Recap: The Next Climate Tech Investment Boom
Over the last five years, there have been promising advances in climate technologies—and they could have a real impact on reducing greenhouse gases. But all of these technologies have one thing in common: They need support for a large range of financial needs. Steve LeVine, editor of The Electric, sat down with three climate tech venture veterans to discuss why funding climate technologies is a smart investment:
- Brook Porter, partner and co-founder, G2 Venture Partners
- Lila Preston, head of growth equity, Generation Investment Management
- Cooper Rinzler, partner, Breakthrough Energy
First things first: What is climate tech?
The term “climate technology” can mean different things to different people. But all the panelists agreed that it cuts much deeper than renewable energy. It goes across energy, agriculture, health and even financial inclusion.
As Cooper Rinzler describes it, “Climate tech is code to me for the fundamentals that drive society. It’s energy. It’s the food we eat, it’s what we build, it’s how we get from place to place. But I think there’s something that’s unified across it, which is that these deep technologies are almost always playing in commodity markets—because commodities are the places that have a sufficient scale to matter to climate change.”
Brook Porter agreed, saying, “When we started, it was largely about renewable energy. Now it’s broadened out, including transportation, food and agriculture. It’s no longer a vertical. It’s really a horizontal slice across every segment of the industrial economy.”
Lila Preston added that it was important for people to expand their thinking of climate tech beyond energy. “One example is services businesses. They can lead to more efficient buildings, more efficient transportation models,” she noted. “The opportunity to think about leveraging climate tech into bigger industries is a pretty significant shift. “
The Inflation Reduction Act Boost
LeVine asked the panelists how the Inflation Reduction Act, which includes tax credits for clean energy investments, has affected climate tech companies.
Rinzler said the most significant thing about IRA is that it speeds the transition to clean energy. “The government can help accelerate the transition by providing supporting capital and subsidies along the way to help pull forward innovation. But this isn’t a change in the underlying thermodynamics. We’re talking about solutions that ultimately should win on their own in a purely market-driven context.”
In addition to accelerating innovation, Porter said, “I also think [IRA is] a mechanism to level the playing field. The reality is that the fossil fuel industry last year got $7 trillion of subsidies. But what we actually need is a price on carbon. In the absence of a market-based mechanism to solve this problem, we’re going to use a bunch of carrots to speed this transition.”
What’s Next: Tackling an Overloaded Energy Grid
As the demand for technology like artificial intelligence, electric cars and data storage rises, the panelists all said the biggest trend moving forward will be solutions that reduce stress on the electric grid.
As Porter said, “We spend a lot of our time thinking about the electrification of everything—not only cars, but homes—and that’s going to place an enormous amount of strain on the grid. There’s a potential doubling of power in the average U.S. household from electrifying homes. Now enter AI and the enormous energy that has been consumed by data center build-outs.”
He also pointed out that these innovations make good investments. “I think there’s an opportunity to pull a lot of these technologies forward in ways that would have been harder to imagine five years ago. So it’s a big challenge and a massive opportunity.”
Investing in the Future
Rinzler crystallized why climate tech is a smart investment play. “Right now is a beautiful time to be in climate investment. Frankly, there are some really wonderful deals out there, especially at the Series C level where there’s been some capital gap creation.”
Climate change is an urgent issue. That’s why funding innovative climate tech companies is crucial—and potentially very profitable. It’s no longer just about doing good. It’s also about doing well.