Sat. Jan 22nd, 2022


Widespread gloom is still swirling around humanity’s chances of tackling the climate crisis, despite the progress made at the COP26 summit in Glasgow in November. “We have 98 months to halve global emissions,” he said. Aminath Shauna, Minister of Environment of the Maldives, adding that failure to do so would result in a “death sentence” for her archipelago.

Policymakers need to move much further and faster before we have any hope of reaching that target within the required time frame. But in at least one area, there has been much more encouraging progress this year: the massive investments made in climate technology. In itself, technology will never solve the problem of climate change. But technology remains an indispensable part of the solution. And there are many positive signs that executives, entrepreneurs and investors are now appreciating the scale of the challenge and taking action to meet it.

According to PwC’s recent State of Climate Tech reported, some 6,000 investors, ranging from venture capital and private equity firms to state funds and philanthropists, have supported more than 3,000 climate technology starters since 2013. In total, investors have sunk about $ 222 billion in these start-ups. Funding has increased by 210 percent over the past year.

As is the nature of the speculative VC sector, most of these new ventures will fail. Some investors may also think that they have seen a similar green tree-and-chest movie before. In the late 2000s, a boom in money flowed to clean technology companies in anticipation of significant policy changes, which governments never delivered. The ensuing market crash has deterred many investors from playing the game again.

Yet there are reasons to believe that the latest investment boom will be more sustainable. First, the need is demonstrably more urgent. Second, policymakers are ultimately creating a more permissive investment environment, even if they have not yet adopted wholesale carbon taxes. Third, many green technologies have evolved significantly and some really exciting innovations are starting to bear fruit.

There have been some astonishing advances in the efficiency and cost dynamics of solar, wind and battery technologies. Many investors are also betting big on hydrogen, next-generation nuclear power and carbon capture. Further on, hope is rising nuclear fusion tokamaks and space-based solar power can provide carbon-free energy sources around the world.

The size of climate technology transactions nearly quadrupled to $ 96 million in the first half of 2021 compared to the previous year. But for any of these technologies to make a significant contribution to reversing global warming, billions of dollars will have to be spent. Large institutional investors will now have to mobilize to scale the deployment of the most impactful technologies.

Some environmentalists claim that betting on technological breakthroughs is a distraction that will hinder meaningful efforts to deploy existing technologies that can make more difference. In fact, we have reached the stage where we have to make every bet we can. “We need the now and we need the new,” as John Doerr, Chairman of the VC Firm Kleiner Perkins and active climate technology investor, it stated.

Perhaps the biggest driver of the wave of climate technology investment is self-interest, which in this case counts as an unequivocally good thing. Tackling climate change may be considered the biggest market opportunity of our lifetime. Great returns often come from solving great challenges. Institutional investors must be willing to jump on board.

Climate Capital

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