On the 22nd of April, Earth Day 2023 was celebrated worldwide to draw attention to the need for immediate and sustained action to combat climate change. Climate change is the most pressing crisis humanity is dealing with right now, and startup founders and investors are racing to build and fund solutions. The importance of impact investing, plus friendlier legislation, has fuelled the rush to ClimateTech both in the US and Europe. Celebrities and established venture capitalists are “greening up” their portfolios, pouring billions into a sector once regarded as niche.
Earth Day 2023 highlights urgency for climate action
ClimateTech is a broad term that encompasses technologies that aim to mitigate or adapt to the effects of climate change. Clean tech startups raised $54 billion globally in 2022, which is almost double 2020’s $28 billion, but less than the record levels raised in 2021. However, the first quarter of 2023 saw a decrease in investment activity in the ClimateTech sector to a near three-year low.
A recent survey by London Tech Week and Microsoft found that over half of global respondents (54%) believe net zero is not possible without technology. Net zero technology refers to technologies that enable the reduction or removal of greenhouse gas emissions from the atmosphere, with the goal of achieving net zero emissions by 2050 or sooner.
The survey also revealed that 82% of respondents stated they are investing in climate tech as a priority, but there are still challenges that need to be overcome, such as lack of skills, funding, and collaboration. The survey also showed that 77% of respondents believe that governments should do more to support climate tech innovation and adoption.
Ways technology can help combat climate change
Using renewable energy such as wind, solar, and geothermal power can reduce our dependence on fossil fuels and lower carbon emissions. But there are other ways technology can help combat climate change such as,
Carbon capture
Technology that captures carbon dioxide emissions from industrial processes and stores it in a secure location is becoming more advanced. Some startups are developing methods to use captured carbon dioxide in products, such as building materials or fuel, which creates a circular economy and reduces emissions further.
Smart grid
Integrating renewable energy sources into existing electricity grids can be challenging due to their intermittent nature. Smart grids use technology to balance the supply and demand of energy, optimizing the use of renewable energy sources and reducing emissions.
Electric vehicles
The transportation sector accounts for a significant portion of carbon emissions. Electric vehicles (EVs) are an eco-friendlier option than traditional cars that run on gasoline. Advances in EV technology, such as longer battery life and faster charging times, are making them more accessible and attractive to consumers.
Circular economy
Moving towards a circular economy, where resources are reused and waste is minimized, is another way technology can help combat climate change. The development of new recycling technology and systems to track and optimize resource use can help achieve a more sustainable future.
ClimateTech sector investment
Fresh data from over 900 ClimateTech leaders, obtained by London Tech Week, which took place from the 12th to the 16th of June 2023, reveals that over half (62%) of global respondents believe Net Zero is not possible without technology, and 63% stated that not enough focus is being given to combatting climate change as a priority.
82% of the respondents are investing in ClimateTech as a priority, with the food tech/agritech industries being revealed as the top areas of investment for businesses in ClimateTech, with a huge 71% investing in that area, followed by 47% investing in energy and another 47% investing in Biodiversity/Environment. Illustrating a commitment to the sector, a huge 71% of ClimateTech leaders invested in 1-5 ClimateTech companies over the past 12 months.
According to the report, UK ClimateTech is playing a crucial role in tackling global climate change, with over 1,000 companies operating in this space, generating £11.3 billion in revenue and employing over 100,000 people. The report also highlights that UK ClimateTech companies have raised £1.6 billion in venture capital funding since 2013, making the UK the fourth largest market for ClimateTech investment globally.
Funding accessibility and talent acquisition key challenges for ClimateTech leaders
Ahead of Earth Day 2023, the new research suggests that although UK ClimateTech is playing a crucial role in tackling global climate change, challenges in accessing funding and finding the right talent are impeding the development of the industry. Data reveals a distinct drop in funding accessibility, with only 26.47% of ClimateTech leaders saying they had received funding over the last 12 months and 29% saying finding the right talent was another key challenge.
When seeking advice, over a third (44%) of ClimateTech respondents said they look to communities. Others turn to fellow founders, events, such as London Tech Week, startup programs like Elevating Founders, accelerator programs, and mentors.
Founder perspectives on ClimateTech’s potential and challenges
The fight against climate change is not a one-size-fits-all solution. It requires a multi-faceted approach, including investment in net-zero technology, government policies, and individual action. While progress has been made, there is still a long way to go to achieve a net-zero future.
Investors and founders must continue to push for innovation and collaboration to overcome the challenges facing the ClimateTech industry, such as funding and talent acquisition. Governments must also prioritize climate change action and create policies that support sustainable practices.
Here are some comments from ClimateTech founders and CEOs about the industry’s potential and the challenges they are facing,
Charles Southwood, Regional VM and GM Northern Europe and Africa
“There is no doubt that, in recent years sustainability has risen to the top of the boardroom agenda. Yet, there is still much to be done when it comes to protecting our planet, as this year’s World Earth Day serves to remind us. Today’s organisations are under more pressure than ever to effectively monitor, manage and extend their sustainability strategies. They also need to be able to demonstrate them to their customers and partners, as well as industry regulators. Despite this, many businesses are still missing a trick when it comes to achieving their ‘greener’ goals. It’s evident that data-driven enterprises are better-equipped to start down the sustainability path, more quickly, and more efficiently. But to follow this path successfully, organisations need to get a handle on their data. This is where modern technologies – like data virtualisation – can help. By providing easy and complete access to all repositories, through a single information layer, data virtualisation enables organisations to bring together data from multiple silos in order to analyse their sustainability progress. Those using this technology don’t need to make numerous replicas of datasets which, in turn, saves on storage and energy costs. In essence, data virtualisation can grant organisations a better understanding of their broader sustainability initiatives from planning phase to outcome phase and help to create a roadmap for a better, greener future.”
Tessa Clarke, co-founder of OLIO, an app that reduces food waste
“2023 has been a watershed moment for ClimateTech, because for the first time, investment in ClimateTech has exceeded investment in FinTech. However, this has taken place against the backdrop of an enormous decline in overall VC investment, meaning that far too many ClimateTech founders are still struggling to access the capital they need. This should concern us all, given the scale of the transition we need to undertake in such short time frames. We also need to see capital going into all areas of the Net Zero revolution, not just the energy transition.”
Michael Wolfe, Vice President, CTO, Outdoor Wireless Networks, CommScope
“This year’s Earth Day serves as a reminder to us all that as pressures continue to rise from consumers, governments, and environmental groups, business leaders need to act fast on sustainability. It’s currently estimated that telcos are responsible for between 1.6% – 3.9% of global greenhouse gases emissions and without immediate action this figure will continue to grow. To keep in line with the Paris Agreement, telcos must reduce their emissions by 45% before 2030, or risk contributing to the irreversible effects of climate change. Leaders in the industry have already set themselves ambitious internal targets to reduce power consumption and incorporate green initiatives into their organisations day-to-day activity. While not overlooking the energy consumption upstream and downstream in the supply chain, by demanding transparency into their partners’ footprint, telco leaders will be able to work together to tackle the issue of climate change head on. With the right initiatives and with sustainability top of mind, telecoms providers can lead the way towards a greener future. “
Heidi Karlsson, Director, Open Footprint Forum at The Open Group
“The effects of climate change are intensifying, pressure from customers and regulators is continuing to increase and with COP27 around the corner, it’s essential for businesses to bring their environmental impact into focus and start taking action. As businesses embrace more digital transformation, they have the opportunity to introduce innovative solutions so they can address the impact they are having on the climate. Yes, many organizations do now have some level of in-house environmental tracking and are building carbon measurement into their systems to monitor productivity, logistics and service usage, for example. However, a lack of industry standards for recording and processing environmental footprint data presents a risk to the progress organizations can make in reducing emissions. Businesses need an overarching strategy to reduce their carbon footprint, and the environmental impact of the business as a whole. By making decisions holistically and embracing digital transformation, businesses can operationalize sustainability. The Open Group Open Footprint Forum™ offers reliable tracking of environmental footprint data and continued consideration of how businesses can reduce their environmental impact. Offering support on accurate data on emissions, material, and energy consumption is essential for mandatory compliance reporting and meeting transparency demands. It’s also critical in taking action to avoid, reduce, and offset emissions – which will be key to unlocking a more sustainable future.”
Vicky Bullivant, Senior Vice President, Sustainability at NTT Ltd
“With a rapidly increasing digital space comes increasing demands on technology and therefore higher levels of energy consumption. The question is, how do businesses manage the need for more energy with greater environmental sustainability demands coming from consumers, stakeholders and employees. An organisation’s carbon footprint is often measured once a year and manually, which is about as useful as only checking your investment balance annually. There is a better way: digitalising your carbon footprint and monitoring it as closely as your profit line. This is how to ensure your business is agile enough to rise to the climate challenge. Businesses should start by implementing modern technologies and practices. This allows them to become proactive in dealing with climate-related challenges and respond at lightning speed while measuring the impact confidently. In this way, organisations can make informed decisions in real time without waiting for an annual report before they act to save our planet.”
Anand Verma, Founder and CEO of Expect, a ClimateTech startup
“As the CEO and Founder of Expect, Earth Day represents a critical moment to reflect on the urgent need to address the climate emergency. It is a day to celebrate the beauty and richness of our planet and to recognise the role that each of us has in protecting and preserving it. This serves as a reminder that the solutions to the climate emergency require a collaborative effort that involves all sectors of society, from individuals to businesses and governments. As a company dedicated to developing innovative solutions that mitigate the impact of climate change, we see Earth Day as an opportunity to renew our commitment to this mission and ensure that this year is the start of actions rather than just talking about the crisis.”
Dr Leslie Kanthan – Co-Founder and CEO of TurinTech
“Throughout this year we will start to see more scrutiny in place to ensure sustainable design and implementation of AI. More than 1.3 million UK businesses will use AI by 2040 and AI itself has a high carbon footprint. A University of Massachusetts Amherst study estimates that training a single Natural Language Processing (NLP) model can generate close to 300,000 kg of carbon emissions. According to an MIT Technology Review article, this is “nearly five times the lifetime emissions of the average American car (and that includes the manufacture of the car itself).” With more companies deploying AI at scale, and the ongoing energy crisis, AI’s energy efficiency and environmental impact are becoming more important than ever before.”
“Some companies are starting to optimise their existing AI using AI base code optimisation techniques to address energy use and carbon emission concerns before deploying a machine learning model. However, most regional government policies, such as UK’s AI Rulebook and EU’s AI Act, fail to give notice to the profound environmental impact of AI. Governments around the world need to emphasise the need for sustainable AI before it harms our environment.”
Davide Ceper – CEO of Varda
“Over the past few years, the agriculture industry has witnessed a sharp increase in the demand for greater transparency and disclosure on farming practices by regulators, consumers, food manufacturers or supermarket chains. These trends, in conjunction with the growing awareness of the massive environmental impact of farming-related activities, have been a powerful force for change and innovation in the sector. When dealing with agricultural data, two of the key issues are the enormous fragmentation and complexity of the supply chain and the limited penetration of data standards, which make aggregation of data from different sources and collaboration among industry participants a very challenging task. If we want to tackle the issue of data fragmentation in agriculture, the first step is to ensure that every stakeholder can rely on a shared infrastructure to identify and find agricultural fields anywhere in the world. Just as a city requires streets and squares with commonly accepted names, so does agriculture, if we truly want to foster collaboration and innovation at scale.”
“By establishing a shared geospatial reference for fields, industry players can communicate more effectively, improving the interoperability of digital farming tools and promoting data exchange across the entire ag & food value chain.”
Net-zero technology- a potential carbon-neutral future
ClimateTech is a key driver of innovation and impact in the fight against climate change. It offers solutions that can help reduce greenhouse gas emissions and adapt to a changing world. However, it also faces challenges that need to be addressed by various stakeholders, including investors, entrepreneurs, governments, and consumers. The fight against climate change requires a multi-faceted approach that combines investment in net-zero technology with supportive government policies and individual action. As we celebrate Earth Day this year, let us remember that we all have a role to play.
