PwC: Climate Tech – the next frontier for venture capital
Every sector of the global economy needs to radically decarbonise in two business cycles to prevent global warming, is the stark message from a ground-breaking climate report by PricewaterhouseCoopers.
The State of Climate Tech 2020; The next frontier for venture capital, is a first-of-its-kind analysis of the state of global climate tech investing. The world has 10 years to halve global greenhouse gas emissions and avoid global warming of above 1.5°C, an amount beyond which scientists warn will be dangerous, is one of the warnings outlined in the 64-page paper.
“To achieve this, every sector of the global economy needs to transform in just over two business cycles. Before 2050 the global economy needs to be at ‘net zero’ carbon emissions. Some of the technologies and solutions critical to enable this transformation are proven but need rapid commercialisation,” outlines the report.
So-called “climate tech unicorns” have emerged with companies like Tesla, Beyond Meat, and Nest showcasing how disruptive companies can deliver sustainability gains but also become billion-dollar brands.
What is climate tech investing?
“Climate tech” is a broad set of sectors which are tackling the challenge of decarbonising the global economy, with the aim of reaching net zero emissions within 30 years. The report looks in-depth at the key sectors; energy, mobility and transport, food agriculture and land use, heavy industry and built environment and how they can evolve in the future.
“The big headline is that early stage investment into climate tech is growing fast,” reports PwC who partnered with Dealroom to look at seven years of global startups from 2023-2019 to analyse how much capital was set aside for climate tech ventures.
Research shows in 2013 the early-stage venture funding for climate tech companies was about $418 million. In 2019, total venture funding increased to $16.1b, a more than 3750% increase. This amounts to three times the growth rate of VC investment into Artificial Intelligence (AI).
“Climate tech is emerging, with promising signs of high-quality entrepreneurs tackling more scalable businesses, enabled by supportive venture capital. We see a new generation of investments that covers a broader range of sectors, and distinctively has (in the main) lower startup costs and clearer paths to scale,” reports PwC.
A moment in time
With the clock ticking the report states there is no greater innovation challenge for today’s founders, technologists, industry leaders and investors.
Trends driving investments in climate tech:
- Countries, cities, businesses and investors committing to net zero emissions
- New and cheaper technologies: AI, cloud, blockchain, and advanced sensors are offering new business models.
- Greater consumer demand: Consumers demanding more from brands and sustainable products spawning ‘climate tech unicorns’ such as Tesla, Nest and Oatly.
- More supportive policies and regulations.
“There’s been a significant cultural move towards accepting climate change as a risk, driven by the children of the 90’s really influencing their families. This generation cares about the sustainability play, and how corporations are addressing this through their supply chains. Brands need to be addressing climate change, or they’ll suffer. Technology is increasingly affecting every industry. AI will be a large contributor to sustainability, and necessity is the mother of investment,” said Vinod Khosla Founder, Khosla Ventures.
The report concludes the climate tech landscape across geographies and sectors displays different levels of maturity and is far from the scale society needed to make the overarching goal of a net zero emissions economy before 2050 a reality.
“It is clear that climate tech has a hugely important role to play as the world grapples with transforming all sectors of the economy towards net zero emissions,” says the report and points out the climate tech start-ups that were founded and achieved ‘unicorn’ status during the late-2010s are the ones most likely to have a significant impact on the reduction of emissions.
“Finally, as countries and regions around the world cautiously develop COVID-19 recovery packages in the coming months and years, these stimuli provide an important opportunity for governments to support and accelerate, climate tech as a high impact area which has the potential to support the overarching goal of net zero emissions growth,” says the report.
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Four CPG giants to fund sustainable accelerator programme
Breakthrough ideas can come from anywhere and anyone. That’s the premise behind the coming together of The Coca-Cola Company, Unilever and Colgate-Palmolive in the funding and support of world-leading brewer AB InBev’s 100+ Accelerator program.
These four consumer packaged goods multinationals will leverage both their size and resources to fast-track a shift toward sustainable solutions by mobilising some of the world’s sharpest thinkers to solve some of the world’s most pressing sustainability challenges.
The aim of this collaboration is to “supercharge adoption of sustainable solutions by funding the accelerating fantastic innovations that will change the world by making all of our businesses more sustainable”, says Tony Milkin, chief procurement, sustainability and circular ventures officer at AB InBev.
“Sustainable business is smart business, and we are working to solve huge problems that no one company can handle alone. With our combined global reach, we can accelerate progress towards a more sustainable future.”
What is the 100+ Accelerator program?
Originally launched in 2018, 100+ Accelerator is a global incubator program that aims to solve key supply chain challenges across water stewardship, circular economy, sustainable agriculture and climate action.
It offers size and scale to passionate entrepreneurs to help bring their solutions to market faster, and the program’s first two cohorts have already piloted 36 innovations in 16 countries, with participating startups raising more than US$200m to help them scale globally.
Among the established innovators are those already creating huge impact on sustainability, with projects including the first solar thermal plant in Africa, recycled electric vehicle batteries that store renewable electricity in China, and upcycling saved grains from the brewing process to produce nutritious foods in the US.
- The implementation of green cleaning solutions to reduce water and energy use in brewing operations in Colombia
- Solutions delivering traceability and insurance for smallholder farmers in Africa and South America
- The collection of more than 1,000 tons of glass waste in Brazil
- Piloting returnable packaging in the United States
- Recycled electric vehicle batteries that store renewable electricity in China
- The ability to upcycle saved grains from the brewing process to produce nutritious foods in the United States
- The first solar thermal system to be installed at an AB InBev plant
How will the new program work?
So, how does it work? Applications are invited from entrepreneurs or small businesses (deadline for cohort 3 is May 31 2021) and the partners will choose 20-25 ideas which are then provided with funding.
Project aligned with goals of the CPG multinationals
The participation by all three consumer packaged goods giants is in line with each of their own sustainability goals, with each passionate about transforming global supply chains towards a greener future, and knowledgeable that “we can achieve our purpose faster and more effectively with equally committed partners”, says Patricia Verduin, CTO of Colgate.
Since launching its World Without Waste sustainable packaging platform, Coca-Cola has actively engaged the startup community for inspiration and innovation and is an inaugural investor in Circulate Capital, a fund launched in 2019 focused on ventures, infrastructure and innovations preventing the flow of plastic into oceans.
The program’s social inequality component is also aligned with Unilever’s values. “This year, we made commitments to ensure that everyone who directly provides us with goods and services receives a living wage by 2030,” says Marc Engel, chief supply chain officer of Unilever. But that’s not all. “We’re increasing our spend with suppliers from underrepresented groups and committed to train 10 million young people.”