Climate Tech: Investment For Sustainable Growth

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The climate crisis demonstrates a multi-trillion-dollar opportunity for investors, and the timing could not be better. The regulatory will is stronger than ever before, as evidenced by the recent single-use plastic ban, which reflects the government’s stance. Climate change-related consumer awareness and behaviour are compelling businesses to operate responsibly and even in the best interests of the environment.

Climate-tech firms have piqued investors’ interest with technologies that not only generate profits but also claim to make a difference by addressing environmental issues. Despite the investments in the sector, India is one of the countries most vulnerable to climate change.

“Businesses have the money and the pressure to reduce their carbon footprint, and hence will be more open to adopting climate tech solutions. Selling a product to a business that can directly monetise that product is a better strategy than selling it to a business that uses it as a process feed input,” said, Vishesh Rajaram, Managing Partner, Speciale Invest.

He added that what is abundantly clear, however, is that climate technology solutions will not be adopted unless they add significant value to the users and are affordable. In terms of carbon emissions, India ranks third, after China and the United States. Because energy consumption contributes significantly to carbon emissions, India has a lot of room to offer clean energy solutions.

Arvind Agarwal, Co-founder and CEO of C4D Partner, stated, “Considering India accounts for 20 per cent of the world’s population and is responsible for generating over 277 million tonnes of waste annually, we believe the circular economy is another sustainable business model worth investing in. Furthermore, a maximum number of patents have also been granted in these two segments by the Government of India, pushing for more technological innovations and the growth of green startups in clean energy and the circular economy. “

Climate technology is a new sector for India. It necessitates active intervention in addition to financial capital as far as green startups are concerned. As the climate changes rapidly around us, this should be an ideal time for green startups to thrive. Nonetheless, this sector faces a number of challenges in the country. To begin with, there is a high entry barrier, with high research and working costs.

Aggarwal added that only a small percentage of the market is willing to spend more on products that are environmentally conscious. Consumers are not yet willing to pay higher prices for eco-friendly products, despite the awareness. Furthermore, a unified policy structure is not yet in place for the industry in India, and it is currently working on various policies from different industry segments, causing operational challenges.

Climate tech is not going to be only a software play. Asset-heavy hardware is going to be an integral part of mitigating climate change. Identifying scalable business models that can allow all the stakeholders to see revenues early is one more integral part of ensuring the venture’s continuous growth. “Changing consumer behaviour requires education and time, and hence, following a business-to-business (B2B) approach—one that is driven by regulations—could be a good way in the near and mid-term, ” Rajaram mentioned.

Pollution is clearly an engineering error when viewed analytically. Given the abundance of resources, there was no pressure to reduce this error when technology in sectors such as housing, transportation, food, electricity, waste, and so on was being developed.

The climate technology industry is poised to influence course correction through innovation and disruption.Ishaan Khosla, Founding Partner, Huddle, said, “Given that this ecosystem is heavily reliant on government and large corporate validation, regulations and buy-in from the right stakeholders are important at an early stage. Without the willingness and readiness for such stakeholders to engage, early-stage ventures will continue to face the chicken or the egg conundrum. For instance, the electric vehicle (EV) ecosystem has received the right kind of support across the ecosystem over the past couple of years, which has catapulted well-performing ventures into the limelight and allowed the venture capital (VC) ecosystem to follow through with large cheques.”

Given the focus and attention on climate goals, the sector is now picking up, and experts are confident that the next few years will be critical in India’s transition to net zero. Given the sector’s growth, investors are more interested in becoming a part of the sustainability story.

Furthermore, government support has been a major factor in increasing confidence in this sector. Between 2016 and 2021, the Ministry of Commerce and Industry granted approximately 61,000 green-tech patents, 90 per cent of which were waste management and alternative energy solutions. Green startup growth, combined with positive investor sentiment, has resulted in increased investment in the sector.



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