Climate technology investments growing exponentially
Updated: Sep 30, 2020
One sure sign that the green economy is developing rapidly is the emergence of new terminology and interest shown therein by global investors.
Cleantech entered the vocabulary soon after the turn of the century. It is understood as referring to business models or technologies which improve performance or efficiency while minimising or reducing environmental pollution. Cleantech encompasses clean energy, clean air, water treatment, supply chain improvement, etc.
Climate technology is a new arrival and deals specifically with tackling climate change, referring to business models and technologies which mitigate its effect. Encompassed here are technologies which reduce dependencies on fossil fuels, transportation and the constructed environment; the latter two of which emit high levels of greenhouse gas.
The distinction is subtle and has not been lost on investors. A report just published by PricewaterhouseCoopers (PwC) shows venture capital (VC) investment in climate tech growing at a rate five times faster than VC investment as a whole between 2013 and 2019.
From a starting point of $418m investment in 2013, climate tech is now attracting $16.3bn worth of investment. Climate tech investment still represents a relatively small share of global VC activity – 6% - but the rate of increase augurs well for future investment.
PwC’s report attributes the increased investment to requirements imposed on corporations to meet decarbonisation and net-zero targets with mobility and transportation accounting for well over half of the investments. They have identified 300 companies who have pledged to be net zero by 2050 as well as noting that the amounts being invested have increased dramatically and at a higher rate than the actual volume of deals.
Activity in VC investment can acquire momentum of its own and some global big hitters have joined in the rush to be involved in climate tech. Amazon has committed to launching their own $2 billion Climate Pledge Fund in June with an announcement of the first recipients from this fund being made in September.
Jeff Bezos, Amazon CEO, has pledged $10 billion of his own money to the Bezos Earth Fund to fight climate change with the help of scientists, NGOs and groups. Microsoft also created a $1 billion Climate Innovation Fund with the aim of being carbon negative by 2030. Likewise, Unilever has pledged to invest $1 billion in a Climate & Nature Fund.
The list goes on but despite all this activity, the PwC report does say that the “climate tech landscape across geographies and sectors…is far from the scale society needs” to achieve net zero by 2050.