Climate technology faces financial challenges.. Will it rise again or decline? (a report)
In a difficult investment landscape, recent reports show that investments in climate technology are no longer the bright spot they once were. Especially since it has declined by about 40 percent recently.
According to the latest data, total investments and financial grants to climate technology startups worldwide amounted to $65 billion during the 12 months ending in September 2023. This number represents a decrease of more than 40% compared to the previous year.
The report attributed the reasons for this decline to multiple factors, including geopolitical unrest and inflation. High interest rates and declining investment valuations. These are challenges that have significantly impacted the climate technology investment landscape.
However, the risks of investing in this sector have become more complex than ever. Last semester, the world witnessed the highest temperatures ever, in a summer unlike any other in history.
This difficult transformation requires the sector to research ways to enhance flexibility and adopt sustainable technological strategies, which contributes to overcoming current challenges and achieving progress towards a future that relies on climate technology as an effective solution to climate change problems.
Climate technology challenges and the need to focus on real solutions
According to the recent report, as the market for climate technology startups declines, they must focus more on solving real global problems and understanding customer needs.
This was indicated by Amit Chaturvedi, global president and managing partner of SE Ventures, which focuses on the areas of energy, sustainability and industrial automation.
Despite this, funding is still directed to industries that cause the largest emissions, such as steel and cement. It represents a small percentage of investments in climate technology.
Although these industries contribute significantly to emissions, efforts to develop technology to reduce these emissions remain limited.
A study conducted by PricewaterhouseCoopers showed that only 14% of total investments in climate technology were allocated to industries that cause significant emissions, which are difficult to reduce easily. In contrast, startups in areas such as mobility and energy received the majority of funding this year.
On the other hand, carbon capture, utilization and storage (CCUS) technology has proven its ability to address challenges in the field of climate technology. The fossil fuel industry has invested large sums in this technology, which could play a role in extending the use of oil, gas and coal in the future.
Climate technology... challenges and bright prospects
Despite the challenges these areas face, there are new investors showing interest in the sector. According to a report, investment in carbon capture, utilization and storage technology remains a focus of interest as levels of demand and government support for such projects increase.
Despite the decline in these investments, there is a glimmer of hope in the development of the sector. It has captured a larger share of the total startup investment market at more than 11%. The influx of investors for the first time in this sector is a positive sign of renewed interest in it.
On the other hand, a host of new mutual funds have emerged in recent months. Which enhances support for this industry. The US Inflation Reduction Act provides a strong boost to the sector, as it includes a set of grants and incentives that support clean industries. Such as producing green hydrogen and generating electricity for homes.
In this context, expectations appear that it will have bright prospects despite the challenges it faces. There is a growing interest in the sector, reflected by the influx of investors and sustainable government initiatives.
Source: websites