Climate Crisis

The Prime Coalition, a non-profit organized to support sustainable, effective, and scalable solutions to climate change, reports that a baby born in 2020 will face seven times more extreme climate events in their lifetime than a baby born at the dawn of the industrial revolution.

John Doerr, a venture capitalist famous for his early backing of Amazon and Google, has published Speed and Scale: An Action Plan for Solving Our Climate Crisis Now. It presents a 10-point plan for reaching by 2050 the goal of net-zero carbon emissions, the point where we add no more greenhouse gas into the atmosphere than we can remove.

https://speedandscale.com/

Briefly, the 10 points are:

• Electrify transportation – 8 gigatons of annual carbon emissions are from fossil fuel-burning vehicles

• Decarbonize the Grid – the largest source of emissions 24 gigatons is from fossil fuel generation of electricity

• Protect Nature – deforestation, forest fires, destructive fishing practices, etc are responsible for 6 gigatons of emissions

• Remove carbon – this goal is to remove 10 gigatons of CO2 from the atmosphere by restoring ecosystems like forests, lands, and oceans

• Fix food – 15% of carbon emissions come from food production including livestock, rice production, and fertilizers

• Clean-up industry – manufacturing of materials accounts for 12 gigatons of CO2

• Turn movements into action – movements are started and sustained by voters, government representatives, and corporations.

• Win politics and policy – The effort must be a coordinated international program spearheaded by global public funding

• Innovate – we need acceleration of research and development

• Invest – a global net zero will require an annual public and private funding of $1.7 trillion.

Annual global funding of $1.7 trillion will require a massive investment in climate technology innovation.

Progress

Over the past 15 years, we have made some progress as a result of innovation. Prices for solar and wind power have declined by 90%. Improved batteries have increased the range of electric vehicles and lowered the cost. Improved energy efficiency has reduced greenhouse gas emissions.

But we need massive public and private investment to fully deploy the innovations we have and generate new ones. Also, trillions spent on dirty energy could be redirected toward more innovation in climate technology.

Investment Today

As a general matter, private investment (principally venture capital) is declining. The IPO market is dormant. The once robust crypto market is in deep freeze.

But climate tech investment remains strong. As reported by ImpactAlpha, in the first half of 2022 new climate tech firms raised nearly $19 billion that nearly matches last year’s record $40 billion.

The volume of deals was up 76%, to 477 transactions, up 76% from the year-earlier It was even 36% higher compared to the second half of 2021.

What constitutes early-stage investment?

Innovation in climate technology typically starts with the inception of climate research and development companies with seed money. When they can demonstrate to investors their ability they enter the early-stage venture capital investment phase. Early-stage capital supports the advanced development of the technology. It can also assist to establish commercial manufacture and marketing of the technology.

A few years ago, early-stage climate startups funding was considered very risky.Today, there have emerged new technological innovations and a wave of relevant talent which has invited new investment in climate technology Many funds are hiring climate scientists to untangle the complexities of climate change.

Craig Shapiro of the Collaborative Fund recently tweeted “In a decade+ of investing in seed startups, we’ve never seen talent migration like this,”. This year they launched two new climate-focused early-stage funds.

Over the past 18 months, ClimateTech VC has monitored more than 78 new climate tech funds.They observed that the majority of the funding is concentrated in the US in the sectors of transportation, energy, and food & land use. A reduction of mega deals (>$500m) so far in 2022 explains the drop in total climate dollars while the actual volume of climate deals has increased with the amount of climate-curious investors joining in.

Closing the Gap

The Prime Coalition was organized to help bridge a gap the early-stage climate financing. Commercial investors were reluctant to take a risk on climate startups. Prime Coalition launched its $52 million Prime Impact Fund in 2020 from the Sierra Club, MacArthur, Packard, and other foundations.

Last year, Prime Coalition launched a venture capital fund for early-stage startups that have the potential for gigaton-scale carbon removal. Prime now says that the funding gap has moved downstream to financing innovative demonstration plants and guaranteeing customers for technology that has not yet proven to be commercial.

According to Climate Tech VC., climate tech innovation in carbon, built environment, and climate management,are supported by a growing amount of seed deals, These include investments in carbon measurement,removal, and utilization technology. Carbon sector deal volume nearly doubled from the first half of 2021.

Global sustainability, if it’s not too late, will require much more climate tech investment than we have now. Currently, the level of early-stage climate financing is encouraging compared to other venture capital investments. But much more is needed.