21-Apr-23 ESG

Financing solutions to drive Europe’s transformation

The upcoming Earth Day on April 22nd highlights how new instruments to protect the environment may also boost Europe’s industrial competitiveness.

Outstanding green and sustainability-linked loans in European countries (US$ bn)

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Sources: The Institute of International Finance (IIF) (January 2023), DWS Investment GmbH as of 4/19/23

Such lending can then help accelerate growth and transformation processes across the manufacturing, transportation, healthcare and education sectors as well as improve the competitiveness of SMEs of all sizes and across all sectors and geographies. Take European healthcare systems, which increasingly need to deliver more and better care with fewer resources. Healthcare and life sciences have been one of the dominant users of private debt in Europe, accounting for 18% of total deals in 2022[1]. These sectors are also starting to show how being at the vanguard of sustainability-linked financing could help provide the investments and system adjustments needed to cope with aging populations, the rise in chronic diseases, the shortage of healthcare workers as well as the constraints on public finance.

SMEs are vital in this regard since they constitute 95% of Europe’s 34,000 med tech companies[2] and have developed nearly 20% of all human medicines recommended for authorization in 2020, half of which target a rare disease[3]. Unlocking the channels of sustainable finance for this sector will become increasingly valuable not just to address Europe’s demographic challenge but also to bolster the health and productivity of Europe’s citizens. This Earth Day seems like a good reminder that solutions developed to protect the environment can have plenty of other benefits too.

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1. Deloitte (2022). Deloitte Private Debt Deal Tracker Autumn 2022

2. edTech Europe (2022). The European medical technology industry in figures

3. European Medicines Agency www.ema.europa.eu/en/human-regulatory/overview/support-smes

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