years. Eligible projects include those that demonstrate commercial viability, enhance the competitiveness of manufacturing processes, and contribute to the energy transition. These include projects related to renewable energy technologies, flexible energy systems, energy storage, and carbon capture, utilization, and storage. The programme timeline spanned over six years from 2014 to 2020.

Sources: (Business Finland, 2025[13]), (European Commission, 2025[14]), (Innovation Norway, 2025[15]), (Innovation Fund Denmark, 2025[16]), (SME Bank, 2025[17]), (Climate Finance Lab, 2025[18]), (Bundesministerium für Umwelt, Naturschutz, nukleare Sicherheit und Verbraucherschutz (BMUV), 2025[19]), (EFTA Surveillance Authority, 2024[20]), (Federal Office for the Environment, 2025[21]), (European Investment Bank, 2025[22]), (Vinnova, 2023[23]).

Equity and quasi-equity financing: Publicly provided equity (e.g. venture capital) and quasi-equity instruments (e.g. subordinated debt, convertible debt, mezzanine financing, profit participation, etc.) enable investments in high-risk green ventures that would not otherwise be financed by private actors. The focus on green innovation and start-ups in particular creates additional considerations and requirements for public support. For instance, since many green ventures, such as renewable energy, circular economy models, or cleantech start-ups, have longer development cycles, public support mechanisms must accommodate longer time horizons than typical VC investments. Furthermore, since green investments often require demonstration of not only financial returns but also sustainability impact, these financing programmes may also require the development of impact assessment frameworks with sustainability-related key performance indicators (e.g. avoided emissions, resource efficiency, etc.). Market barriers, such as insufficient demand for sustainable products may also pose challenges for scaling and growth of these ventures and thus public support may need to include additional funding or complementary policy support for market development.

Examples of various equity and quasi equity financing solutions that have been deployed to support SME green innovators are included in Box 2.2. In the Netherlands, for example, Invest-NL supports innovative green start-ups through equity and subordinated loans, complemented by non-financial advisory and networking services to help scale and commercialise their technologies. In India, innovative start-ups can access equity funding with complementary non-financial support services from the Neev II Fund (see case study from SBTI Ventures in India Annex A). In Canada climate technology firms can access late-stage seed to growth-stage capital through the Climate Tech Fund II (see case study from the BDC in Annex A; (OECD, 2025[24])). Early-stage companies can access seed capital funding through Asian Development Bank (ADB) Ventures (see case study on ADB Ventures in Annex A).

Box 2.2. Examples of equity and quasi equity financing for green innovators

Canada: The Climate Tech Fund II (CTF II), launched by the Business Development Bank of Canada (BDC) in November 2022, is a CAD 400 million initiative aimed at investing in Canadian climate technology firms with high potential to become global leaders and significantly reduce greenhouse gas emissions. This fund builds upon BDC's initial CAD 600 million Cleantech Practice, bringing its total commitment in the cleantech and climate tech sectors to CAD 1 billion. CTF II focuses on providing late-stage seed to growth-stage capital to companies developing impactful technologies across various themes, including energy, mobility, built environment, industry and resources, and carbon management.

Estonia: Greentech start-ups in Estonia can benefit from the SmartCap Green Fund. Investments from this fund can range from EUR 500 000 to EUR 5 million and can go from seed funding up to expansion stage funding. The fund has raised a total of EUR 100 million. Innovative solutions should be related to climate change mitigation and adaption, sustainable water use, circular economy, pollution prevention, or biodiversity and ecosystem restoration measures. The fund is partially funded by NextGenerationEU recovery funds.

France: The French public development bank Bpifrance is supporting SMEs from the Technology, Environment, and Energy (TEE) sector who are specialising in renewable energies, the circular economy, energy efficiency and environmental services. Through the France Energy and Environment Investment Fund 2 (FIEE 2), a buyout fund, which has a target size of EUR 240 million, Bpifrance provides funding ranging from EUR 0.5 million to EUR 20 million. This financial support aims to accelerate the development and growth of TEE companies.

India: The Neev II Fund is operated by SBICAP Ventures Limited, a subsidiary of the State Bank of India (SBI) with additional funding from EIB. Launched in 2021, the fund provides equity and quasi-equity capital to SMEs in India that are working on innovative solutions in areas such as clean energy, electric vehicles, resource efficiency, water management, and circular economy. The fund targets SMEs offering products or services with significant ESG benefits. The fund has raised a total of EUR 125 million, to which the EIB has contributed EUR 25 million.

India: The Green India Venture Fund (GIVF) is a domestic venture capital fund managed by IFCI Venture Capital Funds Limited, established to invest in companies implementing Clean Development Mechanism (CDM) projects and other commercially viable ventures within India. With a corpus of INR 220 crore (USD 26.5 million and EUR 24.4 million), raised from domestic banks, financial institutions, insurance companies, and high-net-worth individuals, GIVF targets sectors such as energy, energy storage, waste management, pollution control, and manufacturing. The fund typically invests between INR4.5 crore (USD 540 000 EUR 0.5 million) and INR30 crore (USD 3.6 million and EUR 3.3 million) in early-stage and growth-stage companies, aiming for a target return of 20% per annum.

Italy: Cassa Depositi e Prestiti (CDP) is supporting SME innovators through its Green Transition Fund with a total amount of EUR 250 million. The fund targets SMEs and start-ups who are launching innovative green technology projects, covering areas such as renewable energy use, circular economy and energy efficiency measures, amongst others. The fund is partially funded through the NextGeneration EU Initiative. Objectives include improving access to finance for innovative SMEs and start-ups, as well as mobilising private sector investment into them. The fund provides both direct investments—including equity and quasi-equity —and indirect investments through third-party funds.

Netherlands: Invest-NL offers impact financing options to Dutch SMEs and start-ups focused on developing green solutions and sustainable technologies. Key focus areas include carbon neutrality, circular economy, and sustainable agriculture. Financing options include direct equity and quasi equity investments in the form or participating interest in innovative start-ups working on cutting-edge green technologies, as well as debt financing in the form of subordinated loans. Invest-NL typically invests up to 50% of the total venture capital, with investments ranging from EUR 5 million to EUR 50 million. To further support green SMEs, Invest-NL offers guarantees to de-risk lending from private banks and investors, enabling SMEs to secure the capital needed to scale their solutions. In collaboration with the EIF, innovative SMEs can also access equity financing from the Dutch Future Fund II (DFF II), which has EUR 400 million available in funding. Key areas eligible for financing include the energy transition, agri-tech and circular economy. In addition to financial support, Invest-NL provides non-financial services such as strategic guidance on scaling operations, navigating regulatory developments, and identifying market opportunities. The agency also fosters networking opportunities, connecting businesses with relevant partners and stakeholders from the ecosystem.

Sweden: The Almi Invest GreenTech Fund is a Swedish venture capital fund established to invest in early-stage start-ups that significantly reduce greenhouse gas emissions or improve local environments. With approximately EUR 120 million under management, the fund focuses on sectors such as renewable energy, energy efficiency, recycling systems, energy storage, electrification, and sustainable materials. Since its inception, the fund has invested in around 40 companies. The Fund is co-financed by the EU.

UK: The Low Carbon Innovation Fund (LCIF) is a public-backed venture capital fund with over GBP 100 million in funding to support SME innovators in the East of England who are developing environmentally beneficial technologies, products or services. Eligible businesses must demonstrate that their green technologies, products or services have measurable greenhouse gas emission reductions. The fund aims to crowd in private investments and receives funding from the European Regional Development Fund (ERDF). It is managed by public institutions such as the Ministry of Housing, Communities and Local Government, University of East Anglia, and Norfolk County Council, amongst others. As of now, over 82 SME innovators have received funding, leading to the development of over 100 new products, services and technologies which have been brought to the market. Funded projects have led to over 10 000 tons of CO₂ emissions being saved annually.

Asia: ADB Ventures, the venture arm of the Asian Development Bank, supports SME innovators and start-ups who develop solutions in the domains of clean energy, circular economy and sustainable agriculture, among others. The programme provides financial support in the form of patient venture capital, as well as seed capital to very early-stage companies, to enable them to pilot new climate solutions. The programme provides accompanying non-financial support.

The EIF and EIB are providing EUR 200 million in equity financing to SME cleantech ventures through the Cleantech Co-Investment Facility. Eligible projects are innovative green technologies or business models which align with the EIF’s criteria for Climate Action and Environmental Sustainability. The EIF will co-invest alongside fund managers with tickets ranging from EUR 5 million and EUR 15 million. The investment is specifically meant to target the ‘’second equity gap’’, which innovators face when moving from the start-up stage into the growth phase.

Sub-Saharan Africa: The E3 Low Carbon Economy Fund I (E3LCEF) is a venture capital fund co-managed by E3 Capital and Cygnum Capital, established to invest in early-stage innovative low-carbon entrepreneurs across sub-Saharan Africa. In May 2023, the fund achieved its first close at USD 48.1 million, with backing from development finance institutions including, among others, the German promotional bank KfW, the Dutch Entrepreneurial Bank (FMO) and the Swedish development finance institution, Swedfund. The fund provides both equity and quasi-equity financing structures to SMEs. E3LCEF focuses on early-stage companies offering low-carbon, decentralised, and smart services, aiming to support at least 16 start-ups specialising in renewable energies and related services such as e-mobility, connectivity, and energy efficiency tools across sub-Saharan Africa.

International: The Althelia Climate Fund (ACF), launched in 2013 and managed by Mirova Natural Capital, is a pioneering impact investment fund dedicated to financing projects that reduce deforestation, mitigate climate change, protect biodiversity, and support sustainable livelihoods for rural communities. The financing mechanisms include debt financing but also quasi equity financing (subordinated loans, profit-sharing agreements). With a global investment scope, ACF focuses on regions including Africa, Latin America, and Asia, supporting sustainable land use and conservation of primary forests. The fund employs a blended finance approach, pooling resources from both public and private investors, and has secured commitments from entities such as the European Investment Bank (EIB), which contributed up to EUR 25 million.

Sources: (Swedfund, 2025[25]), (Mirova, 2021[26]), (Almi, 2025[27]), (Business Development Bank of Canda, 2025[28]), (SmartCap, 2025[29]), (Bpifrance, 2025[30]), (European Investment Bank, 2025[31]), (IFCI Venture Capital Funds, 2021[32]), (ADB Ventures, 2025[33]), (European Investment Fund, 2025[34]), (University of East Anglia, 2025[35]), (InvestNL, 2025[36]), (CDP Venture Capital, 2025[37])

Incubators and accelerators not only offer mentorship and resources (see also non-financial support section below) but also act as conduits to funding by connecting SMEs with investors, venture capitalists, and public funding opportunities. Many incubators and accelerators provide direct financial support through grants, seed funding, or equity investments to help start-ups cover early-stage costs such as prototype development or market entry. Additionally, they often partner with public institutions to deliver funding programs, leveraging government-backed grants or subsidies to de-risk innovation. By creating a network of investors, accelerators and incubators also improve SMEs’ chances of securing follow-on funding from venture capital firms or angel investors. Furthermore, they assist SMEs in preparing for investor engagement, offering guidance on pitching, financial planning, and sustainability reporting to attract green financing.

Some examples of financial support provided through incubators and accelerators are included in Box 2.3. For instance, the Accelerate2030 programme has supported over 480 entrepreneurs, connecting them with impact investors to encourage sustainable growth. The Deeptech plan programme of Bpifrance supports start-ups through mentorship, resources and access to financial support.

Box 2.3. Examples of financial support for innovators delivered through incubators and accelerators

France: In 2019, the French public development bank Bpifrance launched its Deeptech Plan, with a budget of EUR 3 billion, aiming to create 500 deeptech start-ups, with a strong focus on Greentech innovations. The programme provides start-ups with mentorship, resources, and access to financial support, contributing to their growth and integration into industrial sectors.

Kenya: The Kenya Climate Innovation Center (KCIC), launched through the World Bank’s Climate Technology Programme, is providing incubation and scale-up support to innovative climate-related start-ups and early-stage SMEs through its GreenBiz Programme. Running from 2021 to 2025, GreenBiz targets 300 businesses developing climate-related technologies and innovative business models in five key sectors: water, renewable energy and energy efficiency, agriculture, commercial forestry, and waste management. Support is provided through a range of services, including business advisory, mentorship, technical assistance, capacity building, and financing. The programme is supporting 300 climate-tech ventures. It is funded by the Danish International Development Agency (DANIDA).

International: Accelerate2030 is a programme supporting start-ups and entrepreneurs in developing and emerging countries with innovative solutions which advance the UN’s Sustainable Development Goals. The accelerator programme connects entrepreneurs with impact investors to support sustainable investment growth, enabling entrepreneurs to scale their solutions. To date, this programme has supported over 480 entrepreneurs.

Sources: (Accelerate2030, 2025[38]), (Bpifrance, 2024[39]), (KCIC, 2025[40])

Innovation prizes and competitions can enable SMEs and start-ups to obtain financial rewards for their proposals of developing innovative green technologies. These prizes provide funding to SMEs for advancing their solutions without taking on debt or diluting ownership. Additionally, winning an innovation prize enhances visibility, opening up opportunities for market entry, networking, and obtaining further investments. Such competitions further foster potential partnerships and increase visibility among consumers. Examples of this type of support are included in Box 2.4. For instance, European SMEs and start-ups working on circularity, energy efficiency and renewable energy use can participate in the European innovation Procurement Awards.

Box 2.4. Examples of innovation prizes for green start-ups and innovators

France: SMEs and start-ups can participate in the i-Nov innovation competition from Bpifrance. This competition focuses on supporting innovative projects, with a key pillar in Energy, Resources, and Natural Environments. The program provides funding of EUR 1 million to EUR 5 million per project, with 60% covered by a subsidy and the remaining 40% from recoverable advances.

EU: The European Commission offers European Innovation Procurement Awards, particularly targeted at SMEs and start-ups. The Net Zero Industry Procurement category rewards innovative solutions which promote circularity, energy efficiency and the use of renewable energy in industry. Awards range from EUR 25 000 to EUR 75 000.

ClimateLaunchpad, co-funded by the European Union, is a green business idea competition for entrepreneurs. Projects covering areas such as renewable energy, sustainable food systems and mobility can participate. Selected participants will benefit from bootcamps and coaching sessions to build up an effective business plan, as well as networking opportunities. At the end of the programme, businesses have the chance to gain prizes of from EUR 2 500 up to EUR 10 000.

Sources: (Bpifrance, 2025[41]), (European Innovation Council, 2025[42])

2.2. Non-financial support for SME innovators

Non-financial support can assist SME green innovators by complementing financing instruments and it often serves as a catalyst for growth and innovation. This type of support includes mechanisms such as R&D facilitation through collaborative programmes, incubators and accelerators, as well as access to testbeds and pilot initiatives (Table 2.2). These support mechanisms help SMEs refine their technologies, validate business models, and connect with key stakeholders across the innovation ecosystem.

Table 2.2. Non-financial support programmes for SME innovators

Support programme	Description	Examples
Green R&D collaboration programmes	Matchmaking services and funding which enable SMEs to access research facilities and relevant research partners	Cooperation networks and matchmaking services which facilitate partner matching Access to government research facilities
Green incubator and accelerator programmes	Tailored support to facilitate growth and commercialization through mentoring and technical assistance services	Training programmes on developing growth business models Networking and matchmaking to relevant consumers and partners
Green testbed and pilot programmes	Real-world testing facilities to demonstrate and validate innovative technologies	Physical facilities and services which enable testing of solutions Matchmaking services with relevant partners

R&D collaboration programmes bring together SME green innovators, research institutions, universities, and industry players to co-develop breakthrough sustainable technologies and solutions. These programs create opportunities for SMEs to access advanced research facilities, expertise, and funding while benefiting from knowledge-sharing and innovation ecosystems. By pooling resources and expertise, SMEs can overcome the high costs and risks associated with early-stage innovation. Governments and public financial institutions often support these initiatives by providing grants, matching funds, or tax incentives for collaborative R&D.

Examples of greening-oriented R&D collaboration programmes are illustrated in Box 2.5. This includes the Innovative Solutions Canada Programme, which gives innovators access to R&D facilities, government expertise and networks. In Türkiye, innovative SMEs are supported through a 6-month programme which provides matchmaking services, business model development and commercialisation support.

Box 2.5. Examples of R&D collaboration programmes

Canada: The Innovative Solutions Canada (ISC) Programme offers support to SMEs and start-ups with innovative solutions through providing them with access to government expertise, facilities and networks. The centre facilitates connections between SMEs and relevant partners to prove feasibility, test and scale their solutions, as well as providing complementary funding. The programme further provides support on market entry. Key target areas of the programme include green technology solutions such as solar panel recycling or low carbon construction materials.

Türkiye: Türkiye's Scientific and Technological Research Council (TÜBİTAK) is offering support to SME innovators through the Industrial Innovation Network Mechanism (SAYEM) programme. This programme offers a platform aiming to encourage collaborations between innovators, universities and government agencies for innovative R&D projects which target sustainable growth. The programme operates in two phases: first, forming innovation networks with a business roadmap, and second, supporting product commercialisation with grants for R&D implementations. Projects are supported for one year, with each phase lasting six months. After this, a process can be launched which monitors the success of the commercialisation of the product, which can lead to a possible extension in support. This initiative aims to stimulate green industrial innovation through knowledge sharing and cross sectoral collaboration.

Sources: (Government of Canada, 2025[43]), (TÜBİTAK, 2025[44])

Incubator and accelerator programs provide tailored support to SME green innovators at different stages of their journey, from ideation to scaling. Incubators focus on early-stage start-ups, offering resources such as office space, mentoring, and technical assistance to refine ideas and prototypes. Accelerators, on the other hand, help SMEs scale their innovations through intensive business development, market access, and investor connections. These programmes often include funding opportunities, networking events, and training on topics such as commercialisation and sustainability metrics. For green innovators, incubators and accelerators designed around sustainability goals can provide critical resources and guidance to turn ideas into market-ready solutions, while aligning with environmental impact objectives.

Examples of green innovator support through incubators and accelerators are included in Box 2.6. In the EU, SMEs and entrepreneurs can benefit from tailored coaching services, access to resources and matchmaking services through the EIT Climate-KIC Accelerator. The Asian Development Bank (ADB) supports SMEs with piloting opportunities and market entry.

Box 2.6. Examples of incubator and accelerator support programmes

Finland: Business Finland provides market access advisory services and fosters international collaboration and networking opportunities for Finnish SMEs and start-ups developing innovative energy solutions. Support includes guidance on navigating international regulations, insights into global end-user needs, and matchmaking with suitable partners. Start-ups can access the ‘Dealflow Finland’’ portal, which connects them with impact investors.

Asia: The ADB Venture Lab, the technical assistance arm of the venture capital fund of the Asian Development Bank, provides support to innovative start-ups through connecting them with relevant partners. The programme accelerates market entry by fast-tracking solutions and facilitating piloting opportunities.

Europe: The EIT Climate-KIC Accelerator, funded by the EU, supports cleantech entrepreneurs by providing tailored coaching, educational services, and access to tools and resources. The programme helps start-ups develop business models, identify target customers, and connect with relevant partners and investors through matchmaking services. To date, it has supported over 150 start-ups.

International: The Cleantech Innovation Programme, a collaboration between the Global Environmental Facility and the United Nations Industrial Development Organization, supports SMEs and start-ups in low- and middle-income countries to scale innovative solutions that reduce greenhouse gas emissions and drive sustainable economic growth. It offers direct support to SMEs through customised accelerator programmes with tailored training and advisory services to help SMEs refine their business models, scale operations, and secure investment. Adopting an ecosystem approach, the programme connects SMEs with key public and private stakeholders while providing policy guidance to countries to strengthen regulatory frameworks for fostering innovation.

Caribbean: The Eastern Caribbean Greenpreneurs programme by the Global Green Growth Institute (GGGI) is a three-year programme which helps entrepreneurs and start-ups working on innovative green solutions. It offers capacity-building, mentorship, networking opportunities and funding support to help start-ups in the Caribbean region scale their sustainable businesses. The incubator programme targets MSMEs with demonstrated growth potential who are showcasing scalable green business models. High potential start-ups can be award them with repayable grants of up to USD 50 000, as well as facilitating links with potential investors.

Sources: (EIT Climate-KIC, 2025[45]), (Climate Launchpad, 2025[46]), (UNIDO, 2025[47]), (ADB, 2020[48]), (GGGI, 2025[49]) (Business Finland, 2025[50])

Test beds and pilot programmes provide SME green innovators with real-world environments to validate and demonstrate their sustainable technologies or solutions. These programmes reduce the risks of scaling by allowing SMEs to test their innovations in controlled or operational conditions. Public institutions often facilitate access to these test environments by offering infrastructure, regulatory guidance, and funding. Successful pilot programs help SMEs prove the efficacy of their solutions, attract investors, and secure early adopters, accelerating the transition from prototype to commercialisation.

Examples of testbeds and pilots are included in Box 2.7. European SMEs, for instance, can use the Open Innovation Test Bed to test bio-based solutions, as well as receiving complementary technical support, market insights and funding support. Singaporean start-ups and SMEs providing solutions in waste management can apply for a testbed programme offered by the National Environment Agency (see Box 2.7).

Knowledge-sharing platforms provide SMEs with access to expertise by facilitating connections with industry experts, mentors, and other like-minded SMEs and start-ups. These platforms also create opportunities for collaboration, enabling SMEs to share resources, knowledge, and best practices. Additionally, by offering market insights, these platforms help SMEs with market entry. For instance, Austrian start-ups can participate in the Greentech Valley platform to benefit from networking and collaboration opportunities, as well as technical expertise on market entry (see Box 2.7).

Box 2.7. Examples of testbeds, pilots and knowledge-sharing platforms for green innovators

Testbeds and pilots

Singapore: The National Environment Agency is enabling SMEs and start-ups to testbed or demonstrate their Waste-to-Energy solutions. The initiative focuses on energy recovery from waste, improving resource efficiency, and reducing environmental impact. Participants can pilot their solutions in a real-world environment, to help the development and commercialisation of their proposed solution. Applicants need to articulate their deployment and commercialisation plans.

Europe: INN-PRESSME, a public-private collaboration co-funded by the European Union, offers an Open Innovation Test Bed to European SMEs developing bio-based solutions in sectors like energy, transport, and consumer goods. This testbed provides SMEs with access to physical facilities and services needed to develop, test, and scale their innovations. In addition to technical support, it offers market insights, circular economy assessments, funding support, and product certification services to support SMEs.

Europe: The European Institute of Innovation and Technology (EIT) is offering the EIT Community Testbeds for innovative start-ups and SMEs to test their solutions in a real-world environment. This initiative also offers opportunities for collaboration with other industry players and emerging start-ups, fostering further innovation.

Knowledge-sharing platforms

Austria: The Greentech Valley was established by the cleantech cluster ECO WORLD STYRIA in 2005 in Austria through a public-private partnership. It receives financial support from the regional government of Styria and serves as a platform to connect green Austrian cleantech SMEs working on biomass, solar energy, waste management and water efficiency. Greentech Austria provides SMEs with networking opportunities, business development support, market access, and collaboration platforms to help them scale their green innovations. The platform also offers access to funding, technical expertise, and advisory services to help SMEs enhance their green products and services. Additionally, Greentech Austria facilitates connections between SMEs, research institutions, and industry players to accelerate the growth of the green tech sector in Austria and internationally.

US: The National Renewable Energy Laboratory (NREL) facilitates knowledge sharing between clean tech start-ups through its Innovation and Entrepreneurship Center. The centre offers networking and collaboration opportunities, connecting innovative start-ups with investors and industry stakeholders. It further offers tools and data which enable start-ups to obtain market insights and learn about best practices.

Sources: (INN PRESSME, 2023[51]), (EIT, 2025[52]), (National Environment Agency, 2025[53]) (Green Tech Valley, 2025[54]), (NREL, 2025[55])

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