The most recent health crisis has fueled a sense of climate emergency. It has brought together the aspirations of the people and businesses’ interest for eco-friendly innovations. In just a few years, action against global warming has become both a social challenge and a business opportunity. In terms of investment opportunities, according to a report by PwC, climate techs represented only 6% of capital development in 2016, however they’ve grown of about 3750% since 2013. In terms of innovation opportunities, in January 2020, 25% of French entrepreneurs estimated that enterprises’ commitment to climate will result in new products and services. There are also existential opportunities, whereby the climate challenge allows players to anchor their day-to-day commitments and their business over the long term.
Startups heed the call to address climate emergency
The ambitious goal of net zero CO2 emissions by 2050 can only be achieved by reinforcing innovation and accelerating the introduction of efficient solutions to the market. Startups and investors that promote them play a crucial role in the development of climate techs. This term encompasses a broad range of solutions based on:
- processes and uses that emit less greenhouse gases,
- economic models that incorporate the principles of circular economy,
- the optimization of resources and uses through big data,
- CO2 capture and storage processes.
The race to decarbonize our economy is illustrated by an acceleration in fund-raising efforts (+35% CAGR) and invested amounts (+84% CAGR) over the period from 2013 to 2019. It is not merely related to the energy sector but to numerous other sectors, namely the mobility and transportation sector which represents alone 63% of investments made in the last 7 years, in addition to the food and agriculture, industry and construction.
According to PwC report and data from Dealroom.co, more than 1200 startups across 70 countries examined were financed by 2700 investors during this period.
No transition can be achieved without a strong cooperation between major groups and startups
Meeting the climate challenge requires establishing partnerships between major groups and startups. The convergence of interests for the rapid emergence of new services and solutions pushes everyone to cooperate. To accelerate innovation, major groups invest massively in the ecosystem of startups, which benefit from pilot sites to test their solutions and accelerate their industrialization.
This dynamic has been illustrated in recent months by the creation of private equity funds such as Microsoft's $1 billion Climate Innovation Fund (January 2020), Amazon's $2 billion Climate Pledge Fund (June 2020) and Unilever's €1 billion Climate & Nature Fund (June 2020).
Other smaller groups implement similar actions. In October 2020, Stripe, a company founded in 2010 which offers an online payment system, established the Stripe Climate Fund which allows its American enterprise clients to redirect a part of their revenues to a fund dedicated to the financing of startups that are developing CO2 capture and storage solutions.
A challenge to be taken up now or risk being penalized tomorrow
Meeting the climate challenge is not only an opportunity but also a condition of sustainability. The lack of information in terms of “climate reporting”[1] of enterprises targeted by the company EcoAct is a bad signal sent to the public opinion and investors.
Faced with the inertia of certain large groups, some shareholders are exerting pressure: the signatories of the Principles for Responsible Investment require the companies in which they have invested to integrate the risks of climate change into their financial statements. They thus encourage them to adopt sustainable strategies aligned with the Paris Agreement. They also remind them that this period marked by the desire to consume and produce differently offers an opportunity to anchor its raison d'être in action, to align discourse and practices.
[1] PWC, The state of climate tech 2020 : The next frontier for venture capital, septembre 2020, https://www.pwc.com/gx/en/services/sustainability/publications/state-of-climate-tech-2020.html. Le périmètre des données comprend 70 pays.
[2] PWC, Changement climatique : défi ou opportunité, janvier 2020, https://www.pwc.fr/fr/publications/dirigeants-et-administrateurs/global-ceo-survey/23eme-annual-global-ceo-survey/changement-climatique.html
[3] https://blog.dealroom.co/the-next-frontier-in-venture-capital-climate-tech/
[4] The term “climate reporting” refers to the financial reporting provided for in the context of the law of August 17th 2015 related to the energy transition. It aims at increasing “the obligations of transparency of financial players regarding the inclusion of criteria related to the respect of environmental goals (…) in their investment strategies, and the specific consideration of climate risks. <https://www.tresor.economie.gouv.fr/Articles/677780aa-0aac-42bb-a144-37f942cd738d/files/b290fb4b-da2c-4750-99d4-3841e71d1fe8>
[5] Novethic, Engagement actionnarial 2020 : les investisseurs responsables face aux dilemmes des AG 2020, juillet 2020,<https://www.novethic.fr/fileadmin/user_upload/tx_ausynovethicetudes/pdf_complets/Novethic_Engagement_actionnnarial_Juillet_2020.pdf>
