Market study and recommendations to establish a financial product for investments in Sustainable ICT across Europe

Project executed on behalf of the European Commission

Project Objective

The EU is a leading power in the fight for climate action, and as such continues to set ambitious sustainability goals for the mid- to long-term. One such area that is often overlooked with respect to sustainability is the ICT sector. To address this large but uncertain sector, the European Commission contracted Axon to perform an analysis of the sector’s carbon footprint, its innovations in sustainability and its related financing needs. 

Axon’s combined expertise in ICT advisory services and global investment activities allowed us to design a project to produce a comprehensive understanding of the technological developments in the field of sustainable ICT and cleantech in Europe, and use such research to advise on an EU-based financial product for sustainable impact. This project was broken down into the following key objectives:

  • Identification and assessment of sustainable ICT projects, with focus on the following categories: Data Centres, Telecoms (including 5G and IoT), Digital Devices, and Software & AI.
  • Estimation of the entire demand and public supply of finance for sustainable ICT projects in the EU, through the elaboration of a Gap Analysis Model, and the projection of additionally required public spending to meet such demand.
  • Assessment of the share of the investment gap that can be financed under the InvestEU programme.
  • Policy recommendations on the scope of projects eligible for support under the InvestEU Sustainable ICT product. In addition, estimation of the target volume of the product, and its other financial and non-financial parameters.

Project Description

To accomplish these tasks, Axon began with an extensive desk research on sustainability trends, projects and stakeholders within the European ICT ecosystem, in four main categories: Data Centres, Telecoms (including 5G and IoT), Digital Devices, and Software & AI. We then created a database of technologies, projects and project categories influencing sustainability in ICT, detailing the sustainability KPIs, sustainable impact, and investment needs. This research was complemented with interviews with stakeholders (including corporates, technology experts and NGOs) from the European ICT ecosystem on technologies, investment needs, and future projections of sustainability in their industry.

Figure 1: Overview of the ICT projects database structure, built during the project

The supply side of the sustainable ICT financing was also explored in detail, with desk research on trends, financial actors and investments made from the supply of finance to sustainable ICT initiatives in the EU (future and present). A further database was created to log all publicly visible finance institutions at the EU, regional and national level, actively supplying finance to sustainable ICT projects currently or in the next 7 years. This was again complemented through interviews with experts in financial players and investment firms supplying finance to the ICT sector for sustainable projects.

The results of both workstreams led to the creation of a Gap Analysis Model to track total market demand for finance from sustainable ICT projects within the EU suitable to meet the EU sustainability targets (across the major categories and subcategories), against the total market supply of finance in these areas, for the next 7 years. This led to quantifiable future projections of a market gap for sustainable ICT within the EU.

Figure 2: Overview of Axon’s Gap Analysis Model for ICT sustainability

Using the estimated market gaps identified through the Gap Analysis Model and insights gained from our research of both the supply and demand side for sustainable ICT project financing, we were able to elaborate a set of recommendations at the subcategory level for the strategic placement of InvestEU money, fit to deliver the highest impact on sustainability in each area. These recommendations concerned the volume, type, recipient and intended use of investment in each case as well as the supporting rationale.

Key Takeaways

The European Commission team has benefited from this fresh insight into key areas of development with respect to sustainable ICT and cleantech in Europe, their levels of maturity and their anticipated impact on sustainability. The team has received a quantified estimate of public investment levels for sustainable ICT in the EU, and the additional investment requirements to bridge the gap to meet European sustainability targets. This was complemented through recommendations on HOW and WHERE investment should be placed by the European Commission at the category and sub-category level, so as to generate maximum impact on European emission targets, supporting the low-level design of the financial product by the EC.