A Primer on Climate Tech for Founders

Enrique Allen
4 min read

Why is it important?

  • The UN Secretary General, Antonio Guterres, called climate change the “defining issue of our time” and urged leaders to understand the “urgency” finding solutions.1
  • There's a critical need to reduce CO2 emissions. The global climate crisis is caused by overabundance of greenhouse gases, the majority of which is CO2 (89%), mostly from the use of fossil fuels. Greenhouse gases trap heat in the atmosphere which in turn leads to global warming.
  • Other sources of greenhouse gases include methane (17%) and nitrous oxide (6.2%), mostly from agriculture, waste treatment, and gas flaring. Fluorinated gases (2%) from industrial processes. These three types of gases, though a smaller proportion of total emissions, are more potent than CO2 with regards to global warming harm.2

What is climate tech?

Climate tech focuses on decarbonization across all sectors of the economy, the complexity of which reflects the interlinked nature and scale of the climate challenge.3 This includes decarbonation in energy, mobility, food, agriculture, land use, retail, consumption, and industrial processes. Additionally, requires investments in decarbonization technologies.

Why now?

The globe needs to halve greenhouse gas emissions in the next 10 years (by 2030) to avoid global warming above 1.5 degrees celsius, which would come with catastrophic consequences.4

What kind of traction has the space seen?

  • Total funding for climate tech companies is on the rise: $1.6 billion in 2019, 3750% increase from 2013 (~$418 million). The majority of climate tech investments have been in mobility and transport.
  • Companies are starting to care; Amazon committed $2 billion to its “Climate Pledge” venture fund, Microsoft $1 billion to its Climate Innovation Fund, and Unilever 1 billion euro climate fund.
  • ~300 companies have committed to net zero emissions before 2050.5

Sectors in climate tech

  1. Renewable energy
  2. Electrification and transportation
  3. Sustainable agriculture
  4. Industrials
  5. Building and construction
  6. Circular economy
  7. Combating deforestation

Renewable Energy

Energy generation of heat and electricity is responsible for 30% of greenhouse gas emissions globally.6

  • Energy generation: Investments have been focused on renewable energy, mainly in solar. Additionally, on startups that have innovative funding or distribution models for solar and wind. Some energy ventures in wave and geothermal energy. (e.g., Bbox, deliver clean energy using solar home systems or Mosaic for solar financing)
  • Energy storage: Investments mostly in battery development alongside chemical / kinetic storage ventures. (e.g., Energy Vault SA, non-chemical battery system that uses gravity storage)

Electrification & Transportation

Transportation accounts for 25% of global greenhouse gas emissions, leading to increasing interest in electrical vehicles. This climate tech space has seen the most investment between 2013 to 2019, at $37.4 billion as estimated by PWC. 7

  • Micromobility: Inclusive of bikes, scooters, self-driving robots, which has been surging in major cities. (e.g., Bird, scooter startup)
  • EVs and high-efficiency vehicles: Most funding in this space (85%) is dedicated towards EV / Hydrogen EV developments in Chinese startups, such as NIO. Additionally, a smaller percentage of developments in this space, also includes buses, trucks, and smart infrastructure for vehicles.
  • EV Charging: The price of battery storage has dropped 85% in 10 years, which has enabled EVs to proliferate. In 2018, there were 5 millions EVs globally with increasing demands on EV charging stations.8

Sustainable Agriculture

The global food system accounts for 19-29% of greenhouse gas emissions.9 Climate tech ventures in this space are primarily focused on improving efficiency in farming processes, including less intensive farming approaches, new forms of nutrition, capturing carbon in agricultural processes, and reimaging food supply chains.

  • Alternative goods: Alternative foods and lab-based proteins that have low GHG footprint. (e.g., Beyond Meat, Impossible Foods)
  • Precision agriculture: Use of AI, senors, drones, and robotics to gather data and distribute farming resources more effectively. Link here for farm tech market map.10

Industrials

Accounting for one-fifth of GHG emissions, heavy industry (i.e., industries that produce plastics, fertilizers, synthetic fibers, concrete, metals, etc.) requires a broad set of mitigation strategies for decarbonization beyond improving efficiency usage. Needs of the sector include: material use efficiencies, transformative recycling, product efficiencies, and demand reduction.11

  • Increased efficiency in manufacturing processes: Use of hardware and software solutions to increase energy and resource efficiency. Solutions such as AI, IoT, sensors, drones, 3D printing, and automation to increase manufacturing efficiencies, reduce waste, and streamline processes. (e.g., Opus 12, turning CO2 into industrial inputs12)
  • Low GHG materials: Focused on bio-based applications of product alternatives for a wide range of industries from biotech to fashion. (e.g., Ginkgo Bioworks, which uses genetic engineering to produce bacteria)

Buildings and Construction

Buildings and construction account for 39% of global GHG. Around two thirds of the emissions are operations (e.g., building electricity, heat, etc.) while the remainder consist of “upfront” carbon from the materials and construction processes.13 Advancements in the space include high efficiency energy appliances, cooling, and heating, smart building energy management, and efficient construction methods that reduce waste.

  • Low GHG construction processes: Inclusive of ventures that reduce waste during the construction process, including off-side construction, modular construction, 3D printing, or 3D image enabled planning. (e.g., MightyBuildings, 3D printed homes)
  • Smart management of devices: Ventures that focus on energy savings measures through tracking, analysis, and real time adjustment of energy usage. (e.g., Ecobee, smart thermostats)

Circular Economy

This area is tackling energy usage beyond renewable energy. Circular economy strategies require us to move away from today’s “take-make-waste” model and instead creates an economy that is regenerative by design.

The process can extend the use rate of assets, utilizes regenerative techniques, and Applying circular economy in five key areas - cement, aluminum, steel, plastics, and food can eliminate 93 billion tonnes of CO2 in 2050, which is equivalent to cutting all transportation emissions to zero.14

Combating Deforestation

More than 1 million acres of forest have been lost since 1990 with the vast majority linked to commodities production of oil, soy, beef, leather, timber, pulp, and paper. Ventures in this space advocate for reforestation, enable afforestation, or combat deforestation.15

Example companies include Terraformation, which works on global reforestation, and SilviaTerra, which provides precision forestry solutions.

If you’re a founder building a climate tech company, get in touch. If you're a designer interested in climate tech, read our Designer's Guide to Climate Tech.

Thank you to Sida Li for researching this article.