Climate tech: the resilience that defines the future of investment
In recent years, investment in climate technology has experienced a rollercoaster ride. After peaking in 2021, capital flow and transaction volume have fallen below 2019 levels, according to the report State of Climate Tech 2024 by PwC. But it's not all desolation: the most patient and strategic investors are finding hidden gems in areas such as artificial intelligence (AI), climate adaptation and innovative energy solutions. What are the key trends and how are investment strategies evolving?
1. A generalized decline, but with flashes of opportunity
Between the fourth quarter of 2023 and the third quarter of 2024, funding for climate technology fell by 29%, from USD 79 billion to USD 56 billion. However, the U.S. market showed surprising resilience, backed by policies such as the Inflation Reduction Act (IRA). Meanwhile, Asia-Pacific returned to its historic levels of investment, going from a 19% share in 2023 to just 7% in 2024.
The increased maturity of the market has led to a more disciplined approach. As Hampus Jakobsson from Pale Blue Dot points out,”the acceptance of climate change is combined with a strong conviction in the need to invest with a real focus on returns”. This also means that mediocre proposals are no longer able to capture attention.
2. The rise of artificial intelligence in climate technology
The use of AI in climate technology is gaining traction. In the first three quarters of 2024, AI-related startups raised $6 billion, almost 15% of total climate investment. This boom is focused on applications such as autonomous vehicles, intelligent agriculture and optimized energy solutions.
The ability of AI to analyze data, model predictions and optimize processes is key. For example, you can adjust the load of electric vehicles to balance energy demand and supply or improve the efficiency of wind turbines. Despite concerns about their high energy intensity, solutions are being developed to mitigate these effects, such as immersion cooling and heat recycling systems.
3. Adaptation and resilience: a growing priority
The increase in extreme weather events has fueled interest in adaptation and resilience (A&R) technologies. In 2024, 28% of climate technology agreements were related to A&R, a significant increase compared to previous years. These include solutions for managing wildfires, floods and heat waves, as well as products for managing climate risks.
An interesting example is the use of AI in agriculture to identify genes resistant to drought or extreme heat. Innovations in insurance are also emerging, with companies encouraging their customers to adopt adaptation measures that can reduce premiums and risks.
4. Large companies are leading scalability
Corporations play a crucial role in climate technology. During the first three quarters of 2024, large companies participated in 28% of the agreements, especially in medium and advanced stages. This allows them not only to scale proven solutions, but also to leverage their industry experience to support startups.
In the energy sector, for example, companies provided 45% of total financing, a higher percentage than traditional financial investors. This concentration reflects how these corporations seek solutions for their own operations and supply chains.
5. Sectors with funding gaps
Although the industrial, food and agriculture, and built environment sectors generate a significant proportion of global emissions, they still receive a smaller share of investments. Technologies such as green hydrogen and carbon storage have shown potential, but they still need further impetus.
6. The role of climate technology in sustainable cities
Cities, responsible for 70% of global CO2 emissions and 75% of energy consumption, are at the center of the climate crisis. Accelerated urbanization, which by 2050 will have more than two-thirds of the world's population living in urban areas, requires innovative solutions.
Climate technology could transform our cities into sustainable urban ecosystems. Between 2020 and 2021, investment in climate technology reached $56 billion, but future needs could reach $275 trillion by 2050, according to estimates. This includes areas such as the decarbonization of construction, the use of reclaimed materials and the implementation of green technologies such as solar roofs and biosolar panels.
- Reduce embedded carbon: Innovations such as those in Tangible Materials help real estate developers measure and reduce carbon emissions associated with building materials.
- Reclaimed materials: Companies like Urban Machine use AI and robotics to recycle wood and other construction materials, reducing waste and conserving resources.
- Green technologies: Solutions such as green roofs and bioclimatic designs not only reduce energy consumption, but also improve the quality of urban life and reduce the “heat island” effect.
7. Leaders Shaping Climate Technology in 2024
The climate technology landscape is not only defined by investments and technologies, but also by the people who drive change:
- Nadia Calviño, president of EIB: Leads the largest startup lender in Europe, driving a 50% increase in clean investments until 2027 to support the EU's Net Zero Industry Act.
- Niklas Adalberth, founder of Norrsken Foundation and Norrsken VC: His fund closed a second fund of €320 million, making him the largest investor in European climate startups in 2024.
- Benoit Lemaignan, co-founder of Verkor: Led the largest battery project in Europe after the bankruptcy of Northvolt, securing €1.3 billion in loans for its gigafactory in France.
- Katja Grothe-Eberhardt and Mads Emil Dalsgaard, co-founders of Klimate: His Danish company led the growth ranking in Europe, demonstrating the potential of carbon removal solutions.
- Harald Mix, co-founder of Vargas and other climate initiatives: Despite the challenges with Northvolt, his vision has generated multiple successful startups such as Stegra and Syre.
Conclusion: The Future of Climate Technology
If one thing is clear, it's that the climate technology market is in transition. The climate emergency faces a more cautious, but also more focused, investment landscape. The opportunities are there for those who know how to identify them, whether in AI-driven solutions, in climate adaptation technologies or in traditionally underserved sectors. The key is to combine environmental impact with sustainable financial returns, paving the way for a greener and more resilient future.
