Climate Tech Investments Are Misguided

Investment from venture capital and private equity is pouring into climate tech, reaching US$87.5bn over H2 2020 and H1 2021, with in excess of US$60bn coming in the first half of 2021 alone. This represents a 210 percent increase from the US$28.4bn invested in the 12 months prior. Fully 14¢ of every dollar of venture capital (VC) investment now goes to climate tech.

Climate tech encompasses technologies focused on reducing greenhouse gas (GHG) emissions. Following rapid growth between 2013 and 2018, climate tech investment plateaued in the 2018-2020 timeframe, tempered by macroeconomic trends and the global pandemic. However, investment rebounded sharply in H1 2021 driven by a heightened focus on ESG in private markets, emerging regulations and standards, and thousands of companies committing to net-zero strategies.

Where the investment falls short, according to the PwC State of Climate Tech 2021, is in addressing the largest contributors to global emissions. Of 15 technology solutions analyzed, the top five, representing more than 80 percent of emissions reduction potential by 2050, received just 25 percent of the climate tech investment between 2013 and H1 2021.