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Venture Capital Embracing More Unconventional Climate Tech Startups

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The April message from United Nations Secretary-General António Guterres was pointed and grim:

“We are on a fast track to climate disaster,” he stressed. “It is time to stop burning our planet, and start investing in the abundant renewable energy all around us.”

The impetus for Guterres’ statement was the latest UN Intergovernmental Panel on Climate Change (IPCC) report, which painted a dire picture for Earth and urged sharp, abrupt changes in behaviors and priorities, including support for climate tech startups.

Already attuned to the urgency, the venture capital community had been ramping up its investing activity in climate tech startups and was further encouraged to do so in the IPCC report. Perhaps just as critically, a growing portion of the funding has targeted innovative and unconventional approaches to fighting climate change beyond the more well-known solar and wind industries—an essential step for reaching climate goals.

Investment Essential to Climate Innovation

The IPCC authors explained that for humans to have any chance at achieving the Paris Climate Agreement’s 1.5-degree Celsius goal, a multipronged plan of attack must encompass government measures and funding, grassroots civil efforts, and private investment.

On that last item, the report noted that “investment in social and technological innovation could generate the knowledge and entrepreneurship needed to catalyze system transitions and their transfer.” It concluded that private firms and entrepreneurship are essential in driving innovation.

Such thinking serves as validation for many venture capital investors as $39.2 billion was poured into climate tech startups in 2021 alone. The cash commitments included 64 newly announced climate change funds, including:

  • A $1.5 billion catalyst fund from the Bill Gates-backed investment company Breakthrough Energy that’s designed to spark public and private financing of innovative climate-smart technologies over the next three years,
  • A $175 million fund from private investment firm MacKinnon, Bennett & Co. that targets companies focused on the electrification, decarbonization, and digitization of transportation and energy,
  • A $60 million fund dedicated to climate tech investments from impact investing venture capital firm Envisioning Partners, and
  • The $25 million Disrupt Fund from Circulate Capital, an investment management firm dedicated to combating plastic pollution that previously raised $106 million for its Ocean Fund.

$39.2 billion was poured into climate tech startups in 2021.

Climate Efforts Beyond Solar and Wind

While the amount of money pulled in by climate change funds is impressive, investment scopes that stretch far beyond the well-entrenched solar and wind industries are equally valuable.

For example, in early 2022, UK-based Climate VC created a fund to raise £35 million over the next three years to fund companies that may have been overlooked by other investors. One example is Global OTEC, which seeks to cut island nations’ reliance on fossil fuels through ocean thermal energy conversion systems.

Other efforts include:

  • Breakthrough Energy backed Verdox, a carbon-capture system developer using an “electrochemical approach.”
  • MacKinnon, Bennett & Co. funded CarbiCrete, a carbon-negative producer of precast concrete.
  • Envisioning Partners’ early-stage company investments included firms addressing carbon challenges in the food chain such as Unlimeat and Shiok Meats. They join many other efforts to reimagine sustainable food.
  • Circulate Capital’s Disrupt Fund invested in Arzeda, a designer of synthetic proteins that tackle consumer, industrial, and environmental challenges.

More Tools Improve the Odds

As with all early-stage investments, there are no guarantees of success among today’s promising climate tech startups. But by attacking the climate change crisis from a wide assortment of directions—particularly through lesser-known technologies, geoengineering included—venture capital firms and investors are providing more tools to address climate issues and improve the odds of success.

Any company, security, fund or other investment identified herein is provided solely for illustrative purposes and should not be construed as a recommendation or solicitation for the purchase or sale of any such investment. By clicking on a weblink included in the above article, you may access a website operated by a third-party. Please review the website’s terms of use and privacy policy upon entering the site. We are not responsible for any content, links, products or services available on third-party websites.

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