Carbon and climate startups raised a record $1.4 billion in the second quarter of this year thanks to companies and the government’s push to reduce greenhouse gas emissions at a time when it is difficult to attract venture investment funds to other industries, foreign media reported on the 18th (local time).
According to CB Insights, this is in stark contrast to the wide venture funding market, which is showing the largest quarterly decline in nearly a decade.
Recently, venture capital investors seem to consider profitability and positive effects at the same time rather than demanding the best ROI, and expect this investment to be converted into game changer technology to improve the global environment.
In the first half of 2022, investment in climate technology startups surged 47% year-on-year, and venture capital funds such as Y Combinator, Lowercarbon Capital, and Techstars are playing a big role in the surge.
The climate and carbon categories of representative climate technology frameworks include Glimworks AG, which has carbon capture technology in the atmosphere, and startups such as Sweep, which help high-emission companies establish strategies to lower their carbon footprint.
Investors who still do not focus on direct investment in climate technology are looking for other options. For example, carbon offsetting, a system that balances negative emissions through separate sustainable plans such as tree planting, is becoming increasingly popular.
Recently, U.S. President Joe Biden signed an inflation-reduction law that could provide about $100 billion in tax credits for carbon capture projects. In Europe, governments are also providing cross-border initiatives such as European climate law.
However, there is still a long way to go before these climate innovations produce significant results. Carbon capture and storage projects are struggling with high costs and scale-up challenges. And critics say the fossil fuel industry has an excuse to continue pumping oil and gas by supporting carbon capture technology. In other words, resources are diverted from the difficult task of reducing emissions.
However, as institutional investors slowly support climate change response technologies, the climate-focused startup space can continue to grow.
Institutional investors began to ask management how they would take responsibility for how the technology was implemented and operated. Such a move would be the first sign that plans to use fossil fuel as an excuse will soon fall through.
