Climate tech investment is soaring this year – but might not be going to the right areas, according to accountants PwC
The average size of a climate tech deal almost quadrupled to $96m in the first half of 2021, up from $27m one year prior, PwC said in its State of Climate Tech 2021 report, as the number of active climate tech investors rose from less than 900 to more than 1,600 in the first half of 2021.
Investment in companies developing technology to try to combat the climate crisis grew to $87.5bn in the year leading up to June 30.
However, PwC said the five main solutions for carbon emissions, solar power, wind power, food waste technology, green hydrogen production, and alternative foods/low greenhouse gas proteins, received just 25% of the climate tech investment between 2013 and June 2021. This was despite technologies in these areas representing over 80% of the emissions reduction potential by 2050.
The lion’s share of climate tech funding, some $58bn, went to mobility and transportation companies, PwC said.
To help tackle these challenges, corporations have been increasingly committing to VC funds in the energy sector.
Aviva, a UK-listed insurer, has committed £50m ($70m) to back independent venture capital funds backing sustainable-focused technologies.
Its first commitment is into the Clean Growth Fund, which invests in early-stage UK-based technology companies in the low carbon economy, such as Indra, which manufactures and supplies smart electric vehicle chargers, and Tepeo, which invented a zero-emission boiler.
The commitment follows Aviva’s announcement earlier this year to become a net zero carbon emissions company by 2040.
Ben Luckett, who was promoted to chief innovation officer at Aviva in the summer and retains its direct CVC activities through Aviva Ventures, said: “We have seen strong growth in sustainability-focused startups as consumers become more climate conscious.”
Beverley Gower-Jones, managing partner at Clean Growth Fund, added: “Coming so soon after COP26 in Glasgow, Aviva’s investment in the Clean Growth Fund is a strong and welcome strategic move.”
Closed Loop Ventures Group, a US-based venture capital firm, has closed its second fund at more than $50m from limited partners including corporations Microsoft and GS Group.
Other LPs include foundations, such as the Autodesk Foundation, and single and multi-family offices.
The Closed Loop Venture Fund II run by Danielle Joseph will invest in circular economy solutions across plastics and packaging, fashion, food and agriculture, and supply chain technology. The second fund has already invested in Partsimony, Ucrop.it and Dimpora.
Brandon Middaugh, head of Microsoft’s Climate Innovation Fund, an investor in Closed Loop Partners’ funds, said: “Our investment in the Ventures Group’s Fund II is a key part of our efforts toward our 2030 zero waste goals, driven by the innovators and emerging companies that help make this possible.”
“Venture capital plays a key role in accelerating the circular economy, seeding the next generation of solutions to overcome legacy take-make-waste systems, encourage innovation and help transformative companies scale,” added Taehong Huh, managing director of GS Futures, the corporate venture capital unit of GS Group of Korea that had previously committed to Energy Transition Ventures (ETV).
Joe Speicher, executive director of the Autodesk Foundation and head of sustainability at Autodesk, said the foundation had been an investor in Closed Loop Partners’ first and second venture funds. He added: “We are proud to have been an early investor of the Closed Loop Ventures Group and are doubling down on our commitment to help scale the emerging design and manufacturing approaches that make end to end circularity possible.”
FirstEnergy, a New York-listed electric distribution company, has made its second commitment to US-based venture capital firm Energy Impact Partners (EIP).
As a limited partner in EIP Fund II, FirstEnergy joins with other utilities and companies to provide more than $1bn in capital commitments to invest in heating and air conditioning, transportation electrification, energy storage and carbon capture technology, grid hardening, cyber security, and smart home and cities programmes.
This marks FirstEnergy’s second investment with EIP. In July, FirstEnergy backed EIP’s Elevate Future Fund, which is focused on expanding venture capital access and opportunities for underrepresented sustainable energy entrepreneurs.
Steven Strah, FirstEnergy president and CEO, said: “Rather than having to develop a new product or programme on our own, we can jumpstart the process by implementing a pilot programme or partnership using technology from an EIP portfolio company to assess potential customer benefits before deploying on a wider scale.”
FirstEnergy’s investments in EIP funds were coordinated through the company’s Emerging Technologies organisation led by executive director Meghan Geiger Beringer.
The commitments are part of FirstEnergy’s plan to achieve carbon neutrality by 2050, with an interim goal of achieving a 30% reduction in greenhouse gases within the company’s direct operational control by 2030.