PwC Report: Decrease in Climate Technology Due to Expenses
PwC’s State of Climate Tech 2024 report is out and to begin with, it looks unsettling.
The report states that funding for climate tech startups is on the decline due to higher borrowing costs and uncertain economic conditions.
Although funding is down, opportunities and innovations are increasing, especially in the AI, climate adaptation and energy innovation sectors.
Climate tech resilience
Despite a 29% drop in climate tech funding — from US$79bn in 2022-23 to US$56bn in 2023-24 — sectors like AI and energy are gaining investor confidence.
The report states that start-ups have the potential to shape the future due to:
- AI-driven climate solutions: Investment in AI-powered climate tech reached US$6bn in the first three quarters of 2024, up from US$5bn in all of 2023. Applications include emissions tracking, resource optimisation, and agriculture innovation
- Energy innovation leading the charge: Energy-focused startups secured 35% of climate tech funding in 2024, compared to 30% in 2023. Green hydrogen and alternative fuels raised more than US$1bn each. The shift toward mid and late stage deals highlights investors’ preference for scaling proven technologies
- Adaptation and resilience take centre stage: About 28% of deals supported solutions for climate risks like heatwaves, wildfires and floods, with resilience-focused ventures accounting for 12% of total funding.
Enki Toto, Principal at Salesforce Ventures Impact Fund says: “In climate tech, where you often have too much data or not enough, AI can help you better manage resources.”
Key points from the PwC report
Funding
- Climate tech funding decline: Dropped 29% from US$79bn between 2022 and 2023 to US$56bn between 2023 and 2024
- Market share: Climate tech’s share of VC and PE funding fell from 9.9% to 8.3% in the same period
- Mid and late-stage deals dominate: These accounted for 37% of all deals in 2024, compared to 20% in 2019
Regional insights
- US resilience: Climate tech funding remained steady at US$24bn, supported by the Inflation Reduction Act (IRA)
- APAC downturn: Funding share dropped from 19% in 2023 to 7% in 2024
Sector highlights
- Energy innovation leads: Captured 35% of funding in 2024, up from 30% in 2023, with green hydrogen and alternative fuels each raising more than US$1bn
- Industrial funding gap: Share fell from 17% in 2023 to 7% in 2024, despite producing 34% of global GHG emissions
AI-Powered Climate Solutions
- Investment surge: Rose to US$6bn in 2024, up from US$5bn in 2023, representing 14.6% of total climate tech funding — applications include emissions tracking, predictive modelling and resource optimisation
- Focus areas: 62% of AI-related investment went to autonomous vehicles. 20% supported industrial applications like agriculture and energy
Adaptation and Resilience (A&R)
- Emerging priority: 28% of deals in 2024 targeted A&R solutions, accounting for 12% of total funding in Insurance products, urban cooling technologies and wildfire detection
- Geographic concentration: 85% of A&R funding went to start-ups in North America and Europe
Corporate involvement
- Corporate Venture Capital (CVC): Participated in 28% of deals in 2024, primarily in mid and late-stage investments.
- Sector-specific focus: Energy solutions: 45% of corporate climate tech funding. Mobility innovation: Backed by industrial companies and vehicle manufacturers
Investors
- Discipline is critical: Investors are prioritising high-impact solutions over speculative plays
- Scaling underfunded sectors: Industrials, agriculture and built environment need more funding to align with emissions challenges
- Focus areas for growth: AI, energy innovation and A&R solutions are poised for continued investment and impact.
Challenges and opportunities
As economic pressures and higher borrowing costs weigh on the market, investors are focusing on disciplined strategies.
Established companies are stepping in to help scale innovations.
In 2010, Corporate venture capital (CVC) units only participated in 10% of deals, however, now participate in 28% of climate tech deals, often in mid or late stage rounds.
There is also the fact that CVC investments can generate substantial returns, boosting the corporation's profitability and financial health whilst also tackling climate change.
Enki adds: “CVCs can invest on a longer time horizon, supporting start-ups as they test and iterate.”
The shift towards solutions
Investors are prioritising clear, high-impact opportunities, leaving behind speculative ventures.
Hampus Jakobsson, General Partner at Pale Blue Dot comments: “The hype has faded, truly exceptional companies with compelling value propositions are still securing funding, but the market is tight.”
Looking ahead, the transition to a low-carbon economy requires scaling solutions in underfunded but high-emission sectors like industrials and agriculture.
By leveraging AI, driving energy innovations and preparing for climate risks, investors and start-ups can align profitability with climate impact.
The climate tech market is maturing, but the opportunities for those who act strategically are significant.
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