PwC: Investments in climate tech rise 210%, but not in right areas

PwC’s “State of Climate Tech 2021” report said investment in companies developing technology with the aim of fighting the climate crisis grew by 210% from the year before, which saw $24.8 billion in investments.

However, according to PwC, big venture capital and private equity companies aren’t exactly backing the right companies.

Solar power, wind power, food waste technology, green hydrogen production, and alternative foods/low greenhouse gas proteins represent over 80% of the emissions reduction potential by 2050, according to the report. However, these technology solutions only received 25% of the climate tech investments between 2013 and June 2021.

Instead, most of the funding ($58 million) went on mobility and transportation companies, including e-scooter, electric vehicle, and flying taxi companies.

PwC argued that increased funding is needed across all challenge areas to allow for breakthrough innovations and support commercially ready technologies to scale up over the next decade. Governments need to incentivise investors to look into other necessary climate technologies (such as solar power and wind power that have better emission reduction potential than mobility and transport) through policies and action plans.

The average spent on climate tech deals grew from $27 million in 2020 to $96 million at the beginning of this year, according to PwC. Additionally, the number of active climate tech investors rose from almost 900 in the first half of 2020 to over 1,600 in the first half of 2021.

PwC also noted that climate tech SPACs (special purpose acquisition companies) raised $25 billion in the first half of 2021, making up for more than a third of all climate tech investments at the start of this year.

PwC also stated in its conclusion that more focus needs to go onto early stage, seed and Series A investments in climate tech as they have received little attention ever since 2018. It added that there is a need to fund more young climate tech start-ups that have the ability to become companies that are worth billions.

Emma Cox, global climate leader at PwC UK said in a statement: “Innovation is critical to meeting the challenge and the good news is that climate tech investment is up significantly across the board.”

Adding, “however, our research has found there is potential to better channel and incentivise investment in technology areas that have the greatest future emissions reduction potential. This raises the question of why these sectors are missing out – are investors missing a value opportunity or is there an incentive problem that needs the attention of policy makers?”