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Built world climate tech stands out against VC slump

The UK is in a strong position for global investment

A new report says that climate tech is attracting as much as 70% of built world VC investment.

It's been a gloomy year for venture capital (VC) funding, and that applies globally as well in Europe and the UK. Global funding of impact startups is predicted to drop by 36% this year, in a continuation of the pattern of decline which began at the start of 2022.

In Europe, average funding fell by 45%, and in the UK it fell by 54%.

However, one sector is standing out against the general trend - and that is climate tech

A new report by sustainability investor A/O states that climate tech is attracting as much as 70% of built world VC investment. This represents an increase of 20% on where the sector was five years ago.

In one of this year's rare pieces of positive economic news, UK venture capital firms invested $1.1bn (£872m) in early-stage built world climate tech in 2023, which is the third highest level of investment in the world. The US and Germany raised investment in early stage built world tech of $5.6bn and $1.4bn respectively.

The built world or built environment constitutes any human-made enclosures, spaces, structures, and infrastructure created to adapt the natural environment for human use, and it's a source of a significant chunk of global GHG emissions - approximately 37% of all emissions are a consequence of buildings. Our collective success in decarbonising the built world is critical to our success in keeping it habitable at all.

Commenting on the report, Gregory Dewerpe, founder and managing partner at A/O said:

"As we get closer to 2030, there is increased pressure on global corporations to cut emissions and make progress on their net zero targets. This new generation of built world companies will be there to help them solve this urgent problem."

Indeed, Computing has written before on the use of AI and digital twinning technology to make the foundational industries of the built world such as concrete, steel and glass production more efficient, and therefore less carbon intensive. It is a sector being boosted by the ratcheting up of pressure on businesses (including tech businesses) to show investors the extent of progress against all those "net zero by 2030" pledges.

Commenting further on the report, Dewerpe said:

"The built world is not immune to the wider macroeconomic challenges in the tech and startup world in 2023.

"However, climate themes have proven more resilient relative to the wider venture market, and within the built world specifically, we have observed both a more muted downturn and faster recovery - highlighting the underlying tailwinds supporting this transformation and urgency of decarbonising construction and electrifying existing estates."

The fact that some of the fastest growing areas for built world climate investment included retrofit installation, grid storage (which accounted for 40% of total investment in the UK) and renewable energy procurement illustrate that these investments aren't just being driven by record global temperatures but by geopolitics, with the stated policy of many western countries being to reduce their energy dependency on bellicose petrostates.

Investment in built world climate tech is a rare example of oft competing motives - profit, geopolitics, ethics and emissions reduction - aligning for longer term benefit.

Built world climate tech stands out against VC slump

The UK is in a strong position for global investment

A new report says that climate tech is attracting as much as 70% of built world VC investment.

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