Cleantech companies offered new loan via ASB

‍ASB has launched a cleantech fund it says will accelerate the sector and make it easier for early-stage companies to access capital. 

The fund will lend up to $5 million for each cleantech venture, with $30 million available overall. It aligns with ASB’s sustainable lending target of $6.5 billion by 2030. 

New Zealand has a cleantech ecosystem of around 400 companies. The recent Startup Investment report found deeptech – technology solutions based on scientific and engineering principles – to be the hottest sector for investment in the first half of 2023, accounting for almost half the 67 deals made. Among its sub-sectors, cleantech received 22 percent. 

However, there continues to be a tightening in investor capital available globally, particularly for Series A and B rounds. 

The ASB loans, deployed over three to four years, offer the ability to capitalise interest in the early years, which means the interest is added on to the sum owed at the end.

With regard to the loan rates, Jonathan Oram, ASB’s executive general manager for corporate banking, says it will vary per venture.

“It’ll depend on each opportunity, but look, it will be more expensive than a business loan, but it’s not going to be seeking equity returns. So, there’s quite a range there. Returns could be 20 plus percent, right? A business loan will be less than 10. It’s going to be somewhere in between”.

Once the loan is in place, ASB has no say in daily operations, Oram says, provided businesses adhere to the “covenants relevant for each transaction”. Other than ‘being specific to the customer,’ no further elaboration as to what these might be was provided.

The target

‍The bank is targeting businesses with a “few runs on the board”, says Oram, and a pathway to profitability within five years.

Sectors of interest include renewable energy generation, new low-carbon transport or construction materials and industrial processes, waste and pollution reduction technology, carbon sequestration, farm emissions reduction or natural environment protection. However, Oram says there is room for flexibility, with ASB willing to consider businesses on the “fringes of cleantech”. 

Unlike the October-launched ASB Access food and fibre programme, which piloted with six eligible businesses, there is no limit to how many businesses can take part, with Oram describing the bank as having “an appetite to lend down to small projects”.

Though the loans are bank-backed, Oram believes the fund will provide a “useful marriage” between the bank’s larger corporate and private equity customers willing to deploy capital to meet their sustainability goals and cleantech startups looking for investment. 

“Banks have a really important role in terms of accelerating that move towards net zero [emissions] and that’s because capital, and availability of capital, are big drivers,” he says. 

He expects the fund to work alongside other providers such as New Zealand Green Investment Finance and says ASB would be interested in pursuing partnerships. 

Businesses do not need to be ASB customers to participate.