Less than 3 per cent of startups have been able to reach Series B or beyond funding levels in India’s climate tech ecosystem which addresses critical challenges in the world’s 7th most vulnerable country to both the causes and impacts of climate change, said a report on Friday. Innovation for Impact: Indian Startups Driving Climate Action report by IIM A Ventures and Japan’s MUFG Bank said that while early-stage funding is relatively robust with two-thirds of funded startups securing seed rounds, there’s a noticeable gap in growth-stage capital.
“This indicates a need for more substantial later-stage investments to help promising solutions scale,” the report said for the climate tech startup ecosystem represented by over 800 operational climate tech startups and over $3.6 billion raised between 2014 and 2024.
“India’s climate tech sector is not just a rapidly growing industry but a vital force in the global fight against climate change. The $3.6 billion raised by startups over the past decade highlights the sector’s significant potential and the pressing need for enhanced support to scale breakthrough solutions,” Chintan Antani, IIMA Ventures.
The report further noted that over 80 per cent of climate tech startups are focusing on emission-reducing (mitigation) solutions, while solutions for building resilience are relatively sparse. In terms of funding, transport and mobility startups dominate the climate tech ecosystem with over 350 startups raising nearly 85 per cent of the total funding.
“However, other sectors like industrial decarbonization, waste management & circularity, and alternative fuels remain underfunded despite their high potential for climate impact,” the report said.
The report also highlighted five areas for climate tech innovations in India:
- India’s decarbonisation market is projected to reach $10.3 billion by 2032 with opportunities in carbon capture, utilisation, and storage (CCUS) technologies, driven by industrial demand and government initiatives to reduce emissions.
- The $15 billion waste management industry in India offers significant potential for circular economy solutions. Key areas include recycling technologies, waste-to-energy systems, and innovative materials.
- Alternative fuels is another sector with multiple high-growth markets including EVs (expected to be worth $637.85 billion by 2032), green hydrogen electrolyzers ($78 billion by 2050) and biofuels ($10.31 billion by 2030).
- According to the report, India’s climate finance need is estimated at $1 trillion over the next decade. Since there is a visible absence of climate finance options that startups can leverage for scaling up their offerings and achieving growth, it presents an opportunity for innovative financial instruments and blended finance solutions.
- Lastly, growing demand from government bodies and corporates for data-driven climate action tools offers opportunities in air quality monitoring, disaster management and biosphere tracking.