Can venture capital save the planet? The industry is betting a serious amount of money, to the tune of $70.1 billion, in climate tech startups to prove it can — or at least do its part.
The more muscle behind this goal, the better. Hence the recent launch of the Venture Climate Alliance, a coalition of firms looking to build an industry-wide movement to combat climate change and transition to net-zero emissions.
Some of the world’s largest VC funds, such as Tiger Global, have signed on to the alliance — signaling a shift from traditional VC investment targets like software and financial technology. Twenty-three VC firms across the U.S. and Europe have signed up so far.
Members commit to reaching net-zero emissions for their operations by 2030 and reporting progress transparently. They'll also engage with their portfolio companies to create paths to net zero in the early investment stage and help them to realize those goals.
Venture capital has long played a role in transformative innovation across technology, pharmaceuticals and other industries. So, it makes sense for the industry to embrace a role in scaling up climate tech as part of the solution to reduce greenhouse gas emissions.
It doesn’t hurt that a jump in energy prices is driving more money to climate tech. Green energy technologies are reaching the point where they are cheaper and better performing than their fossil fuel incumbents. It’s no wonder, then, that funding for startups focused on clean energy and reducing fossil fuel use rose 4 percent from 2021 to 2022, according to BloombergNEF.
Government support is also increasing with policies like the U.S. Inflation Reduction Act and the EU Green Deal Industrial Plan. Across the globe, public and private investments in climate tech totaled $1.1 trillion in 2022, according to a Bloomberg analysis.
"Net zero for thee but not for me is no longer a workable solution,” Daniel Firger, co-founder of the Venture Climate Alliance, said in a statement. “If we're serious about moving the entire world economy into alignment with a pathway to net-zero emissions, we must consider the critical role that private markets play in that journey."
VC investors are the linchpin between capital markets and early-stage innovation, with the opportunity to help companies move from initial development to commercialization and scale.
The alliance wants to bridge the gap between the hundreds of net-zero commitments in public markets and early-stage innovation from startups, which can help legacy industries decarbonize at a lower cost with new products and processes, Alexandra Harbour, a co-founder of the Alliance, said in a press announcement.
Marrying established companies with startups is a proven path to achieving greater innovation for legacy industries while giving newcomers a leg up, as TriplePundit recently reported.
Yet the methodologies, tools, and data to track climate impacts of early-stage investments are either nonexistent or inaccessible, the Alliance attests. That’s why its members want to develop best practices to collect, interpret and report this data and share what they learn with the industry.
Image credit: Scott Webb/Pexels
Based in southwest Florida, Amy has written about sustainability and the Triple Bottom Line for over 20 years, specializing in sustainability reporting, policy papers and research reports for multinational clients in pharmaceuticals, consumer goods, ICT, tourism and other sectors. She also writes for Ethical Corporation and is a contributor to Creating a Culture of Integrity: Business Ethics for the 21st Century. Connect with Amy on LinkedIn.
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