Green Finance, Member Exclusive

Green Finance Briefing: VCs are betting on climate tech amid a broader down market

  • Climate tech is accelerating at unprecedented pace, in contrast to the broader tech sector, with global VC funding reaching $70 billion in 2022.
  • This year, however, the growth rate of the climate tech sector is expected to moderate due to a challenging economic backdrop.
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Green Finance Briefing: VCs are betting on climate tech amid a broader down market

Data Snack: VCs are betting on climate tech amid a broader down market

Climate tech is accelerating at unprecedented pace, in contrast to the broader tech sector, having mobilized a focused and competitive investor base.  

Global venture funding in climate tech reached $70.1 billion in 2022, up nearly 90% from 2021, according to HolonIQ data.

In the US, climate tech VC funding in 2022 reached $29 billion, surpassing the investments made in the entire 2006-2011 Clean Tech 1.0 Boom, which recorded $25 billion in venture capital. Given this current growth rate, cumulative VC funding in the sector is set to cross the $100 billion mark next year.

Across the pond, Europe doubled venture funding in climate tech to nearly $18 billion as it seeks a path towards energy independence, out investing China ($11 billion) for the first time.

Diving into sub-sectors, the most popular was storage with nearly $20 billion in VC funding, with batteries dominating the space, followed by alternative storage technologies. Energy grids for distribution and EV charging also attracted substantial investments last year.

Other big areas were mobility ($11.4 billion) and agriculture + food ($9.5 billion). 

Data and finance recorded a lower share of dollars than the number of deals, as this category is principally B2B SaaS versus other sub-sectors that focus more on physical assets/infrastructure and are more capital-intensive. 

This year, however, the growth rate of the climate tech sector is expected to moderate due to a challenging economic backdrop. 

There are 83 climate tech unicorns around the world, collectively valued at over $180 billion. While there was a range of public market exits, SPACs remained a popular route as the traditional IPO market proved more challenging. 

But looking at performance, climate tech SPACs have traded below the broader market last year, according to CTVC.

Just look at the charts

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