European climate tech firms raised a record $13.2 billion in 2022 – well over a tenth of all VC funding – but investment still needs to ratchet up significantly, particularly for established technologies.
According to first-of-its-kind research by World Fund, increasing carbon costs, the worsening climate crisis, and economic opportunity are pushing more and more investors toward climate tech solutions.
However, there is a widening funding gap. Only 16 per cent of climate finance needs are currently being met, with investment needing to increase by 590 per cent by the end of the decade to keep the global community on track for net zero.
Where the opportunities are
The funding gap is widest in later-stage venture capital for the commercialisation of ready-for-market, established technologies, especially hardware solutions – which are forecast to create 60 per cent of climate tech revenues over the next five years but often struggle to find funding to commercialise.
The highest untapped investment potential is in historically underfunded areas like solutions for industry, buildings and land, rather than ‘trend’ sectors like mobility and energy.
‘Much is still to be done’
The white paper provides a set of guidelines for investors on the principles for capturing the climate tech opportunity, as well as the steps climate tech developers must take to secure investment.
“Europe has the potential to lead the global climate tech revolution, and whilst we have lost a lot of time, it’s not too late to prevent the worst consequences of the climate crisis. We must grasp the full economic and environmental potential of the technological revolution unfolding before us,” explained Danijel Visevic, founder partner at World Fund.
“This first-of-its-kind analysis of the private markets in climate tech illustrates that much is still to be done – in terms of ensuring there is sufficient funding to secure a regenerative world – and the VC community has a particular responsibility to fight to secure that future. That means doubling down on climate deep tech – and the innovative solutions that replace carbon-heavy industries.”
