What are the drivers and barriers to investment opportunities within the clean energy and technology sectors and what needs to be done to address the challenges? The article looks at the global market for clean technologies investment and the role of collaboration by various stakeholders in accelerating the energy transition and mitigating climate change.
The year 2020 saw the number of governments and corporations pledging to achieve net-zero by 2050 more than double in the space of a year, with a wave of countries setting new energy transition goals. The global community is without doubt waking up to the urgent need to deliver net-zero emissions – and the significant investment required to finance this transformation.
In a recent report, Making Mission Possible – Delivering a Net-Zero Economy, the Energy Transitions Commission (ETC) anticipates that between $1-2 trillion of additional investments will be needed every year to the middle of the century to achieve the energy transition. Likewise, the International Renewable Energy Agency (IRENA) estimated that cumulative investment in renewable energy must reach $27 trillion between 2016 and 2050 to meet the Paris Agreement goals.
Whilst the last clean tech ‘boom’ saw investors plough around $25 billion into start-ups between 2006 and 2011, its success was short lived. Due to a variety of factors, including the 2008 financial crisis, lengthy development cycles and certain technological realities, the clean tech bubble burst, deterring many from investing in clean energy for the rest of the decade. The MIT Energy Initiative working paper Venture capital and cleantech: The wrong model for clean energy innovation that was published in 2016, estimates that venture capitalists lost roughly half their money in a matter of years. This put the industry on the back foot for a period.
Having first developed a financial model around climate change in the early 2000s, Consensus Business Group’s Chairman, Vincent Tchenguiz, has seen up close how the industry has changed over the past 20 years – and how the new wave of climate tech investment fundamentally differs from the ill-fated boom and bust clean tech of last decade.
Most notably, the new epoch of climate tech is a broader concept which concentrates on decarbonisation across all sectors of the economy, from agriculture to healthcare and everything in between. Clean technologies themselves are now both better and cheaper. For example, BloombergNEF’s New Energy Outlook 2020 found that the costs of solar, wind, and batteries had respectively fallen by 85%, 49%, and 85% between 2010 and 2019, whilst advanced materials, AI, blockchain and computing are enabling systems to be changed in new and dynamic ways.
Governments, regulators and businesses are increasingly recognising that up-front capital is needed to scale these solutions. Climate tech investment has once again picked up momentum in recent years. In their report, The State of Climate Tech 2020, PwC estimated it had risen by more than 3750% between 2013 and 2019.
Rather than slowing investment activity, COVID-19 has in fact renewed efforts for the green transition, with the World Economic Forum launching its Great Reset initiative last summer, and international efforts to ‘build back better’ taking centre stage. In other words, the pandemic has presented an opportunity to fast-track investment in clean energy and technologies. It is little wonder that energy transition investment hit $500 billion for the first time in 2020, according to a recent analysis by BloombergNEF.
Cross-sector collaboration is key
However, crucial to this investment is crosssector collaboration. Net-zero is a common goal of global corporations, investors, and governments, and strong partnerships are needed to realise the potential of innovative climate change technologies. Public-private cross-industry collaboration is what is driving the global climate agenda.
As the World Economic Forum recently put it: working together is no longer optional but imperative. This collaborative action to advance climate change technologies is the primary aim of PLANETech – a joint initiative of Consensus Business Group and the Israel Innovation Institute. PLANETech is building an active global network for multinational corporations, government offices, startups, academia, and investors to promote the development and implementation of innovative technologies that support the goal of net-zero emissions by 2050. Cross-sector collaborations would ensure the pooling of resources, expertise and contacts to fast-track climate tech development and ensure that the commercial capital and means are in place to progress solutions at the pace and scale needed. Activities should support organisations in discovering how their technologies can address climate change challenges while gaining economic value, in particular, nurturing overlooked sectors and technologies.
Collaborations should aim to provide practical solutions to real-world issues and events. Whilst it is vital to take a proactive approach to achieving the energy transition and reaching net zero, the world must also be prepared to deal with the unfortunate fallout of climate abnormalities.
For example, built environment – the infrastructure of towns and cities which consists of buildings, energy networks, transportation and land-use – can be designed in a way to both mitigate climate change and support climate adaptation. Improved construction processes can help reduce carbon footprint, whilst buildings and infrastructure can
be built to be more resilient to high-impact climate events, ultimately improving both environment and public health.
In recent years, the world has come a long way in recognising the need to decarbonise. Governments and corporations
have made bold commitments to accelerating net-zero goals, describing the next 10 years as the ‘decade to deliver,’
whilst investors are becoming increasingly focused on environmental matters and the opportunities presented by climate change technologies. Technological innovation and cross-sector collaboration must go hand in hand to provide realistic, actionable solutions to climate change, in terms of both mitigation and resilience.
Only through the intentional development of climate change technologies and partnerships between stakeholders
can we expect to see cleantech breakthroughs discovered and scaled to transform industries and society.
About the authors
Consensus Business Group is a UK-based investment group, led by Vincent Tchenguiz. Experts in developing unique and strategic financial models, the group’s key areas of investments are in the healthtech, life science, climate change technologies and HLS sectors. Its diversified portfolio has been meticulously built along the years as an elaborated platform for corporates, countries, and other public and private key players to engage with.
The Israel Innovation Institute is a nonprofit “think and do tank” bringing innovative technology and knowledge into real-world settings. The institute enables and facilitates the development, testing, and demonstration of scalable, innovative solutions to global challenges – in indispensable fields such as digital health, precision agriculture, smart mobility, desertech and climate change technologies.