Corporate investment in climate-tech start-ups is essential in advancing climate technology and the transition to a net-zero or net-negative emissions economy. Corporations tend to invest in technologies that are closer to widespread adoption than public or other private investors. However, their contribution to climate change innovation has been overlooked until now. A study investigated a dataset of climate-tech start-ups founded between 2005 and 2021 and found that corporate investors are most active in later investment stages when technologies are closer to market deployment. Corporate investment in climate-tech start-ups is highly concentrated, with a few large corporations playing an outsized role. The study recommends that policymakers focus on incentivizing investment in climate-tech that aligns with long-term climate and societal goals. It also suggests that public investment may be necessary to fill the funding gap in some sectors.
Corporate Investment: A Key Player in Climate-Tech Innovation
Climate-tech start-ups require financial investment to commercialize their innovative ideas. However, many of them lack the resources to make their ventures successful. Corporations, on the other hand, have access to resources like global markets, supply chains, and manufacturing facilities, which could benefit start-ups. Corporate investment in climate-tech start-ups should be fully considered to advance climate technology, according to a new report published in the journal Joule on March 17, 2023.
The report, authored by Morgan Edwards, a professor at the La Follette School of Public Affairs at the University of Wisconsin–Madison, and her lead co-author at the University of Maryland, highlights the potential impact of corporate investment on climate technology trajectories. Although corporations are usually motivated by profits, they can also expand existing business models, gain innovation insights, and meet environmental, social, and governance (ESG) commitments.
Well-resourced corporations investing in start-ups can have an outsized influence on which start-ups succeed and grow, thus shaping climate technology trajectories. “We will need a whole host of new technologies to transition to a net-zero or net-negative emissions economy. Many innovations are currently in development but not yet mature,” says Edwards. “Finding the right mix of corporate, private, and public investments will be critical to getting these technologies to market quickly and encouraging new innovations.”
In 2021, corporate investments in climate technology exceeded $11 billion, with over 460 start-ups receiving funds, representing a quarter of all public and private investment dollars. However, there is still a sizeable gap for governments to incentivize investment in climate-tech that aligns with long-term climate and societal goals. According to Kavita Surana, a senior fellow at the Center for Global Sustainability at the University of Maryland and co-author with Edwards, this gap needs to be emphasized more to make the necessary advances in climate technology.
Corporate investment in climate-tech start-ups is a growing but often overlooked aspect of energy innovation. By utilizing corporate resources and expertise, start-ups can benefit from greater investment, and corporations can expand their business models and meet their ESG commitments. Governments must also play a crucial role in incentivizing investments that align with long-term climate and societal goals, emphasizing the need for collaboration between corporations, private investors, and governments.
Corporate Investment: A Key Factor in Advancing Climate Technology
Corporate investors play a significant role in climate-tech innovation and the transition to a net-zero or net-negative emissions economy. According to a study published in March 2023, corporations tend to invest in technologies that are closer to widespread adoption than public or other private investors. However, their contribution to climate change innovation has been overlooked until now.
The study investigated a dataset of 6,996 climate-tech start-ups from North America, Europe, and Israel founded between 2005 and 2021. They also looked at 9,749 investors who participated in 33,698 investment deals. The research team found that corporate investors are most active in later investment stages when technologies are closer to market deployment.
The study also found that corporate investment in climate-tech start-ups is highly concentrated, with a few large corporations like Shell, Alphabet, and Samsung playing an outsized role. Between 2016 and 2021, these large companies each invested in over 25 climate-tech start-ups, and some companies, including Amazon, Ford, and Alphabet, invested over $1 billion. Investments were also concentrated in certain technologies, such as fuel cell and hydrogen technologies, while others like marine and hydropower, nuclear, and biomass generations received little funding from private sources.
The study recommends that policymakers focus on incentivizing investment in climate-tech that aligns with long-term climate and societal goals. It also suggests that public investment may be necessary to fill the funding gap in some sectors.
The research team sees this study as a starting point in understanding the relationship between corporate investors and climate-tech start-ups. It may eventually lead to informed policy that will ensure positive climate and societal outcomes.
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