Climatetech VC’s pick their top sectors for 2023

Last year saw an upsurge in climate change impact, investment and innovation, reports ClimateHack Weekly. More than 25% of all venture capital funding went to climatetech alone with an increased focus on technologies that have the most potential to cut emissions.

So, the benchmark for the next year has been set and long-term emissions and net zero targets are front of mind. Which technologies have caught the attention of leading climatetech investors?

And which start-ups could move the needle?

Here is how you can invest in breakthrough climatetech solutions according to ClimateHack.

A bundle of (clean) energy

Clean and renewable energy faced unprecedented demand in 2022.  Following market turmoil, largely due to Russia’s invasion of Ukraine, countries around the world prioritised the production of sustainable, affordable energy. And demand shows no sign of slowing down.

Sandra Malmberg at EQT Ventures reveals that one of their key areas is on renewable energy procurement and energy demand flexibility driven by energy price fluctuation, sustainability pledges and electrification of industries.

Jessica Burley at Planet A adds that she is “betting that start-ups in energy independence will be more able to buck the upcoming economic downturn.”

“We are seeing an all-time high pipeline in energy. The global political climate has put energy on the top of the agenda and we see the space attracting more and more world class founders who recognise the huge market opportunity,” observes Tove Larsson at Norrsken VC.

Dannielle Strachman at 1517 Fund points out: “Solar panels, installation, home solar etc. are a commodity space now. Panels are cheap. Installation keeps getting cheaper. And the hardware keeps getting more reliable. Unless you’re building robots or tools for improving site productivity by 10x, it’s really unlikely that you’ll be able to create the next great start-up here. Yet, this changes if you’re building something that leapfrogs the current generation, or opens new applications.“

Catalysing carbon capture

Capture it. Store it. Use it. Entrepreneurs are harnessing technologies to sequester carbon, crucial to achieving carbon neutrality by 2030.  And so we can expect to see many more entrepreneurs entering the market, predicts Tomás Álvarez Belón at Collaborative Fund: “We’ll see a ten times increase in carbon removal start-ups, leveraging solutions from soils to buildings to algae.”

Similarly, Sandra Malmberg at EQT Ventures foresees climate fintech funding on the rise this year – “from managing and mitigating climate risk, to mobilising capital to catalyse decarbonisation.”

Marieke Gehres at Earlybird VC adds that “carbon credits are definitely not the end game, we will definitely see more innovation in this space in the coming year, especially on the supply side, i.e. carbon project developers since they are still facing several inefficiencies in financing their projects or in the measurement, reporting and verification process.“

Rewards and reforms are on the rise

As pressure mounts on governments and authorities to increase (or at least introduce) incentives; subsidies and support will give rise to a wave of innovation and adoption.

Beatrix von Schroeder at AENU says that the US IRA credits will motivate hard-tech climate start-ups to start operations in the US early on. “Everything from green hydrogen, to alternative fuels, to carbon capture or batteries and heat pumps, benefit from this significant cost reduction.

She notes the European Union reforms on plastic and packaging support reuse and recycling solutions. Time will tell how this affects start-ups in the reuse, recycling and biodegradability space.

Construction x climate change

Eliminating waste and pollution, circulating products and materials and regenerating nature are all part of moving to a circular economy. And we need sustainable biomaterials to build smart cities of the future, today.

“We are excited about the potential for the bioeconomy to provide exciting biomaterials to build our cities more sustainably, says Max Blanshard at 2150. “The team is on the lookout for great companies leveraging these technologies in construction.“

Sandra Malmberg at EQT Ventures sees the decarbonisation of the chemical industry as a key focus for 2023, to touch “more than 90% of all manufactured goods and emitting more than two gigatons of greenhouse gases per year globally.”

Future of our agri-food system

Our food systems are responsible for a third of human-caused GHG emissions. And yes, alternative proteins can significantly reduce our carbon footprint, but other areas will see increasing attention and investment this year:

“The foodtech environmental discussion will move beyond greenhouse gas emissions to an increased spotlight on biodiversity, water scarcity and other planetary boundaries“ says Erik Byrenius at Trellis Road.

He adds that there will be an increased spotlight on “staple foods (e.g. corn, rice, wheat, potatoes, cassava, legumes) and how to improve them in terms of climate resilience, nutritional value, environmental footprint etc.“

And agritech will attract massive funding for non-GMO crops to high-tech technologies (smart sensor, satellites) to efficiently manage crops and harvest.

“We see more and more investors focusing specifically in foodtech. This is great because we need to address two big challenges – environmental footprint as food production is still one of the top contributors to CO2 emissions, but also the need to address the long term risk of food crisis,“ adds Tove Larsson at Norrsken VC.

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