India and Climate Tech: Unleashing India’s Green Investment Potential

ClimateAngels | Feb 01, 2023

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According to PwC’s state of Climate Tech report – 2022, Climate Tech received 25% of the total global VC investment pie.

This shows a significant increase from roughly 14% in 2021. To the 1250+ member unicorn club, globally Climate Tech has contributed 87 startups. These stats go on to show that Climate Tech is emerging on top despite the economic background of the past year.

Rising transport emissions highlight electric vehicle transition. Green hydrogen fuels expected to drive future. PwC Climate Tech 2021; shown in the graphically in the image

Source: PwC – State of Climate Tech In India – 2021

The shift in the investor attitude towards Climate Tech is apparent in India. During 2017-2021 of the $75 billion invested in Indian start-ups only a modest portion, roughly $1 billion, trickled down to climate tech companies.

The $1 billion in funding was largely provided by angel investors and seed-stage investors. Many of the seed-funded businesses are starting to attract customers and are prepared for larger rounds of funding. In 2021-22, there were numerous instances of larger rounds of funding. Notable ones included:

Tiger Global led the $25 Million Series A round for Battery Smart
BP Ventures led $25 Million round for BluSmart
Shell Ventures led $25 Million round for Statiq
Woodside Energy and Ankur Capital led $20 Million round for Stringbio
Dare Ventures $25 Million round for Ecozen

How Is The Growth of Indian Climate Tech Ecosystem?

While the growth in the Indian Climate Tech ecosystem took a long time to surface it is definitely here to stay. The following trends shed a light on the developments that have taken place in the sector in the recent past.

Climate Tech is an innovation-first deep tech sector. The key growth indicators for the sector include the significant amount of investment in the sector.

According to HolonIq, Climate Tech investments in India have increased from ~$100 Million in 2015 to $3.7 Billion in 2022. There is a strong case for companies to dive deep into solutions that can cater to the requirements of the Indian consumer.

Companies are achieving this by actively filing for patents, for instance, our portfolio company – Matter has filed more than 100 patents since its inception. Innovation is a necessity as models copy pasted from other continents and countries simply cannot work in India and patents are the ultimate testament of innovations.

Moreover, the number of companies operating in the market has been seeing an upward trajectory of late too. According to a report by IIC, India currently houses 120+ funded climate tech start-ups. Collectively these startups have raised 200+ funding rounds from 272 unique investors across India. This has helped India ranked 9th globally in the VC funding for climate tech.

Climate Tech companies have a market-expanding nature due to the exacerbating climate crisis. The technologies in the sector would cater to an ever-increasing total addressable market. Additionally, the government policies and regulations in place to support the growth of these companies can also be analysed.

India has committed now and again to take an imperative stance in the fight against climate change at the COP 27 Summit India put forth a few comprehensive targets. The government has also introduced several subsidies to ease the burden on consumers until these technologies can be deployed on scale.

India’s Transition to Net Zero Emissions by 2070

India in its quest for self-reliance and to transition to a Net Zero Economy by 2070, has taken several key steps to nurture and strengthen its Climate Tech ecosystem.

Several sectors of the Indian economy such as mobility and transport, agriculture, and built environment to name a few are grappling with Climate Change.

According to Deloitte’s estimates in the business-as-usual scenario Climate Change could end up costing the Indian economy more than $33 Trillion while taking the challenge head-on innovating and exporting Climate Solutions can add $11 Trillion to the economy.

These hard-to-abate sectors of the Indian Economy while being essential for constant economic growth also pose a massive threat to the environment and the economic interests of the country, but in the threat also lies a massive opportunity for Angel Investors, Family Offices, VCs and other HNIs.

The Climate Tech ecosystem in India requires an injection of risk capital to help startups tide over the Valley of Death while also generating alpha-level returns for the early investors.