Climate tech is a dynamic and innovative sector with many promising investment opportunities. In this 2024 industry report, we outline the global market for climate tech, the latest trends, key players, rising startups, risks and opportunities for investors. We hope these insights are useful as you consider your portfolio strategy.
Market Overview: Climate Tech
Climate tech refers to technologies intended to mitigate or reverse the effects of climate change (e.g. by reducing greenhouse emissions).
The global market was valued at $20.43bn in 2023 and is projected to reach $149.27bn by 2032, representing a compound annual growth rate (CAGR) of 24.8%. The global market can be divided in multiple ways, including:
- Technology (e.g. cloud computing, blockchain and digital twin)
- Application (e.g. water purification, crop monitoring and carbon footprint management)
- Component (e.g. climate tech solutions and services)
- Geography
Energy and mobility occupy the top sub-categories within the wider climate tech space. These encompass exciting technological innovations such as EV batteries, solar energy and building energy efficiency.
The funding picture is highly unique. In 2023, European venture capital (VC) funding surpassed that of the US, which has steadily pulled back since the first quarter of 2021. Today, the two regions account for most of the global funding picture, with China and the rest of Asia occupying a much smaller minority.
Key Features & Market Trends
One tailwind behind climate tech is the increasing public awareness of climate change and the need for innovations to address it. The Pew Research Center’s annual Global Attitudes survey showed a rising global trend of populations viewing climate change as a “major threat.”
This was reinforced by a 2023 Global Trends survey, where 80% of respondents agreed: “We are heading towards an environmental disaster unless we change our habits quickly.” There is also widespread government support, with initiatives like the Paris Agreement committing to keeping global temperature rises below 1.5°C.
Many corporations have rallied around net-zero goals, recognising their importance to customer bases. For instance, nearly half of Fortune 500 companies have stated they want to reduce their global emissions by 45% by 2030, reaching net zero by 2050.
Electric mobility has gained the highest share of climate tech investment since 2019. However, In recent years, this has declined. One key reason is the price rise for lithium carbonate (a crucial component in EV batteries), which rose 50% above the 2015-20 average in 2023.
Key Players & New Entrants
Climate tech is largely bifurcated into large enterprises and SMEs (including some dynamic startups). Examples of the former include Climeworks (a leader in direct air capture technology), Octopus Energy (supplying renewable electricity and gas to homes) and Sylvera (uses machine learning and satellite imagery to measure and verify carbon emissions from forests).
On the other side of the spectrum, early-stage companies are also spearheading innovations in areas as diverse as carbon capture, renewable energy storage and sustainable agriculture. An example is BeZero. Founded in London in 2020, this startup is revolutionising how carbon credit rating systems work. $70 million had been raised as of October 2024, with a notable $50 million achieved in a Series B round.
Another interesting case study is Sylvera. Another London-based startup, Sylvera is enhancing global transparency in the carbon market with its carbon offset intelligence platform. The firm has raised $39.5m so far, with $32 gained in its Series A round – drawing prominent investors like Salesforce Ventures and LocalGlobe.
Opportunities & Risks
The primary opportunity for investors in this sphere is climate tech’s massive market growth potential. Across the world, populations, companies and governments are lining up behind decarbonisation and sustainability.
Growth is also projected across various verticals, including energy, transportation, agriculture, and more – offering significant diversification opportunities to investors. Widespread net-zero goals also offer buoyancy to investment through subsidies, tax credits and grants.
Investors could also participate in transformative impacts and outsized returns via startups that successfully make technological breakthroughs – e.g. in areas like carbon capture, energy storage and green hydrogen.
However, there are challenges that investors need to be mindful of. In particular, climate tech startups are often on the “cutting edge” and may fail to reach commercialisation or scale due to technical challenges.
Climate tech often requires substantial upfront investment. This can lead to bottlenecks, capital constraints or difficulty securing funding for scaling. The flooding of firms to the sector could also lead to saturating markets and drive down margins.
Certain sub-sectors, such as infrastructure or energy, typically involve long payback periods – possibly taking years or decades to yield returns.
Many of these risks can be mitigated by following time-honoured principles of investing, such as diversification and time in the market. However, investors should always conduct effective due diligence when reviewing climate tech startups for their portfolio.
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and consider joining our exclusive investor network:
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