What to Expect from the Climate Tech Boom

Over the last few decades, the climate crisis has accelerated and created new problems solvable with tech. As a result, investment money is flowing into the green tech space, and companies are incentivized to play a role in creating a solution. According to research from PWC, climate tech investment grew at five times the venture capital market rate over the last seven years.

Part of the reason for this shift is impact investing—the idea that today’s investors want to feel like their money is helping to improve a societal problem rather than just generating a return.

Impact investing is especially common among Millennial and Gen Z investors; a whopping 87% of Millennial investors believe that environmental, social, and governance factors should play a role in investment decisions. Millennials are expected to inherit $30 million in generational wealth over the coming years, so it follows that climate tech investments will only continue to increase. Plus, entrepreneurs are problem-solvers by nature. Climate change is causing a slew of problems that need to be solved and fast. It’s creating the perfect recipe for innovation, investment, and, hopefully, tech solutions that help to slow or reverse climate disasters. And as these problems are solved, more investors and entrepreneurs will be drawn to the space.

What does the climate tech boom mean for your business? The answer depends on your industry and personal goals, but a few potential paths forward are here.

Launch a Climate Startup

If you’ve ever had an idea for a climate-related tech product, now is the time to bring your vision to life. Climate tech startups raised at least $7.5 billion in 2020 alone, according to Silicon Valley Bank. Climate tech doesn’t have to focus on the obvious concepts like electric vehicles or rooftop solar. There’s an opportunity to get creative with your launch and approach climate change from a different angle. For example, companies that build models around the potential impacts of climate change are also booming alongside more direct solutions.  

If you’ve ever had an idea for a climate-related tech product, now is the time to bring your vision to life. Climate tech startups raised at least $7.5 billion in 2020 alone, according to Silicon Valley Bank.

Clean Up Your Climate Practices

With the increased investment and focus on the climate space, consumers will expect more from brands’ sustainability practices. Expect it to become more commonplace for consumers to investigate your company’s carbon footprint and other climate-related impacts. If you have less than stellar practices, make a plan to clean up your act as soon as possible.

Collaborate with Other Sustainability Companies

As innovations continue to pop up in the climate space, we may see more opportunities for collaboration among companies and stakeholders. If you’ve found success with a particular climate solution in your own company, consider if others might benefit from it as well. Climate change is a time-sensitive issue by all accounts, so companies are likely to be more willing to work together rather than trying to protect individual profit.

Invest in Climate Tech

Lastly, if you can’t beat ‘em, join ‘em. You can always invest in climate tech ideas with your own funds (or your organization’s funds). This option works well for entrepreneurs that are busy with existing endeavors or people who have no interest in building something new from the ground up. Rather than supporting a cause with your time and energy, you can support it with funds.

Despite these options, many of today’s investors remain wary of the climate tech space. Many venture capitalists funded the "clean tech" boom of the early 2000s, then lost more than $25 billion between 2006 and 2011. Since then, however, we’ve seen the first class of climate tech unicorns—Tesla, Beyond Meat, and Nest all fall into this category. They’ve proven that success is possible, as is a significant ROI for investors. Knowing this is possible is a huge step towards inspiring other companies on a similar path.

Only time will tell how this current climate boom fares, but all signs point to an opportunity for today’s climate businesses and enthusiasts. Spend some time thinking about what this means for your business to position yourself for the next decade of success.

Business Takeaways

• Audit your company’s climate impact and take action to correct any weak points. Expect consumers to demand transparency around these issues in the next decade.
• Consider how you can join forces with other similar companies on a joint climate venture.
• Share your company’s climate wins. As you find ways to reduce your carbon footprint or become more sustainable, let other companies know so they can follow suit.