By: Sumeet Singh, Partner, Climate Angels
Climate tech which has always been a necessity, thanks to its growing importance, is now an attractive asset class. The VC investors are actively stepping ahead to back promising startups in this space and partnering with them in their journey.
The numbers confirm this growing interest, and according to Traxcn data, climate tech companies received investments of $ 1.4 billion in India till September 2022. The amount invested in this sector in 2021 was $ 836.7 million.
It is being seen as a major disruptor like AI and fintech. Investments in early stage climate tech ventures bring huge financial gains for investors. The time is in its favour as leading economies across the globe are joining hands to support the climate cause and opening channels for investments. The United States and China, as per a report, are leading the race with investments of $ 48 billion and $ 18.6 billion respectively between 2016 and 2021.
India, which stood 9th in the list, is climbing up the ladder by setting clear targets to reach sustainability goals. It aims to reach net zero by 2070 and as per its updated NDC, it has set an emissions-intensity target of 45 percent below 2005 levels by 2030. It further seeks to achieve 50 percent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. In the coming year, efforts to achieve these targets will gain steam from all stakeholders and demand for climate tech will boom.
Investment in climate tech is an unmissable opportunity as there is a sense of urgency among companies to reach their sustainability targets. They are accelerating their decarbonisation and energy efficiency efforts and working to fulfil their green commitments. They are trying to meet sustainability standards and become more transparent on clean sourcing and supply chain efficiency to meet expectations of their customers, shareholders, partners and global clients.
Notably, they now realise that it is their social responsibility to leverage climate tech and integrate sustainable practices in businesses to support the fight against climate change.
This means that companies, to achieve these goals, will rely more on climate tech. The demand for technologies will gain momentum, making it the best choice for sustainability-driven investment opportunities. This will give dual benefits to investors–making financial gains on their investments in the long run and creating a positive and social impact.
Another key reason that makes investment in climate tech lucrative is backing from the government in terms of policies and regulatory aspects. Also, the increasing awareness among customers on the perils of climate change and responsible buying behaviours are propelling its importance.
The government is supporting climate tech companies with incentives and growing inclination among customers to invest in climate-friendly products which make climate tech a favourable investment opportunity.
India is fast turning into a clean mobility ecosystem. The EV sector is booming and the country’s automobile industry will integrate newer technologies to meet rising demand. Additionally, development of charging infrastructure, battery manufacturing and EV financing will multiply the investment opportunities in this sector.
India is a large market for renewable energy. It is ramping up its solar and wind power capabilities. This will boost the local production of solar cells, wind turbines, and components. There are efforts already in place to use green hydrogen as a fuel alternative. As technologies develop further, green hydrogen will witness reduction in costs, leading to mass adoption.
Lastly, off late there has been an inflow of high-quality early-stage climate tech deals which indicate a strong deal flow for the $68 Billion dry powder that climate tech VCs across the world have raised in the past year. Innovation is the key to solving Climate Change and Climate Angels is at the forefront of backing these innovation first companies in India.
It comes across 50 such deals per month and has teamed up with several leading global investors to enable the transition to net zero. Needless to say, things are looking bright on the horizon for Climate Tech.
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