Investment in climate change technology skyrockets in 2021 – PwC

    29 Dec 2021

    Investments in companies developing technologies to combat the climate crisis increased to $87.5 billion in the first six months of this year, a new study by PwC showed.

    Thus, the growth was 210% compared to $24.8 billion in the same period a year earlier, according to a study by the State of Climate Tech 2021.

    PwC names solar energy, wind energy, food waste processing technologies, “green” hydrogen production, and so-called “alternative food products” as the five main technological solutions. However, it is estimated that investment in these five areas accounted for only 25% of total investment in climate change development between 2013 and June 2021, even though technologies in these segments provide an opportunity to reduce more than 80% of emissions by 2050.

    The bulk of investments, or about $ 58 billion, fell on businesses in the field of mobility and transport. This includes companies involved in developing electric vehicles, electric scooters, and flying taxis.

    At the same time, the average volume of transactions in the field of climate technology soared almost fourfold, to $96 million, in the first half of 2021, compared with $27 million a year earlier. The number of active investors in this area has grown from less than 900 in the first half of 2020 to more than 1.6 thousand in the first half of 2021.

    Specialized mergers and acquisitions (SPACs) in this segment raised more than $ 25 billion in the first half of this year, representing more than one-third of all climate technology funding during this period.

    The most significant volume of venture capital investments from the beginning of the year to June 30 was attracted by American companies: $ 56.5 billion was invested in startups in the United States. In second place are companies from China; investments in them amounted to $9 billion.

    For decades, many investors have tried to avoid investing in climate technology startups for fear that they might not generate enough income. Investment growth was strong between 2013 and 2018, but investment growth stalled in 2018-2020, according to PwC.

    Meanwhile, the figure rose sharply in the first half of 2021.

    Investment in companies developing technology to try to combat the climate crisis grew to $87.5 billion in the year leading up to Jun. 30, according to new research from PwC published on December 14.

    That’s up 210% on the $24.8 billion that was invested in climate tech in the same period the year before, the financial services firm said in its PwC “State of Climate Tech 2021” report, adding that 14 cents of every venture capital dollar now goes to climate tech.

    But venture capital and private equity companies aren’t necessarily backing the right climate tech companies, according to PwC.

    The firm focuses on what it says are the five leading technology solutions: solar power, wind power, food waste technology, green hydrogen production, and alternative foods/low greenhouse gas proteins. It says these five received just 25% of the climate tech investment between 2013 and Jun. 2021, despite technologies in these areas representing over 80% of the emissions reduction potential by 2050.

    The lion’s share of climate tech funding, some $58 billion, went to mobility and transportation companies, PwC said. That includes companies focused on e-scooters, electric vehicles, and flying taxis.

    The average size of a climate tech deal almost quadrupled to $96 million in the first half of 2021, up from $27 million one year prior, PwC said, adding that the number of active climate tech investors rose from less than 900 in the first half of 2020 to over 1,600 in the first half of 2021.

    Climate tech SPACs (special purpose acquisition companies) raised $25 billion in the first half of 2021, accounting for more than a third of all the climate tech funding during the period.

    While overall growth is up, the number of early-stage, seed, and Series A investments in climate tech has mainly remained stagnant since 2018, PwC said, adding that there’s a need to fund more young climate tech start-ups that have the potential to become companies worth $1 billion or even $10 billion.

    French climate tech start-up Sweep announced that it had raised a $22 million Series A round led by Balderton Capital, a venture firm based in London that has also backed urban navigation app Citymapper, e-scooter firm Voi and on-demand car service Virtuo.

    In terms of geography, U.S. climate tech companies are attracting the most venture capital funding, with $56.5 billion going to start-ups in the country in the year leading up to Jun. 30. PwC said Chinese climate tech companies raised the second-highest amount, with $9 billion. Meanwhile, climate tech companies across Europe raised $18 billion.

    The world has ten years to halve global greenhouse emissions if it is to have any 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,” Emma Cox, global climate leader at PwC U.K., said in a statement.

    “However, our research has found there is potential to better channel and incentivize 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 valuable opportunity, or is there an incentive problem that needs the attention of policymakers?”

    Over the decades, many investors have chosen not to back climate tech start-ups over concerns that they may not deliver a suitable financial return. There was a period of rapid growth between 2013 and 2018, but climate tech investment plateaued between 2018 and 2020, according to PwC, which attributed the slowdown to macroeconomic trends and the global pandemic.

    However, investment rebounded sharply in the first half of 2021 as environmental, social, and corporate governance (ESG) was thrust into the spotlight, and companies committed to net-zero strategies.

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