ClimateTech: A New Investment Genre for Startups Emerges

There’s HealthTech. FinTech. InsurTech, AdTech and AgTech. And biotech, of course. Is “ClimateTech” the newest emerging sector where technology-based startups are entering to combat climate change?

Given how quickly savvy entrepreneurs identify ways to transform an industry, it seems only natural that they are identifying tech-aided advances to help solve climate adaptation and resilience challenges. Activity certainly is accelerating and it will prove interesting to see if socially responsible investors take note. After all, venture capitalists may be wary since many made money-losing bets during the so-called CleanTech era in the 2000s.

So, what is ClimateTech? The Collider, a three-year-old Asheville, N.C. nonprofit dedicated to helping the world prepare, adapt and become resilient as climate change intensifies, defines this term as a “rapidly emerging industry in which data-driven products are developed to enable communities, companies, and governments to understand their risk and exposure to the effects of climate change and take action to adapt and become resilient.” (Take a look at The Collider’s infographic below.)

At least three resilience-focused ClimateTech categories can be classified. They are:  

• Energy resilience: Two years ago, according to one report, utilities had invested over $2.9 billion in distributed energy companies. Distributed generation falls into the classic CleanTech venture capital definition, and wealthy investors such as Bill Gates and Jeff Bezos have been pouring money into the billion-dollar Breakthrough Energy Ventures fund for distributed generation and other energy tech. For instance, they have funded Sierra Energy, whose waste-to-energy gasification technologies are modular. And the Australian startup Omnicarbon provides the first artificial intelligence core smart city platform to partner with cities to achieve a sustainable, resilient and decarbonized future.

 

• Climate risk analytics: While investors become more sophisticated in how they harness data to select the startups most likely to thrive, there also is money to be made in investing in the analytics themselves. For example, Moody’s acquired Four Twenty Seven, Inc., making it an affiliate and giving the rating agency access to a giant database of granular climate change risk analytics. Bloomberg reasoned that the acquisition potentially signifies “the beginning of a major shift in how markets price risks related to climate change.”

 

• Agriculture: Sure, this could fall under AgTech, but such precision agriculture products as software management, data analytics, water efficiency and seed innovations are closely related to climate change, recruiting younger farmers and luring venture capital investors focused on agriculture, including Avrio Capital and Anterra Capital. Boston-based Indigo Agriculture, for one, develops microbial and digital technologies that improve environmental sustainability and consumer health, among other things.

While social impact investors haven’t been shy in investing in disaster recovery and big tech firms have donated sizably after extreme events, ClimateTech goes beyond do-gooding to find bottom-line benefits. While traditional CleanTech investments have slowed, these three climate resilience tech investment areas suggest there’s money to be made while combatting climate change.  

In fact, the genre is so ripe that a ClimateTech Wiki has emerged. The site offers a platform for both mitigation and adaptation/resilience technologies; give it a look and consider what climate resilience you can invest your time or treasure in.

Image credit: Hugh Han