Investment from venture capital and private equity is pouring into climate tech, reaching US$87.5bn over H2 2020 and H1 2021, with in excess of US$60bn in the first half of 2021 alone.
This represents a 210% increase from the US$28.4bn invested in the 12 months prior, with 14¢ of every dollar of venture capital (VC) investment now going to climate tech. Where the investment falls short, according to the PwC State of Climate Tech 2021, is in addressing the largest contributors to global emissions. Of 15 technology solutions analysed, the top five, representing more than 80% of emissions reduction potential by 2050, received just 25% of the climate tech investment between 2013 and H1 2021.
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. Innovation is critical to meeting the challenge and the good news is that climate tech investment is up significantly across the board. However, our research has found there is potential to better channel and incentivise investment in technology areas that have the greatest future emissions reduction potential. This raises the question of why these sectors are missing out – are investors missing a value opportunity or is there an incentive problem that needs the attention of policy makers?”
Climate tech encompasses technologies focused on reducing greenhouse gas (GHG) emissions. Following rapid growth between 2013 and 2018, climate tech investment plateaued in 2018-2020, tempered by macroeconomic trends and the global pandemic. However, investment rebounded sharply in the first half of 2021 driven by a heightened focus on ESG in private markets, emerging regulations and standards, and thousands of companies committing to net zero strategies.
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