Climate technology investments growing five times faster than average market rates
Venture capital investment into climate-related technology is growing five times faster than the average rate of all other industry investments, with new analysis from PwC finding that corporate and investor demands for low-carbon innovation led to $16bn being invested in 2019.
PwC’s new analysis shows that demand for climate technology has grown rapidly across venture capital markets. In total, $16.3bn was invested into climate tech across data, carbon capture and storage (CCS), the built environment, industrial process, agriculture, transport and energy in 2019.
While climate tech still only accounts for 6% of the venture capital market, it’s representation has grown by more than 3750% in absolute terms since 2013. In fact, growth in climate tech has surpassed growth in Artificial Intelligence investment. However, levels of investment into climate tech are actually down on 2018 levels.
According to the analysis, the growth has been driven by corporate requirements to meet net-zero commitments and investors ramping up interest and investments into low-carbon markets.
“Investor participation in climate tech is fundamentally different to the noughties clean tech era. Climate tech funding seems to be coming from every corner of the market,” Dr. Celine Herweijer global leader, innovation and sustainability at PwC UK said.
“More traditional venture capital firms are today at the table, growth stage investors including government backed asset managers and Private Equity players are getting involved in earlier stage deals to get exposure, and corporate players from oil majors and global consumer goods companies to Big Tech are playing important roles as strategic investors to scale approaches.”
PwC attributes part of the growth to the 300 companies that had committed to net-zero commitments at the time of writing the report – including PwC. In addition, many companies have set up large-scale investment funds to trial and commercialise low-carbon innovations.
Last week, for example, Amazon announced the first beneficiaries of its $2bn Climate Pledge Fund, with organisations developing carbon removal technologies, nature-based carbon markets and electric vehicle (EV) innovations set to benefit.
Elsewhere, Microsoft has launched a $1bn climate innovation fund, using its own capital, to help develop carbon reduction and removal technologies. The tech giant plans to reduce its carbon impact to below net-zero by 2030, with an additional goal of removing carbon from the atmosphere that the company has emitted since it was founded in 1975.
Consumer goods giant Unilever has also unveiled a new set of sustainability commitments, pledging to end its contribution to deforestation, promote regenerative agriculture, transition to biodegradable ingredients and reach net-zero emissions for products by 2039 - all supported by a new €1bn Climate and Nature fund.
Fortunately, the net-zero transition can be delivered without placing an economic burden on society. By scaling up energy efficiency efforts and deploying renewable energy generation capacity far more rapidly, the world could "technically and economically" transition to net-zero by 2050 for the cost of less than 1% of global GDP annually through to mid-century.
That is the key conclusion of a report from the Energy Transitions Commission (ETC), backed by 40 leaders from major energy companies, finance giants, high-emitting sectors like steel and transport and bodies such as the World Resources Institute (WRI). Corporate backers include the likes of ArcelorMittal, Shell, Tata Group and Volvo.
“The bottom line is that demand for climate tech is only going to accelerate,” the PwC report adds. “With global corporations, investors, and governments pledging to transition to net zero value chains, portfolios and jurisdictions, they are all betting on climate technology breakthroughs to be found, scaled and to transform industries and society. Demand is not yet at a stampede but the market is heating up and it’s time for all stakeholders to help back the innovations the world really needs.”