Global Investment in Climate Technology Startups Falls by 40.5%

Investment in climate technology startups worldwide has declined by 40.5% to $64.55 billion in the 12 months leading up to September, as economic uncertainty and geopolitical conflict have impacted investor confidence, according to a recent report by accounting giant PricewaterhouseCoopers (PwC).

Climate Tech Sector’s Resilience Amidst the Decrease

Despite the significant drop, PwC’s State of Climate Tech 2023 report revealed that the decline in funding was still smaller compared to the 50.2% fall in total venture capital and private equity investment across all sectors during the same period.

In total, venture capital and private equity investment reached $638.2 billion for the study period, compared to $1,280.81 billion in the previous 12 months.

While the decline in funding has set the industry back to the investment level of five years ago, PwC also highlighted a positive trend of investors allocating a larger share of capital and grants to climate tech startups focusing on higher emissions reduction technologies.

Shifting the Investment Focus

Emma Cox, global climate leader at PwC, expressed enthusiasm regarding the shift in investment priorities towards technologies that offer the greatest potential for emissions reduction.

“While this shift is promising, it is crucial to continue the momentum and increase investment levels across all technologies with emissions-cutting potential,” Cox stated.

PwC emphasized that the decrease in investment comes at a critical time when innovative solutions are urgently needed to mitigate, measure, and adapt to climate change.

In a previous warning issued by the consultancy, it was revealed that the rate of decarbonization falls significantly short of what is necessary to limit global warming to 1.5 degrees Celsius.

According to PwC’s annual Net Zero Economy Index, achieving a decarbonization rate of 17.2% is now essential to meet the ambitious goals outlined in the Paris Agreement.

This rate is nearly seven times higher than what was achieved in the past year (2.5%) and 12 times faster than the global average over the last two decades (1.4%), PwC concluded.