Why Does Climate Tech Venture Investing Matter?

Many of the climate solutions in the Project Drawdown Table of Solutions involve new technologies and innovations, and/or applications of them. How do we implement them? There’s one thing most new technologies and ventures need to help them get off the ground: funding.

According to the IEA, “The world is set to invest a record USD 1.8 trillion in clean energy in 2023: this needs to climb to around USD 4.5 trillion a year by the early 2030s to be in line with our pathway” [to 1.5C]. And for the record, this is for the 1.5C target which we have practically blown through.

The IPCC includes finance and innovation enabling conditions for progress - and lack thereof as a condition of failure:

The IPCC also highlights finance and technology as a suggested response in the near-term: “Finance, technology and international cooperation are critical enablers for accelerated climate action. If climate goals are to be achieved, both adaptation and mitigation financing would need to increase many-fold. There is sufficient global capital to close the global investment gaps but there are barriers to redirect capital to climate action. Enhancing technology innovation systems is key to accelerate the widespread adoption of technologies and practices.”

Finance is a key lever that can be used to move the needle on climate change.

What types of finance are needed? Here is a look from CTVC at some of the types of financial instruments used at different stages of a new technology’s TRL (Technology Readiness Level):

As you can see, one of the key instruments is venture financing. Angel investing and venture capital are funding the businesses of the future, and in doing so, helping define the set of future solutions.

Where should this funding be going? While historically a large amount of it has gone towards “traditional VC” companies (SAAS, social networks, etc.), I would argue that with the depth of the climate crisis facing us, many more dollars should be going towards the future we want to create: ideally, a livable one. Remember how Kodak pioneered digital photography, but never pushed it much because it would cannibalize the film business, and then went out of business? Incumbents not making the short-term investment in electrification/decarbonization today are risking their whole business in the long-term (like Kodak did). 

In 2023, the share of VC and PE funding going into climate tech accounted for 10% of private market start-up investments (PWC). There may be a $2 trillion private funding gap for next-generation climate technologies by 2030 (Deloitte). This funding is needed in order for us to achieve the goal of limiting global temperatures to 1.5°C by 2030 (Deloitte).

Increased funding is needed across all climate tech areas to enable breakthrough innovations and trigger sectoral tipping points, whilst also supporting commercially ready technologies to scale up over the next decade. I’ve heard it said that we need to redirect the flow of three things to facilitate the transition: energy (electrical), capital, and talent (human energy) - climate tech venture investing can help do all three.

Not only is climate tech venture investing impactful for reducing climate change, but it also offers an opportunity for significant financial returns. While some climate technologies have moved well beyond a proof of concept, there are still significant areas of untapped potential. Our whole world is being rebuilt.

By investing in climate tech, I believe I can make an impact and change the world for the better, for our generation and generations to come — and so can you. It could be the biggest investment opportunity in history (see Chris Sacca’s take).

Want to learn more about climate tech angel investing?

Check out Climate Angels, a new educational initiative built in collaboration with Climate Capital, to help more people learn about climate tech angel investing. Our next program starts Thursday, April 18th, 2024 and we have limited spots remaining.

The program will be taught by senior leaders from Climate Capital, and we’re excited to welcome guest speakers from various climate VC funds. 

We hope to see you (virtually) there! Not sure if Climate Angels is right for you? Email Jenn at jenn@climateangels.vc

Thinking back to our inaugural Climate Angels cohort, we’re filled with gratitude for the vibrant community that came together to forge a path in climate tech investing. A huge thank you to everyone who contributed their time, knowledge, and passion to make this program a success.

Special shoutouts to our incredible instructors, speakers and mentors from Lowercarbon Capital, MCJ Collective, Planeteer Capital, Earthshot Ventures, Climactic, Voyager Ventures, Plug and Play Tech Center, Gaingels, Elemental Excelerator and many others who enriched our journey with their insights. Your contributions have been invaluable in empowering our participants to drive impactful investments in the fight against climate change.

To our amazing Climate Angels Fellows, your enthusiasm and commitment to making a difference have truly inspired us. We’re excited to see how you’ll apply the knowledge and connections gained here to foster a more sustainable future.

Our Fellows say it best:

From a climate tech unicorn founder, to an exited entrepreneur, to someone starting their own fund, to a venture partner, to folks making their first climate tech investments, to folks who’d made a number of climate tech investments before, it was awesome to see the breadth of backgrounds our fellows brought to the table.

Our next cohort of Climate Angels is in partnership with Terra.do, kicking off on April 18th! If you’re passionate about climate tech and eager to join a community of like-minded investors, we invite you to express your interest. Tell us why you are excited about investing in climate here, where you can apply to our upcoming cohort and continue this journey with us. Together, let’s keep pushing the boundaries of climate tech investing and create a lasting impact on our planet.

Note: The Author’s opinions are their own and not necessarily representative of Climate Capital.

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