New research shows that by 2022, more than a quarter of all venture capital funding will go to climate technology.
PwC research Overcoming inertia in climate technology investment Shows climate technology investment between $15 billion and $20 billion, the same level as in the first half of 2021.
This means that the total funding raised for climate technologies since the beginning of 2018 is $260 billion, of which more than $50 billion has been invested in 2022.
Funding is increasingly directed towards the technologies that will best reduce emissions, the study said. In 2021, start-ups targeting industries with 85% of emissions attracted only 39% of investment, while in 2022, startups in these industries attracted 52% of climate technology investment.
“Faced with its first real test of the past decade, the climate technology market is showing encouraging resilience,” said Will Jackson-Moore, PwC UK global ESG lead. “In the context of Russia’s invasion of Ukraine, inflation and a sharp correction in capital markets, there is a high risk of a collapse in investor confidence.
“The task is to build momentum, focus more on early-stage funding, and further advance technologies with the greatest potential to reduce emissions.”
However, the study highlighted three less positive trends. Since the beginning of 2021, the number and total value of deals under $5 million (usually in the early stages of funding) has been declining. Downward trend in early-stage funding suggests weak pipeline for quality start-ups, which may prevent investors from deploying the highest levels of available capital for years to come, it warned.
Despite the strong share of venture capital spending, the overall decline in deployed venture capital is reflected in the climate sector, with cash funding in the first three quarters of 2022 down 30% over the same period in 2021.
The study added that while the alignment of investment funding and impact potential has improved, markets remain inefficient in meeting climate goals. It argues that solutions such as food waste reduction technologies and new solar technologies remain relatively underfunded.
Image Credit | Man.eu via Shutterstock