How Investing In Green Tech Can Lead To A Green, Sustainable Future

ClimateAngels | Feb 07, 2022

“With the COVID-19 pandemic, we all know how unfair we have been to the environment. Thus, many investors are currently investing in green tech startups. The average size of a climate tech deal almost quadrupled to $96 million in the first half of 2021, up from $27 million one-year prior.”

What is green/climate tech investment? How does it work?

Greentech is also known as environmental technology (Envirotech). It’s a field that blends science, chemistry, climate control, and electrical devices to create new machinery and tools for environmental conservation. The technology, popular as Clean Tech, also combines the resources required for continued flourishing on Earth.

Green/climate tech investing entails making investments in firms that follow sustainable and friendly methods.

Investing in green/climate tech startups is not only an alternative for financial stability for investors.

Moreover, it is also critical to our people’s and planet’s existence. Rising number of governments, businesses, and investors have committed to achieve net-zero emissions by 2050.

Hence signalling solutions for net zero emissions target. This is one of several factors driving investment growth and investor interest including:

• New and cheaper technologies
• Greater consumer demands
• More supportive policies and regulations
• Growing corporate demands
• Increases in investments.

Green climate tech investments are booming like never before

Investment in climate tech is continuing to show growth as an emerging asset class. It’s a total of US$87.5bn over H2 2020 and H1 2021, with H1 alone delivering record investment levels of more than US$60bn. Megadeals are becoming common. They are driving much of the recent topline funding investment growth in green tech.

The top 5 of the 15 specific green tech areas represent over 80% of future emissions reduction by 2050. These 5 received 25% of recent green tech investments between 2013 and H1 2021.

The COVID-19 pandemic has not slowed investment activity. Since the crisis hit, major firms have pledged billions to green tech investment. It includes Amazon’s $2billion ‘Climate Pledge venture fund, Microsoft’s $1billion Climate Innovation Fund, and Unilever’s €1 billion climate funds. Close to 300 companies have a commitment to achieve net-zero emissions before 2050.

Green-tech start-ups in the U.S. are garnering the highest venture capital funding, with $56.5 billion that came to them in the year 2021. As per PwC climate tech report 2021, Chinese climate tech startups raised the 2nd largest sum, $9 billion. Meanwhile, European climate-tech firms raised $18 billion.

According to PwC research, around 1600 investors participated in over 700 funding rounds in H1 2021. This compares to fewer than 900 investors active in the first half of 2020. It indicates increased competition for climate tech deals as the wider investment community becomes aware of the asset class’s potential.

Since 2018, the number of early-stage venture capital, seed, and Series A investments has been constant. It ranges between 260 and 320 deals in each of those half-years.