A quarter of VC funding goes to climate tech: PwC – Tech

More than a quarter of 2022’s venture capital (VC) funding went straight into climate-technology start-ups’ pockets, a new study finds, signifying a resilient trend in the archetype despite an overall slowdown in tech investment.

The report entitled “Climate Tech Investment Index” was released on Nov. 3 by PwC, a multinational audit and assurance, consulting and tax-service provider, in collaboration with Pitchbook, a global company specializing in providing private-capital market database.

“In the face of its first real test over the past decade, climate-tech markets have shown encouraging resilience,” said PwC UK global environmental, social and governance leader Will Jackson Moore, as per PwC’s press statement released on Wednesday.

Moore said this trend is encouraging in the midst of unfavorable conditions such as the war in Ukraine, inflation and sharp correction in the capital markets, which logically would deteriorate investor confidence. Against all odds, it did not.

“Eight in 10 investors surveyed this year plan to increase their investment in environmental, social and governance [ESG] products over the next two years,” reads a PwC report.

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In 2021, start-ups targeting sectors that were responsible for 85 percent of emissions attracted just 39 percent of total investment and that situation flipped this year as they garnered 52 percent of climate-tech investment, meaning investors were increasingly targeting technologies that can do most in cutting emissions with their funds.

“The task is to build momentum, with more attention to early-stage funding and further boosting technologies with the highest potential for reducing emissions,” said Moore.

Climate tech itself is defined as tech-based companies who focus explicitly on providing solutions to reduce greenhouse-gas emissions, or those that address the issue of global warming.

The total quarterly investment in climate tech throughout 2022 ranges between US$15 to $20 billion, a figure that has been consistent since the first half of last year.

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However, 2022 has been seeing a steady drop in overall investment levels as VC funding for climate tech fell to $52 billion in this year’s first three quarters, a drop of 30 percent compared to last year’s same period.

Regardless, it still represents 20 percent from the aggregate funds raised for climate tech since the start of 2018, totaling $260 billion.

To the contrary, the report found another drift for early-stage start-ups; the volume of critical funding for them to scale up has been in deficit since last year and it appears to be deepening in 2022, casting the spell of “trending in the wrong direction”.