Global 'climate tech' investment more than triples

Worldwide investment into technologies focused on reducing greenhouse gas emissions (GHG) has more than tripled in just 12 months, analysis has uncovered.

The findings from PricewaterhouseCoopers (PwC) show that 'climate tech' investment from venture capital and private equity reached $87.5bn (£65.8bn) during the second half of 2020 and first half of 2021, representing a 210% increase on the $28.4bn invested over the previous 12 months.

More than $60bn of investment was made in the first half of 2021 alone, with 14¢ of every dollar of venture capital now going to climate tech.

This has been driven by growing focus on ESG considerations, emerging regulations and standards, and thousands of companies committing to net-zero strategies. However, the analysis also suggests that investors are falling short when 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 climate tech investment between 2013 and the first half of 2021.

“Our research has found there is potential to better channel and incentivise investment in technology areas that have the greatest future emissions reduction potential,” said Emma Cox, global climate leader at PwC UK.

“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?”

The top five technologies representing over 80% of future emissions reduction potential are solar power, wind power, food waste technology, green hydrogen production, and alternative foods/low GHG proteins.

However, mobility and transport continues to receive the lion’s share of climate tech funding as electric vehicles, micro-mobility and other innovative transit models attract investor attention, raising two-thirds of total climate tech funding during the second half of 2020 and first half of 2021.

The US lead the way in climate tech investment during this period, attracting $56.6bn, while China raised $9bn, and Europe $18.3bn. The analysis also shows that the average climate tech deal size nearly quadrupled in the first half of 2021 to $96m, up from $27m one year prior.

Cox added: “The last 12 months have shown a clear intention globally to respond to the climate crisis and achieve net zero.

“There is now a critical opportunity for venture capital to set the direction of travel for investment, focusing to a greater extent on the key technology areas that will enable the greatest progress in decarbonisation.”