It’s a Great Time To Be a Climate Tech Entrepreneur.
Our planet is undeniably changing. Oppressive heat waves, devastating droughts, extreme wildfires, record flooding and more intense storms - there is no doubt that the reality of climate change is upon us. And since at least 1896, we’ve understood why. When we burn fossil fuels (coal, oil, and natural gas), cut down our forests, till our land and manufacture the products we use, we unleash a staggering amount of CO2 and other greenhouse gases into the air we breathe (we now release over 40 billion metric tons of CO2 per year into the atmosphere). This drives higher global temperatures and a more unstable climate, and is fueled by the continued lobbying and prolonged misinformation campaigns spread by the industries that benefit most (mostly big oil and gas). All this is greatly diminishing our ability to protect and preserve our planet, people and vulnerable habitats, and gives a glimpse into the grave consequences we will face if we do not act soon enough.
According to the recent IPCC report, which serves as the basis for the UN Secretary-General’s proclamation of code red for humanity, an increase of more than 2 degrees Celsius would be devastating - flooding in most coastal cities, stronger wildfires, more powerful storms, heightened public health risks (i.e., additional pandemics) and entire areas of the world becoming uninhabitable. Experts agree: In order to avoid the worst of this, we must limit global warming to 1.5 degrees Celsius. To do so, we must cut global carbon-based emissions in half by 2030 and achieve net zero carbon emissions by 2050.
This means that we have less than 10 years to drastically change how many of the world’s major industries do business. Just 10 years. And over the same period of time, we will see global demand for food increase by 35 percent, water by 40 percent and energy by 50 percent, adding to the stress existing systems will face from the effects of climate change.
Yet there is hope, and the story we write for future generations (and ourselves, really) is not written in black and white. With significant challenges come tremendous opportunities. Those who meet this moment and help lead us into a cleaner, more sustainable future stand to gain the most. The urgency, timing and economics all finally align for visionary leaders to come together to tackle our biggest challenge. Here is why now is a great time to be a climate tech entrepreneur:
1. Awareness of this crisis is growing - fueling both corporate and consumer urgency. For the first time ever, the majority of Americans now say they have personally experienced the effects of climate change. Our changing world is being felt in every inhabited region across the globe. Today, climate disaster events (wildfires, droughts, heatwaves, storms, hurricanes, and tropical cyclones) are occurring 10 times more frequently than they were just 60 years ago, and each year, an average of 24 million people are displaced due to these natural calamities. In 2021 alone, there were 18 climate disaster events that devastated communities throughout the U.S. These events resulted in the loss of 538 lives and over $100 billion in damage. Climate change is no longer a future problem to be dealt with by future generations.
The good news is that people are finally understanding the enormity of this collective challenge and recognizing the urgency to act. A recent BCG survey found that 90% of respondents are equally or more concerned about environmental issues after the pandemic, and two-thirds believe that priority ought to be placed on environmental issues when considering economic recovery. And 87% of consumers also agreed that private companies should incorporate environmental considerations across their products, services and operations. Sustainability is now a business imperative.
This is fueling increased urgency in boardrooms of companies all over the world. Companies like Microsoft, Google, Amazon, Apple and even Ford have pledged to become carbon neutral - which may have been seen as a rather radical commitment just a few years ago (even if it is just a commitment). So far, over 20% of Forbes Global 2000 companies have made some type of net zero commitment, and in 2019, 90% of companies in the S&P 500 index published a sustainability report. According to one recent survey, 93% of executives believe customers will hold them accountable for their impact on the environment - driven in large part by transparency into supply chains and operations.
2. The market economics finally align.
Evidence is plentiful that we are in the midst of a complete transformation of every carbon emitting industry on the planet. One of the boldest illustrations of this is the drastic decrease in the cost of renewable energy (mainly wind and solar) that now outcompetes carbon-producing options like coal. Batteries are powering an increasing number of new car sales, and it’s not unreasonable to say that all cars sold by 2030 will be EV.
With the decreasing costs of solar, wind, pumped hydro, electric vehicles and other new clean technologies, more and more investors are taking notice and betting on a decarbonized future (see point #3 below). This is fueling even more innovation and driving costs down farther. It finally appears we are at the brink of radical disruption - one that will shepherd in a cleaner and better future. It may have taken us several decades to get to this point, but the cleaner way is also now the more economical way.
And if it’s not the carrot, it’s the stick. It is expected that environmental risks will cost supply chains across the globe over $1 trillion over the course of the next five years, with $120 billion of costs passed on to consumers. But when action is taken, the upside is promising. A CDP survey of 8,000+ suppliers showed that those engaged in activities to reduce GHG emissions were able to save a total of $34 billion in 2020 alone while reducing emissions by 619 million metric tons. Furthermore, some estimates suggest that bold action could result in a $26 trillion economic gain through 2030, along with the creation of 65 million new low-carbon jobs.
And we’re finally seeing this bold action starting to pay off. You don’t need to look any farther than the massive IPO of Rivian to see this. As Bill Gates recently said, “this is the greatest opportunity for innovation in human history.” Entire industries are being transformed, and no sector will be left untouched. This includes our entire energy system, current manufacturing and industrial processes, food and agricultural systems, transportation and mobility options and the built environment (and everything in between). There is significant opportunity for innovators developing solutions to reduce, mitigate or adapt to the effects of climate change in all of these industries, and the market is finally rewarding this. In line with Gates’ belief that there will be “Microsoft, Google, Amazon-type companies'' that come out of the climate-tech space, Blackrock CEO Larry Fink has predicted that the next 1,000 companies to have a market valuation over $1 billion will be those focused on climate-related technologies.
3. Investment in climate solutions is at an all-time high.
An increase in awareness supporting solutions to the climate crisis and market incentives that align with a transition to a carbonless future is drumming up unprecedented levels of investment in the climate tech space.
Climate tech - characterized as technologies developed to reduce greenhouse gases in energy generation and storage, the built environment, industrial processes, food systems, land use, sustainable transport and carbon capture - is one of the fastest growing areas of both public and private investment. According to Pitchbook, there are nearly 2,600 climate tech startups which have collectively raised over $50 billion in the past two years. VC dollars going to climate tech grew five times faster than overall VC investment in the last year, and in 2021 so far, over $32 billion has been poured into climate tech startups. In addition to traditional venture capital firms, corporate venture capital and private equity firms are also establishing funds for investment in climate solutions. If you are an entrepreneur at the forefront of our climate crisis, there is plenty of money to be found at every layer of the capital stack.
This can’t come soon enough. The climate crisis is here, but the tools, technologies and policies we have right now can only take us so far. In order to hit net zero by 2050, existing technologies and climate finance measures account for a reduction of only 65% of GHG emissions, with the remaining 35% dependent on new climate technologies. This leaves a wide gap for entrepreneurs to fill. It is up to each and every one of us to play our part in this ambitious pursuit for a better tomorrow. That’s why we are seeing growing support for those willing to take on one of the most daunting challenges of our lifetime. The world needs more climate tech entrepreneurs, and there isn’t a better time to be one.
The climate crisis is the most urgent issue of our time, and we must take bold action in order to set us on a trajectory toward a healthier and safer planet for all. Our entire livelihood is at stake. The status quo is unsustainable. But as awareness and concern for this mounting crisis grows, economic incentives align, and climate tech entrepreneurs gain support at unprecedented levels, there is hope for a better future. Ambitious and disruptive climate innovation is essential, now more than ever before.
At gener8tor, we know that climate change is one of the biggest challenges we face. Through our upcoming Sustainability Accelerator, we are committed to the growth and success of solutions aiming to solve, mitigate, or adapt to our climate crisis, and we are devoted to supporting founders that reflect the diverse communities that are being disproportionately impacted by climate change. We believe that a better future is not only possible, but essential. If you are a founder building something in the climate tech space, we’d love to support you on your journey. You can find more details and apply by January 2nd here to be a part of our upcoming cohort.
Thanks to Zareen Khan, Program Manager of gener8tor Sustainability, for the research and support in writing this article.
Written by Ryan Jeffrey, Managing Director of gener8tor Sustainability & Climate