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    The Climate Tech Opportunity

     

    Climate technology is quickly evolving. New organizations, policies and efforts are entering the field steadily, as climate risks grow globally.

     

    The Climate Tech Opportunity, a publication from the Oxford Climate Tech Initiative in partnership with the Skoll Centre for Social Entrepreneurship at Oxford Said Business School, provides an overview of key trends, challenges and opportunities facing the climate tech field.

     

    It is based on a survey of over 140 climate tech practitioners (including investors, entrepreneurs, scientists and policy-makers) and interviews with over 60 experts from over twenty countries, and provides insights into building better programs, strategies, platforms and policies to support climate innovation.

     

     

    You can download the report here, and for more information on it please reach out to Jamil Wyne.

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  • OVERVIEW

    The climate-tech opportunity is timely, unique, and urgent. In a short period of time, climate tech has become a heavily-funded sector that has drawn the attention of entrepreneurs, investors, scientists, academics, policy-makers, and other key stakeholders across global markets.

     

    Yet despite the growing momentum, the sector is still in its nascent stages, and numerous uncertainties persist. Which sectors are considered the most promising by investors and entrepreneurs? Are low incomce countries and communities accessing climate tech solutions? How do we build more efficient climate tech ecosystems? How can we reduce the barriers to scaling climate tech startups?

     

    This report offers a preliminary response to these questions. It is based on a survey of over 140 climate tech practitioners (including investors, entrepreneurs, scientists and policy-makers) and interviews with over 60 experts from over twenty countries. It assesses some of the challenges and opportunities within the climate tech ecosystem, in hopes of equipping stakeholders in the field, as well as new entrants into it, with insights they can use to build better programs, strategies, platforms and policies to support climate innovation.

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    CLIMATE TECH IS EVOLVING RAPIDLY

     

    Climate tech startup and investment activity is growing rapidly. While reported numbers vary, since 2013, there have been over 6,000 investors in climate tech startups, and 2022 alone saw over 3,000 VC rounds into climate tech. Over the past decade, there has been an estimated 40X increase in overall climate venture capital globally.

     

    Source: PwC (2021). State of Climate Tech 2021: Scaling breakthroughs for net zero.

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    Source: HolonIQ (2023), 2022 Climate Tech VC Funding Totals $70.1B, Up 89% from $37.0B in 2021.

  • We are innovating in climate tech at a faster pace and greater volume than ever before 

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    Source: Pigato, Miria; Black et al. (2020). Technology Transfer and Innovation for Low-Carbon Development. World Bank. 

  • CLIMATE TECH BY THE NUMBERS

    USD $70bn+

    Overall venture

    capital funding for

    climate tech in 2022

    USD $1.4tn+  

    Expected value of

    companies in carbon

    removal or reduction by 2027

    3,300+ 

    Climate tech

    investment

    deals globally in

    2023

    83

    Climate tech unicorns

    primarily in the US, China,

    Germany, UK and Sweden

    USD $18.4bn 

    Climate tech funding

    goinginto storage (the

    largest of any sector

    globally) in 2022

    40x

    Growth in overall

    climate tech funding

    over the past decade

    89%

    Increase in global

    climate tech funding

    from 2021 to 2022

    2X+

    EU climate VC activity

    from 2021 to 2022

    (largest increase of

    any geography)

    USD $22.6bn+ 

    Invested in climate tech

    outside of US, EU and

    China from 2010 -2022

    Source: HolonIQ (2023), 2022 Climate Tech VC Funding Totals $70.1B, Up 89% from $37.0B in 2021; and PwC (2021). State of Climate Tech 2021: Scaling breakthroughs for net zero.

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  • SPOTLIGHTING OPPORTUNITIES

    Check out the report to see sector-by-sector analysis of the most promising opportunities across the climate technology stack.

  • Energy

    Transporation

    Food, Agrilculture, Land Use

    Industry

  • Built environment

    Management and reporting

    GHG Capture, use and removal

  • MOVING FORWARD

    Despite a significant increase in funding and an influx of talent and startup activity, climate tech is still a young field and faces many challenges to building, implementing and scaling solutions. These include the need for additional and diverse funding sources, mobilizing more support from government and corporate entities, talent and workforce, supporting adaptation goals, and ensuring that solutions reach vulnerable communities and populations, among others. Addressing these concerns should be a top priority. This section will explore five significant themes that emerged during conversations with experts. These themes shed light on how we should direct our efforts to ensure that funding, solutions, and the surrounding ecosystem are scaling efficiently and equitably.

  • 1. FUNDING

    Main objective:

    Increase the amount,

    as well as types of available funding for climate tech innovations.

    KEY INSIGHTS

    • More climate funds are being launched, and more investment is flowing into climate tech, yet we need to diversify the funding supply
    • Grant and concessional funding are critical yet in low supply – e.g. hardware risk and long timelines for realizing returns are prevalent, creating the need for patient and low returns capital
    • Mismatches between sectors of highest impact and where investment is flowing could impede progress

    2. GOVERNMENTS AND CORPORATIONS

    Main objective:

    Governments and corporations must help enable climate tech growth and impact at the national and local levels.

    KEY INSIGHTS

    • Supporting R&D, helping to accelerate market access and development, enable testing of new technologies in the market, etc. are all within the public sector remit
    • Need taxonomies around climate tech, climate funding, ESG, etc. to better streamline efforts
    • Creating an enabling environment for climate tech, whether through regulation that favors climate tech (such as feed-in tariffs), phasing out of fossil fuel subsidies, or providing subsidies (such as accelerated depreciation, etc) for climate tech
    3. TALENT AND WORKFORCE

    Main objective:

    Create national strategies

    to build the talent pool

    for climate tech.

    KEY INSIGHTS

    • Climate tech investment and climate finance, in general, are already creating jobs, and are predicted to continue to be massive employment generators in the future
    • Deep technical skill sets and industry experience are in high demand, but currently difficult to access
    • Need private sector partnerships with universities and academia, as well as educational guiding frameworks

    4. DEVELOPING COUNTRIES AND VULNERABLE POPULATIONS

    Main objective: 

    Ensure that climate tech solutions are reaching communities vulnerable to climate change both in developing countries and developed countries. 

    KEY INSIGHTS

    • Few funds and climate tech solutions are built to focus on developing countries and vulnerable populations
    • Tech transfer and local capacity in developing countries are lacking, and must be improved to attract capital and talent
    • Local populations need to be included in the process of designing and deploying climate tech solutions, which often need to be customized to fit local contexts
    5. ADAPTATION

    Main objective: 

    Build out the adaptation solution set and create the necessary investment strategies around it.

    KEY INSIGHTS

    •  Adaptation funding globally is lacking, and the bulk of climate tech activity to date has focused on mitigation 
    • Need to define where the main adaptation investment opportunities are, and the appropriate types of capital and instruments to fund them 

  • DEEPENING THE KNOWLEDGE BASE

    This research is just the beginning of the conversation on how to advance the climate tech ecosystem globally and capitalize on the climate tech opportunity. Given that the climate tech field is still young, there are many areas where we need to deepen the knowledge base.The below list provides a snapshot of some of the key questions needed answers, which we hope can help shape a more robust research agenda.

  • 1. FUNDING

    KEY RESEARCH QUESTIONS

    • What types of funding beyond standard equity and debt instruments are most needed, particularly for R&D intensive and hardware companies?
    • What innovative financing solutions can be leveraged in climate tech?
    • Which organizations are best suited to provide grants and concessionary funding to early stage climate tech solutions, and how do we mobilize support from them?
    • How do we ensure that the sectors with the greatest potential for impact are receiving the necessary funding? 

    2. GOVERNMENTS AND CORPORATIONS

    KEY RESEARCH QUESTIONS

    • How do governments and corporations add value across the lifecycle – from conceiving and commercializing solutions all the way to scaling and liquidity events?
    • What are the specific partnership strategies that climate tech startups can pursue with governments and corporations?
    • How do governments avoid crowding out investors?
    • What strategies and policies can governments provide to encourage investments in climate tech?
    3. TALENT AND WORKFORCE

    KEY RESEARCH QUESTIONS

    • What are the necessary taxonomies and frameworks for education and employment in the climate tech sector?
    • How do we improve the linkages between the private sector and academia to ensure a steady flow of talent from universities and research centers into climate tech companies?
    • How do we rapidly upskill individual students and job seekers as well as larger populations to ready them for working in climate tech, at scale?

    4. DEVELOPING COUNTRIES AND VULNERABLE POPULATIONS

    KEY RESEARCH QUESTIONS

    • How do we improve investment conditions for climate tech in developing countries?
    • What types of climate tech solutions, both mitigation and adaptation, are most needed in developing countries?
    • How do we engage local communities in the development and implementation of climate tech solutions?
    • Which organizations are best-placed to lead climate tech efforts in developing countries and vulnerable populations?
    • Which resources beyond funding - e.g. policy, talent, etc. - are most critical to supporting climate tech innovation in these markets?
    5. ADAPTATION

    KEY RESEARCH QUESTIONS

    • What does the full climate tech adaptation solution set look like?
    • Are there specific business models that are more prevalent amongst adaptation solutions?
    • Which funding vehicles and strategies are most applicable for adaptation solutions?
    • How do we customize adaptation solutions to different contexts?
    • What are the best metrics for quantifying adaptation impact?

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