Investments In Climate Tech Startups Are Assuring Positive Climate Change

ClimateAngels | Feb 07, 2022

“Reports suggest that our planet is warmer now than at any point in the past 650,000 years. It’s high time we should start taking climate change. Climate tech has the potential to boost our economies, and quality of life while reducing human impacts on the environment.”

Why is the planet facing intense climate change?

The greenhouse gas (GHG) emissions produced by human activities are the major cause of today’s changing climate. Greenhouse gases are vital in keeping the world warm enough for humans to live on. Climate change impacts it all from where we live to the water, we drink to the oxygen we breathe as global ecosystems shift.

All these were developed during World War II for various degrees of use and manufacturing. The population and volume of consumption have increased. Hence all these consumption patterns, as well as production processes, must be reconsidered.

Climate tech investments have evolved over the years

Emma Cox, Global Climate Leader, PwC UK, said: “The world has 10 years to halve global greenhouse emissions if we are to have hope of achieving net-zero by 2050.”

The last two years have seen a transformation in the VC landscape. New types of capital and funding mechanisms have resulted in significant new flows of investment into private markets.

The investment landscape for climate tech is no different, as society feels the impact of climate change. Following rapid growth between 2013-18 climate tech investment plateaued between 2018-20. So did the wider VC and private equity (PE) market, tempered by macroeconomic trends and the global pandemic.

Climate tech investments growth rebounded in H1 2021, benefitting from latent capital with an increased focus on ESG Investing (Environment, Social, & Governance).

Investment into climate tech startups & number of deals

Source: Amazon | Sustainability; Driving Climate Solutions

PwC analysis identified over 6,000 unique investors, including venture capitalists, private equity, corporate VCs, angel investors, philanthropists, and government funds. Together they have funded over 3000 climate tech startups between 2013 and 202, covering 9,000 funding rounds.

Key Investment Hubs: H2 2020 – H1 2021

“Technology is not the answer, it’s the amplifier of intent, and climate tech alone is not the panacea, but it’s a space that is emerging rapidly as a critical mechanism to bend the emissions curve down and get us back on track towards 1.5 degrees.”

– Leo Johnson, Partner, PwC UK

Image showing the world map and top climate investments hub in 2021

Source: Price Waterhouse Coopers (PwC)

SPAC: A tool in the climate tech toolkit

SPAC investment into climate tech has taken off. SPACs provide an alternative way for climate tech start-up management teams and sponsors to list their companies and access public marketing funding. Many in the VC climate tech community believe that SPACs have been helpful for climate tech.

Mobility and Transport contain the largest number of unicorns. It includes 43 from a total of 78 across all challenge areas.

The majority are EV-related (16). It is followed by efficient transport systems (13). Batteries and fuel cells (5) and low GHG air transport (5). 19 of the unicorns are in the US and 15 are in China.