Why Private Investment in Climatetech is Key to the Fight Against Climate Change

By Juliana Garaizar, VP, Greentown Labs and Katie Mehnert, founder and CEO, ALLY Energy

Ida, as a hurricane and then a tropical depression, is the latest storm to come thrashing through a large swath of the United States, leaving dramatic destruction in its wake. This, unfortunately, is not surprising. Extreme weather “supercharged by climate change” is becoming the new norm, including powerful tropical storms, wildfires, tornadoes, and even fire tornadoes.

As the U.N. reports, some climate trends “are already irreversible for centuries to millennia,” and humanity faces a "code red."

But just as we face unprecedented challenges, we also have unprecedented opportunities to build technologies to help. This is where climatetech comes in.

Grown out of the ashes of clean tech, climatetech is a new generation of scrappier, capital efficient technology. It includes two broad categories: mitigation technologies, which capture or reduce greenhouse gas emissions, and resilience technologies that prepare people, communities and infrastructure for the impacts of climate change.

The opportunity for investors

Climatetech isn’t just a centerpiece of the solution to climate change. It’s also one of the biggest opportunities for today’s investors. A report from PwC finds that in order to achieve climate goals, “every sector of the global economy needs to transform in just over two business cycles.” Entrepreneurs are critical in making this happen, and climatetech is now “the next frontier for venture capital.”

Venture funding in this space has skyrocketed, seeing a 3750% increase between 2013 and 2019, PwC notes. In fact, it has grown at triple the speed of VC investment into Artificial Intelligence, even though AI has gotten much more attention. “The incentives for founders and the venture capitalists who support them are structured to help them explore uncertain areas with potentially large markets and high returns,” the report says.

This funding has also become a safer bet. “The modern climate-tech business looks fitter and more financially sustainable than a decade ago,” when VC firms lost more than half of the $25 billion invested in clean tech startups, The Economist reported last month.

There is a role for public investment as well. In addition to providing disaster relief in the wake of extreme weather, federal and state governments can support skill development programs that help train workers for climatetech jobs. And they can create environments conducive to entrepreneurship. But ultimately, we believe private investments will have the greatest impact.

Global competition

There are entrepreneurs all over the world looking to create multi-billion dollar climatetech unicorns. To lead the way, make the biggest difference and rake in the biggest profits, the United States must be proactive. This is why the process of constantly incubating “homegrown” startups in the climatetech space is essential.

As residents of Houston, we lived through the devastation of Hurricane Harvey in 2017, followed by Hurricanes Maria and Irma. Here in the “energy capital of the world,” leaders of government and industry saw the importance of speeding up the creation of climatetech solutions. When Greentown Labs opened in the city earlier this year, it was a direct outgrowth of that effort.

As the largest climatetech incubator in North America, Greentown sees every day the incredible number of solutions being built by startups. The need for these solutions keeps growing as well. Earlier this year, Texas saw its power infrastructure fail during a freeze. In recent days, New Orleans’ power infrastructure failed as well. In the years ahead, no part of the country will be spared extreme weather. Climatetech solutions, and the capital to support them, are needed now—and urgently.

The importance of equity

The people who can discover, develop and operate new technologies come from all walks of life and all backgrounds. To build a better future, we all must ensure that every child gets a strong STEM education; that every young adult learns about the tremendous opportunities to work in the field of energy and climatetech; and that every worker in these companies has a chance to contribute new ideas.

As capital is invested in climatetech, those of us working in this space must ensure that new startups are truly inclusive, empowering everyone to be a part of this emerging innovation.

There are reasons to be hopeful about the future. The BBC’s Tom Heap, who covers environmental issues, said earlier this year that he’s “never been so convinced that the world has the potential to change,” mostly because of “ideas -- an eruption of climate change solutions. Applied human intelligence is the vaccine against climate change.”

It’s up to all of us to fuel those ideas and help them come to life.

Juliana Garaizar is vice president of innovation for Greentown Labs and the head of its Houston incubator. Katie Mehnert is founder and CEO of ALLY Energy, the careers platform for an inclusive energy transition. ALLY is a seed stage member company of Greentown.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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