In the ‘State of Climate Tech Report 2023', consulting firm PWC reports a 40.5% drop in climate tech investment across the last 12 months.
But it’s not all bad news, funding into industrial climate tech solutions targeting the highest emitting sectors like concrete, steel making and manufacturing has grown from 8 to 14% globally.
In the U.S investment in this space for industrial solutions has doubled, going from a share of 9% to 16%, boosted by Inflation Reduction Act incentives and grants.
For Asia Pacific (excluding China) for industrials, it’s sitting at a 5.64% share of overall investments with the majority of dollars going into mobility and energy climate tech start-ups.
So, what's causing this significant drop? The usual suspects of rising inflation and soaring interest rates have contributed to this, with falling investment rolling back to 2018 levels
🚀 Key takeaways for climate tech start-ups:
- High-emission sectors like concrete and steel making require urgent attention.
- Global investment in industrial climate tech solutions rose from 8% to 14%.
- For Asia Pacific (excluding China), industrial climate tech funding is at 5.64%.
- U.S. investment in this space has doubled, from 9% to 16%, propelled by the Inflation Reduction Act.
- Sectors like food waste, agtech, and the built environment, while having high impact potential, see lesser funding.
- One of the biggest challenges for scaling climate tech especially in the industrial space is adapting to local infrastructure and assets which is a complex obstacle to overcome.
A successful climate start-up needs robust business fundamentals, profitability potential, and scalability regardless of funding fluctuations. Achieving net zero targets demands investment beyond just VCs and private equity, especially in infrastructure.
Why should we care?
We're at a pivotal point in our global push towards the 2050 Net Zero targets. PwC cites IEA data suggesting over a third of future emission reductions will hinge on today's technologies. Historically underfunded, high-emission industrial sectors present valuable opportunities for climate tech solutions.
So, sustained funding from both private and government sources is critical to drive innovation across the next decade.
Read the full PWC report here.