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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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Venture Capital Is Obsessed With Climate Tech

  • The climate technology industry has exploded in the past decade, with more than $70 billion investing in 2022 and another record-breaking year expected in 2023. 
  • PWC estimates that more than one-quarter of all venture capital funding is now going to climate technology, with a focus on decarbonisation. 
  • Universities are responding to the growing demand and funding for climate tech by developing climate-specific degree programmes to ensure a qualified workforce.

Investments in climate tech have risen significantly in recent years, as governments put increasing pressure on companies to decarbonise, introduce favourable climate policies, and push a rapid transition to green. This has provided opportunities for start-ups and long-established tech companies worldwide to innovate and develop new products that will support an accelerated green transition. 

Just a decade ago, climate tech was largely unheard of, with little funding coming from the world’s biggest companies. But skip forward 10 years, after multiple COP climate summits, and climate tech is where every company wants to invest their money. Approximately 35,000 climate tech companies were established between 2010 and 2022, bringing the total to 44,595. Investment in 2022 was estimated at around $73.86 billion, and climate tech can expect another record year in 2023. The industry is led by the U.S., followed by the U.K., but start-ups offering innovative climate technologies are emerging around the globe. 

The U.S. is home to approximately 14,300 climate tech start-ups. While an estimated 5,200 climate tech start-ups operate in the U.K. And funding for U.K. climate tech is expected to achieve around $20 billion a year for the rest of the decade. Germany, France, Canada, and the Netherlands are trailing close behind with thousands more climate tech companies. If climate tech firms continue to grow at the same rate as the previous decade, there could be around 66,500 climate tech companies worldwide by 2030, representing around 3 percent of all start-ups. While the majority of climate tech start-ups continue to work in the energy sector, at around 25 percent, many are developing technologies for other industries such as farming and food production, mobility, and manufacturing.

Universities are responding to the growing demand and funding for climate tech by developing climate-specific degree programmes. With jobs in fossil fuels expected to fall in the coming years, as opportunities in renewable energy and climate tech rise, climate-focused degrees are more likely to prepare students for the job market of the green transition. In fact, jobs in renewables and the environment rose at a ratio of 5:1 in 2015 and 2:1 in 2020, compared to jobs in oil and gas.

Investment in energy start-ups increased by an estimated 2.7 times between 2020 and 2021, to total $29.65 billion in 2022. And much of this financing was directed at climate tech, such as batteries, innovations in renewable energy generation, alternative fuels, more efficient grid management, and carbon capture and storage (CCS) technologies. 

Now, some of the world’s biggest companies are investing in climate tech. At present, 49 countries and 93 Fortune 500 companies have committed to net-zero targets. Venture capital investment in climate tech in the U.S. rose by 80 percent between 2020 and 2021, to reach $56 billion. And PWC estimates that more than one-quarter of all venture capital funding is now going to climate technology, with a focus on decarbonisation. This reflects the momentum in climate tech and its ability to remain resilient during times of economic and energy crises. 

Some of the majors betting on climate tech include Amazon, with its $2 billion Climate Pledge Fund, and Microsoft, with its $1 billion Climate Innovation Fund, both launched in 2020. Microsoft gave itself a time limit of four years to invest this money, of which it has spent $564 million. So, it’s not surprising that the company just announced a major investment in Brooklyn-based climate tech company BlocPower. 

Microsoft, Kimbal Musk, and NBA’s Russell Westbrook all announced investments in BlocPower this month, following a $155 million fundraising round to expand and finance community decarbonisation projects. In addition to the funds, BlocPower acquired $130 million of debt financing led by Goldman Sachs, bringing the total to $250 million. BlocPower’s CEO Donnel Baird stated, “We are fighting the climate crises while improving quality of life for city residents.” Baird added the funding will “allow us to accelerate building decarbonization across America.”

BlocPower focuses on improving the energy consumption and efficiency of U.S. buildings, working with cities to build and retrofit structures using renewable energy and energy efficiency concepts and technology. Its most notorious work has been in the New York college town of Ithaca, which BlocPower has helped to become the first net-zero municipality in the U.S. The first phase of the development included electrification projects for 1,000 residential buildings and 600 commercial buildings, with the project aiming to cover a total 6,000-building inventory.

The company is also helping other major tech firms to improve their climate actions, offering support to Meta to achieve its 2030 climate goal of carbon neutrality. BlocPower is helping several tech majors to renovate Menlo Park, the Silicon Valley hub of many firms, to electrify thousands of buildings and reduce fossil fuel consumption.

In addition to green energy developments, companies and governments worldwide are investing heavily in climate tech to help accelerate the green transition. Investments in climate tech have risen significantly over the last decade, a trend that is set to continue. And while some companies are seeing more funding than others, the plethora of climate tech start-ups popping up worldwide offers a variety of investment opportunities across a far-reaching range of industries. 

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By Felicity Bradstock for Oilprice.com

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