The climate tech emissions-funding mismatch

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Climate tech start-ups have had a torrid time over the past few years.

Global investment has fallen 60% according to the latest State of Climate Tech report from PwC, from $150 billion in 2021 to $60 billion in 2024.¹

The majority of investors are ultimately only in the game to generate a satisfactory risk-adjusted return, but for those investors who also want to have an impact on global emissions, the latest funding data suggests there’s a misallocation problem. Some sectors receive disproportionate amounts of funding relative to their overall share of emissions, while other sectors are starved of capital.

Over the past decade, climate tech start-ups focused on energy and mobility have received 2-3 times their share of global emissions. In contrast, food, agriculture and land use, industrials, and the built environment have been starved of investment relative to their contribution to overall emissions. The trend appears to have become even more acute in the past year or so as investment has increasingly gravitated towards energy and mobility start-ups.

In short, there is an emissions-funding mismatch.

The biggest CO2 abatement opportunity lies elsewhere

While venture capitalists, the media, and individuals focus their attention on the switch to renewable energy and electric vehicles, the real action, and the sector that is in most need of correcting the emissions-funding mismatch is industry.

The global industrial sector (which includes sub-sectors such as oil and gas production, cement, iron and steel, and petrochemical processing, etc.) emitted 15.5 Gt CO2e during 2022. The industrial sector is the single largest source of emissions, accounting for almost one in every three tonnes of CO2e released into the atmosphere. And the impact that industrial production will have on the climate is likely to grow over the next 20-30 years.