PWC: Climate Tech Attracting Huge Investment This Year — But Might Not Be Going To The Right Areas

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 Wednesday. 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.

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.

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 remained largely 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.

On Tuesday, French climate tech start-up Sweep announced that it has 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.

“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.

SOURCE: CNBC
IMAGE SOURCE: PIXABAY