Climate Tech Surges

A paradigm shift is taking place, wherein private capital now perceives climate technology as a promising investment opportunity.  Nearly $90 billion poured into climate tech investments over the past two years, but is that enough to hit our emissions targets?

Climate scientists generally agree that we have ten years to cut our global greenhouse gas emissions in half if we have any hope of achieving net zero by 2050 and staying under the pivotal 2 degrees Celsius warming threshold.

While technology is not the panacea, breakthrough climate tech solutions that facilitate decarbonization are critical to meeting the challenge.

And the race is on: climate tech investments tripled in 2020 and 2021 from previous years, and the growth trajectory is expected to continue at an exponential rate.  More than $130 trillion has been pledged by fund managers, banks, pensions, and other asset owners to finance the transition to net-zero energy, water, and carbon.

According to the Glasgow Financial Alliance for Net Zero (GFANZ), the following investments are necessary to reach net zero by 2050:

• Electricity: $16 trillion
• Transportation: $5.4 trillion
• Buildings: $5.2 trillion
• Industry: $2.2 trillion
• Low-emission fuels: $1.5 trillion
• Agriculture, forestry, and other land use: $1.5 trillion

“Investment into emerging climate technologies will be critical to solving the climate change equation, as new technologies are needed to balance the sources and sinks of greenhouse gas (GHG) emissions,” GFANZ asserts.

Some essential climate technologies, like solar photovoltaics and electric vehicles, have already become price competitive, thereby eliminating early adopter investment risk.  Other sectors, like battery storage , still have some scaling to do before they fully pencil out, but they’re getting close to reaching maturity.

With that said, 35% of the technology that is needed to reach our climate goals has yet to be invented, which means that we have a colossal opportunity—and challenge—ahead of us. 

Five sectors of the economy are collectively responsible for more than 50% of global GHG emissions: power, road transport, steel, hydrogen, and agriculture.  To be sure, these sectors will receive major investments and incentives to innovate and decarbonize.

Public-private partnerships will continue to drive the development and adoption of electric vehicles, clean energy, smart grid technologies, advanced controls, vehicle-to-grid integration, high-performance materials that sequester carbon , food waste technology, and plant-based proteins. 

According to GFANZ:

As the building sector accounts for 38% of all energy-related CO2 emissions, the need to make buildings more energy efficient through LED lighting, high-efficiency HVAC, and energy controls will require significant investments. Air conditioning alone will have to undergo a revolution, as current cooling technologies depend upon fluorinated gases, which cause about 2,000 to 4,000 times more warming than each equivalent unit of carbon dioxide and could account for up to 20% of climate pollution by 2050. Rising temperatures, heat waves, and growing incomes are expected to drive AC adoption from the 1.6 billion units currently in operation to 5.6 billion units by 2050, while electricity demand will likely triple over the same period. Total investments to decarbonize buildings, mainly in retrofits and heating and cooling appliances, could almost quadruple between 2020 and 2040, from $190 billion to $710 billion per year.

Without a doubt, the climate tech sector will continue to mushroom, creating the next wave of investment unicorns, with companies in the electrification, blockchain , carbon removal, resource efficiency, and clean ag spaces leading the charge.

Want to learn more about climate tech innovations and important decarbonization trends?  Join us for our 2022 Forecast webinar on February 16 at 2 ET.  Register today!