What is ClimateTech?
ClimateTech refers to a broad category of technologies, solutions, and innovations designed to address the challenges of climate change. These can include approaches such as renewable energy, energy storage, carbon capture and storage, sustainable agriculture, and transportation.
The aim of ClimateTech is to reduce greenhouse gas emissions, improve energy efficiency, and support the transition to a low-carbon economy.
Addressing climate change involves both mitigation and adaptation. Mitigation measures are actions taken to reduce and curb greenhouse gas emissions, while adaptation measures aim to reduce vulnerability to the effects of climate change.
To categorise climate solutions, there are three simple ways:
Market opportunity and growth rate
In 2021, the global market for ClimateTech was estimated to be around $13.8 billion with a CAGR of 24.2% leading to a $147.5 billion market size by 2032.
A surge in investment from both public and private sectors, increasing awareness of the urgency of the climate crisis, the development of new technologies, and policy initiatives supporting the transition to a low-carbon economy are driving the growth of the ClimateTech market. As more and more businesses and governments seek to reduce their carbon footprint and contribute to global sustainability efforts, the ClimateTech market is expected to be a major area of growth and innovation in the coming years.
Investment trends to date
ClimateTech investment has grown rapidly in recent years, with billions being invested in the sector. According to PitchBook, ClimateTech VC investment grew from $2.9 billion in 2019 to $13.8 billion in Q3 2021, but dropped in Q1 2023 to $5.7 billion most likely due to the global economic downturn. However, the US Government’s Inflation Reduction Act 2022 provides carbon emission reduction tax incentives to businesses, and with the 2050 net zero emissions target looming, analysts see the recent market trends as an anomaly. In fact, Pitchbook predicts that five years from now, ClimateTech will be a $1.4 trillion market.
The investor base in ClimateTech is also expanding beyond VCs and institutional investors, with more corporate venture capital funds, impact investors, and even governments and philanthropic organisations investing in the sector. Investors are increasingly focusing on early-stage ClimateTech startups, often the most innovative and disruptive companies, and are looking for measurable social and environmental benefits, not just financial returns.
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Future potential
Investment in ClimateTech will continue to grow with more institutional investors and new types of funding vehicles such as green bonds and impact funds. As more resources are devoted to ClimateTech, we can expect to see rapid innovation and scaling up of solutions, potentially with the support of government policies and incentives. Collaboration between businesses, governments, and other stakeholders is also expected to increase. Ultimately, the goal of ClimateTech is to reduce greenhouse gas emissions and mitigate the impacts of climate change, helping to safeguard the planet for future generations.
Current applications
Emissions reduction technologies are being developed and deployed to mitigate the impacts of climate change. These include carbon capture and storage (CCS) technologies that capture carbon dioxide emissions from industrial facilities and store them underground, renewable energy technologies like solar and wind power, and energy storage technologies such as batteries and fuel cells. Sustainable transportation technologies like electric vehicles, building efficiency technologies such as smart building automation systems, and sustainable agriculture technologies like precision farming and smart irrigation are also key solutions. As the climate change challenge continues to grow, we can expect to see more innovative solutions emerge in the future.
Why invest in ClimateTech
Investing in ClimateTech has numerous benefits. The sector is experiencing significant growth, with the potential to generate high returns for investors. Investing in ClimateTech allows investors to support innovative solutions that can have a positive impact on the environment and society.
Governments around the world are increasingly implementing policies and regulations aimed at reducing greenhouse gas emissions and promoting sustainability, creating a favourable environment for ClimateTech solutions and supporting their commercial viability. Investing in ClimateTech can help diversify a portfolio and mitigate risks associated with more traditional investments. Finally, investing in ClimateTech can provide access to new markets and opportunities, particularly in emerging economies where there is a growing demand for sustainable solutions.
Learn more about ClimateTech
Whether you’re a seasoned investor or someone interested in learning more about the impact of climate change, there has never been a better time to explore the possibilities of ClimateTech.
Find out more about the latest developments in ClimateTech in our articles below and book a call to ask about our current ClimateTech deals.