Lessons from the EU: three key insights on impact investing for Australian investors

The European private impact investing market reached €190 billion in 2024. Whilst European policymakers have built structured, scalable frameworks for impact investing, the real opportunity here in Australia is private capital adoption to drive large scale environmental and economic transformation.

At Dragonfly Enviro Capital, we back growth companies with proven solutions that directly address climate resilience, pollution, waste management and biodiversity enhancement. Global investors are shifting towards impact-driven investments because the returns are there, the demand is growing, and the need for action has never been clearer. The role of government? To follow the lead of private capital.

What has the EU’s impact investment market and model demonstrated?

1. Private equity moves faster

Private equity has played a central role in the European impact investing market growth, scaling companies that deliver both commercial success and measurable impact. Private equity has demonstrated that it can move faster, de-risk innovation, and generate stronger returns compared to traditional government funding alone.

This is also reflected in Dragonfly's portfolio, where companies like Red Earth Energy Storage are rapidly expanding Australia's renewable energy storage capacity. Their commercial-scale battery systems provide a critical piece of the transition away from fossil fuels, filling a market gap that would have otherwise relied on slow moving policy incentives.

Similarly, Pacific Bio’s macroalgae technology is transforming wastewater treatment by stripping out pollutants - a nature-based solution that reduces reliance on chemical-intensive processes. These solutions are already profitable, yet they remain underutilised in government utilities.

By leveraging private capital, Dragonfly demonstrates how scalable solutions can drive impact without waiting for regulatory mandates.

2. Strategic alignment maximises impact

One of the EU’s most effective strategies is aligning impact investments with economic and environmental priorities, ensuring capital flows into the right sectors at the right time. The European Green Deal serves as a clear economic blueprint, focusing capital on high-impact areas such as energy transition, circular economy solutions, and biodiversity restoration.

In Australia, a similar approach would mean directing investment into high-growth sectors such as biodiversity resilience and decarbonisation - key areas included within Dragonfly’s mandate.

Water and Carbon, for example - have pioneered natural wastewater treatment solutions, including wetlands that filter out industrial contaminants such as PFAS (“forever chemicals”). Their model directly aligns with Australia’s water and health priorities, yet greater policy alignment could accelerate adoption across government infrastructure projects.

Private equity impact investments recognise opportunities and if governments follow our lead, it would ensure that funding flows towards solutions that are already proving their value in the private sector and further accelerate growth, impact and economic security.

1. Innovation drives market growth

Europe’s expansion into diverse financial instruments - such as green bonds and impact-focused investment funds - has increased market participation, funnelling capital into projects that deliver both financial returns and global impact.

In the UK, green bonds have raised billions for areas Dragonfly is already addressing such as climate resilience. Similarly, in the EU, Sustainability Awareness Bonds have directed capital into biodiversity protection, pollution control, and renewable energy.

Our investee, Downforce Technologies, a UK-based, high-growth company, is already demonstrating how AI and satellite monitoring can quantify soil health, making land restoration financially viable. This is an example of land restoration becoming economically viable and is the kind of opportunity Australia could harness by increasing investments into regenerative industries through impact-focused funds.

Through these approaches in the UK and Europe, private capital has been able to fund high-impact industries at scale. Australian policymakers could facilitate - not dictate - this transition by aligning regulation with market-driven innovation.

The takeaway - impact investment is leading the way forward.

Dragonfly’s portfolio demonstrates that private capital is already outperforming traditional government funding in delivering scalable, profitable, and measurable impact.

Rather than waiting for policy frameworks to dictate investment flows, Australia could take a page from the EU’s success and get behind private capital to do what it does best - identifying high-impact opportunities, scaling solutions, and generating economic and environmental value.

Contact us to learn more.

References:

European Venture Philanthropy Association. (2024). The size of impact 2024. (VIEW LINK)