Investing in Climate Tech: A Path to a Sustainable Future
The current economic downturn has taken a toll on venture capital investment, but one sector that continues to shine is climate tech. Despite a 40% decrease in VC and private equity investment in 2023, climate tech is still receiving a larger share compared to other tech segments. This is a testament to the growing recognition of the urgent need for planet-saving technology.
SET Ventures, a leading Dutch climate tech VC, recently raised €200mn for its fourth fund, doubling the size of its previous fund. This uplifting news highlights the positive momentum in the climate tech investment landscape. SET Ventures plans to invest in 20 to 25 European companies that are driving innovation in the energy transition.
The Criteria for Climate Tech Investment
Anton Arts, Managing Partner at SET Ventures, sheds light on the process of selecting companies to invest in. The first consideration is whether the proposal aligns with SET Ventures’ focus on digital technologies that advance a carbon-free energy system. They also evaluate the potential impact and financial viability of the opportunity.
Arts emphasizes the importance of a strong founder team, a sizable market opportunity, and a unique offering in the market. While there is less capital available for investment, startups that meet these criteria have the advantage of choosing among investors who are eager to fund their ventures.
A Generational Opportunity
Investing in climate tech is not only a socially responsible choice but also a lucrative one. According to the International Energy Agency (IEA), the transition to a new energy economy presents a massive market opportunity for clean technologies. If the world achieves net-zero emissions by 2050, the annual market opportunity for wind turbines, solar panels, batteries, electrolysers, and fuel cells will grow tenfold to $1.2 trillion.
Arts believes that the energy transition is a “generational opportunity in magnitude.” He compares the potential returns from climate tech investments to the success seen in software and internet businesses. With more talent entering the climate tech sector and an increasing focus on sustainable solutions, the market dynamic is shifting towards climate tech as a mainstream investment category.
Moving Towards a Sustainable Future
The investment landscape for climate tech is evolving rapidly, with a greater emphasis on business models and applications that can scale. SET Ventures is committed to supporting startups and scaleups that offer innovative solutions for energy efficiency and clean energy management.
Some notable companies in SET Ventures’ portfolio include Sensorfact, Energyworx, and Instagrid. Sensorfact helps clients reduce industrial energy waste, Energyworx provides data management solutions for energy providers, and Instagrid has developed a portable power system for professionals to work off-grid.
As the world faces the pressing challenges of climate change, investing in climate tech is not only a way to generate financial returns but also a crucial step towards building a sustainable future. With the potential for significant market growth and the emergence of new technologies, climate tech presents a unique opportunity for investors to make a positive impact on the planet while reaping the rewards of their investments.