This year, climate tech cemented itself as one of the most significant sectors to watch. Mounting pressure from an increasingly unsustainable environment and technological innovations have made climate tech one of the most well-funded spaces in tech.
Recent data from HSBC Innovation Banking and Dealroom found that climate tech alone made up almost 20% of total VC investments in the UK.
The recent agreement at the COP 28 climate summit to transition away from fossil fuels was significant, but some say it doesn’t go far enough. Climate tech innovation will be needed to fill the gap.
The industry faces a critical next 12 months. UKTN has spoken to climate tech experts to determine how 2024 might play out.
Going beyond carbon
According to Taco Engelaar, managing director at energy infrastructure software company Neara, climate tech has so far been completely dominated by reducing carbon emissions, but in 2024 “climate tech will step out of carbon’s shadow”.
Carbon offset and removal have made up a lot of the sector so far, but Engelaar said “perceptions are changing” due to “scepticism around carbon reduction methods” and an increasing need to focus on the “tangible effects of climate change”.
Flash floods, wildfires and power outages have become far more common as climate change continues and, according to Engelaar, that is “opening people’s eyes to the sector’s broader potential”.
The Neara director predicted the climate change conversation next year will centre around technology that can tackle “what were previously once-in-a-generation weather events”.
This could manifest in many different ways, such as “strengthening energy infrastructure” and using AI to create more realistic models of extreme weather.
The onus is on politicians
Clean tech as an industry is growing rapidly, but with an issue as global as climate change, there will always be a great responsibility for policymakers to make the right choices.
Jamie Vollbracht, a founding partner at the green VC Kiko Ventures, told UKTN that with an election likely to take place next year, “politics will affect the climate tech ecosystem”.
In the UK, the polls suggest a clear advantage for Labour. However, there are no guarantees for how this election might play out and Vollbracht has some concerns in both directions.
“This Conservative government will sacrifice the environment to win short-term favour with voters,” he said, adding that “should a Labour government come into power, it’s unclear exactly how this would impact climate”.
Vollbracht called on Labour leader Sir Kier Starmer to take a possible electoral victory “as an opportunity to finally pursue an industrial strategy that prioritises sustainability, as many other nation states already do”.
The climate tech VC noted, however, that recent comments from Starmer praising Margaret Thatcher “are a cause for concern” as she had “arguably the most neo-liberal attitude of any UK politician of recent decades”.
“Whoever wins the election, we hope they will put urgent action firmly back on the agenda: it’s the right thing to do for the sake of the planet.”
UK will compete with Europe
The UK climate tech sector has established itself as a world leader in securing investment, however, Catriona Hyland, a research analyst at climate VC A/O, feels it is at risk of slipping behind the EU.
Data from A/O found that Germany had overtaken the UK for investment into built world climate tech, a sub-sector the firm claims has been overlooked in the past.
“Germany is outpacing the UK as the top European hub – but London is the top investment hub globally,” Hyland said.
Hyland added that the UK did see impressive growth in investment in this area, Britain’s 27% rise was dwarfed by the 73% growth seen in Germany.
The analyst pointed out that while “London has seen the largest deal count globally now for some time, this has generally been at the earliest deal stages, with total dollars invested lagging behind”.
Impressive momentum in Germany and a greater prioritisation of climate policy in the EU mean that for Hyland, the UK will have to step up its game to compete with Europe next year.