Lisa Martine Jenkins PROTOCOL
The hottest investment in 2021? Climate tech.
March 17, 2022
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  • Corporate venture capital investments in climate tech businesses more than doubled in 2021, setting a new record. Last year, these types of funds funneled $23.2 billion into the sector, which includes renewable energy, energy storage and electric vehicles, among others.

    This surge — up from $10.1 billion in 2020 and the previous high of $12.9 billion in 2018 — amounted to 210 total deals, according to data from PitchBook acquired by The Wall Street Journal.

    The pronounced upswing speaks to widespread pressure on companies to show off their climate bona fides and potentially profit from the energy transition (even if the startups have been a mixed bag in terms of their financial return so far).

    The creation of a venture arm is a company’s opportunity to do just that. Traditional companies — including those in carbon-intensive industries like automakers, aviation and Big Oil — have increasingly added venture capital operations. Beyond profit, these operations can be an avenue for companies to invest in technologies that they’ll need to reach their own climate goals.

    In fact, some are extremely transparent about it; it’s the stated goal of United Airlines’ venture firm, which has made five investments so far. Among United’s investments are Alder Fuels, which offers a cheaper way of integrating biological materials into low-carbon aviation fuels, and ZeroAvia, a hydrogen-electric jet engine developer.

    PitchBook’s data shows that total corporate venture investments into companies looking to speed up the energy transition remained low until 2016 and 2017, when they doubled and then doubled again. Funding hovered in the neighborhood of $10 billion for the last four years, however, until 2021’s dramatic spike. The upswing coincided with a slew of corporate climate plans, as well as more corporate engagement in environmental, social and governance issues more broadly.

    It remains to be seen, though, whether these investments will actually translate into gains for the climate. Emissions have continued to increase in recent years, reaching their highest level in history in 2021, even as funding for their mitigation has amped up as well. While more than $23 billion invested in the clean energy transition may sound like a lot — and may well pay dividends down the road for investors and the climate — the actual financial commitment by both companies and governments needed to make it happen is orders of magnitude bigger. Globally, funding for fossil fuels still outpaces that for renewables, and the International Energy Agency warned that the investment in the clean energy sector “remains far short of what will be required to avoid severe impacts from climate change.”