24 April 2023

For the past week our Green Daily newsletters have focused on the climate tech set to decarbonize world economies, featuring winners of BloombergNEF’s Pioneers awards. The coverage has led up to BNEF’s two-day summit, which starts today. Click here to follow our rolling update. Terminal subscribers can also watch events at LIVE <GO>. Later in the week, Bloomberg Green will hold our own summit. You can attend virtually by registering online. Today’s newsletter — the final one in our special climate tech series — is about the money moving the green transition. We take a deep dive look at who’s investing and where they’re putting their money. 

Following the $1.1 trillion climate tech boom

By Eric Roston and Akshat Rathi

Click here to read the full version of this story on Bloomberg.com.

Big money — from the three biggest economies in the world, as well as scores of ambitious venture capitalists — is suddenly flying toward startups promising to help the world build a carbon-free future.

It’s a shift from the world of software into the actual world, following the trajectory of a tech founder like Peter Reinhardt, who sold a software company for $3.2 billion in 2020 and now leads carbon-storage company Charm Industrial. The newer startup, which he co-founded in 2018, turns carbon-rich biomass into sludge that can be safely buried underground. “We need to rebuild almost all the infrastructure around us to eliminate fossil fuel emissions and return the atmosphere to pre-industrial CO2 levels,” Reinhardt says. “That will require a tectonic shift.”

That’s why horizon-scanning investors are suddenly less interested in reseeding yesterday’s innovations (solar, wind and lithium-ion batteries) than doing deals that push forward the frontiers of climate tech. Decarbonized food, carbon-removing contraptions, futuristic materials and next-generation fuels are now portfolio targets for venture capitalists.

For early-stage investors, solar panels and electric vehicles are so 2011. By now these are relatively mature products built on the work of previous decades. They’re doing the job they were built for: gradually replacing fossil fuels. In fact, solar and wind are cheaper than coal in most of the world today. That means market forces will turn power grids a deeper shade of green with each passing year, and VCs can focus on electrifying everything else.

“There is capital available for great entrepreneurs — and good entrepreneurs — to tackle really hard problems in a way that wasn’t available in that first wave” of renewables investment, says Gabriel Kra, co-founder of Prelude Ventures. During the last 15 years, he adds, “the core technologies have changed, the participants have changed, the capital availability has changed, the building blocks have changed. And that’s what’s leading to this second, more successful wave of innovation.”

Investors won’t be working alone. Many of the most exciting startups combine private and public backing. Examples abound, despite a tech downturn that’s eliminated more than 120,000 jobs from the sector in the US and a banking crisis that’s taken down VC favorite Silicon Valley Bank.

Venture capital investment in climate tech reached a record $70.1 billion last year, according to HolonIQ Global Impact Intelligence. That was an enormous 89% rise over 2021 at a time when overall VC investment retreated, the tech sector shed jobs and Russia’s war in Ukraine spiked oil and gas prices and unleashed a scramble for fossil fuels.

Early-stage financiers are standing up against a backdrop of government, corporate and consumer spending on emissions reductions and adaptation measures. A balance of forces — investor enthusiasm backed by public-sector spending, facing off against global economic headwinds — will be a major topic of discussion during the two-day BloombergNEF Summit on the energy transition in New York this week.