Estonian companies’ involvement in green investment is similar to the rest of Europe

Studies show that green investments support countries’ competitiveness and economic growth and new economic opportunities are created by developing green technologies. “Many companies in Estonia invest in environmental protection,” said Märt Masso, expert of the Foresight Centre. “However, we need twice as much investment because the technology, equipment, buildings and energy systems used in economic activities need to be modernised much faster than they are today. In some cases, they need to be updated even before the end of their economic life.”

The green transition requires at least 13 billion euros of investment in Estonia. It is estimated that the total annual green investment required in Estonia is around 4% of GDP until 2030, around 2% of GDP from 2031-2040 and up to 1% of GDP from 2041-2050.

According to the Foresight Centre’s estimates, investing one euro in greener economic activity results in a total production increase of 1.2 euros and tax revenues for the provision of public services increase by 20 cents. “Therefore, we can expect money put into green investment to bring more benefits to the economy and competitiveness than investment into technologies with a larger environmental footprint,” said Masso.

According to the European enterprise survey, small and medium-sized enterprises increase their growth opportunities by investing in resource efficiency. Studies show that by investing 1% of annual turnover in resource efficiency, it is more probable that the company’s sales revenue will grow by up to 20%.

In Estonia, the share of companies investing in environmental protection is close to that of the European Union average. In 2023, 53% of Estonian companies have already invested and 52% plan to invest in managing climate change and reducing carbon emissions. In the European Union, on average, 54% of companies have already invested in this and 56% intend to do so.

However, Estonia lags behind considerably when it comes to energy production investments. In the European Union, on average, almost half of companies invest in this sector, while in Estonia, only 30% do.

Moving successfully towards a more sustainable economy depends on breakthroughs in the development and implementation of new green technologies. The Foresight Centre points out in their short report that compared to the EU average, Estonia’s innovation capability is hindered by companies’ low contributions to research and development. In 2022, companies’ investments in innovation accounted for 1% of GDP in Estonia and 1.5% in the European Union. “Knowledge transfer from universities to the business sector has improved over time, but it is still quite poor,” said Masso and added that when supporting investment and innovation, improving the regulatory environment must be a part of it.

The short report “Green investment trends of companies in Estonia and Europe” (in Estonian) has been prepared within the framework of the Foresight Centre’s research stream “Green transition scenarios in Estonia“.