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Climate Tech Investment Plummets 40% in Face of Economic Uncertainty, What Does This Mean for Our Planet’s Future?

Climate Tech Investment Plummets 40% in Face of Economic Uncertainty, What Does This Mean for Our Planet’s Future?

Despite a 40% decrease in investment in climate technology, the sector has performed relatively well compared to other areas, with investment falling less than the average across sectors.

According to a report from PwC, investment in climate technology has dropped by 40% in the last year. However, this decrease is attributed more to market conditions and economic uncertainty rather than a deliberate move away from climate tech. In fact, the share of funding going to climate tech continued to rise, accounting for over 10% of private market start-up investments in 2023.

Emma Cox, PwC UK’s global climate leader, emphasized the importance of developing and scaling up climate technology to address the climate challenge. She expressed concern about the absolute decline in investment but also highlighted the positive shift towards investing in technologies that can have the greatest impact in reducing emissions.

The report also revealed a shift towards greater efficiency in spending for emissions reduction, although there is still a disproportionate share of investment going to technologies with lower potential. However, there has been an increase in the proportion of climate tech private equity and venture capital, as well as grants for start-ups working on technologies with higher emissions reduction potential.

Solar power and green hydrogen have seen significant increases in investment, with solar power’s share up by 24% and green hydrogen up by 64%. Carbon capture, utilization, and storage have also experienced a 39% increase since 2022. However, it still represents less than 2% of total climate tech funding.

Investors have shifted away from early-stage deals to mid-stage deals, indicating challenges around scaling or implementing capital-intensive climate tech. The industrial sector, which is one of the highest emitting sectors, has seen a surge in climate tech venture funding, with the share of investment almost doubling between Q4 2022 and Q3 2023.

While the decrease in investment in climate technology is concerning, it also presents opportunities for investors to engage in the current dip and support the development of climate tech innovations. The need for these technologies will only grow stronger as the world continues to address the climate crisis.

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Nayan Kumar