Economic uncertainty pulls down climate technology investment
Source: Asia Insurance Review | Dec 2023
Investments in climate technologies from venture-capital (VC) and private equity (PE) fell by 40% in 2023 as economic uncertainty and geopolitical conflict continue to dent investor confidence according to PwC’s 2023 State of Climate Tech report.
The report analysed over 8,000 climate tech start-ups and over 32,000 deals worth more than $490bn. It said a challenging macroeconomic environment, sinking valuations, and geopolitical turmoil were responsible for the drop.
The PwC’s Climate Tech Investment Index, which has been significantly expanded in 2023, however, found that the fall in climate tech investment was significantly smaller than the VC and PE average fall of 50% across sectors.
The report reveals that investors are shifting focus to high-polluting sectors – particularly industry, manufacturing and resource management, which at 34% of emissions account for more than any other economic sector. Investors directed less than 8% of climate tech venture funding to this sector between 2013 and Q3 2022, but that had leapt to 14% by last September.
Investment jumped by 64% in green hydrogen and 24% in solar, and 45% of global climate tech funding now goes to transport – although heavier transportation solutions are less mature than electric cars and vans.
The share of VC and PE funding going into climate tech continued to rise, accounting for more than 10% of private market start-up investments in 2023, up from 7% in 2018. There are also signs that climate tech investment is becoming more mainstream, with seasoned climate investors (who have invested in five or more climate tech deals) taking up a smaller share of the total number engaging in climate tech, as the share of first timers increases. A