It ain’t easy being green: Climate tech funding plunges as interest rates rattle investors
Climate tech investment has plunged globally this year as recession fears and rising interest rates put the brakes on a green funding frenzy, new figures have revealed.
Venture capital investors and private equity firms have reined in their investment into tech firms taking on climate issues by some 40 per cent to $490bn in 2023, amid a wider slump in start-up and tech funding, new figures from PwC show.
Some 8,000 climate tech start-ups raised $490bn in the first nine months of the year. Analysts at the Big Four firm described the slowdown as a worrying one for the sector.
“The development and scale-up of climate technology is an essential part of meeting the climate challenge,” said Emma Cox, global climate leader at PwC UK. “So, while it is not surprising that absolute levels of investment in climate tech have fallen along with the market, it is concerning,”
She added that despite the slump climate funding had performed well against the market, with investment slowing less sharply than in other areas. PwC said recession fears and the ripples of conflict had spooked investors.
The good news is that the sector has performed well in relative terms, with investment falling less than in other areas.
“It is also encouraging to see a shift in the balance of investments towards technologies that can cut emissions the most,” she added.
The slowdown comes amid a wider slump in the investment landscape over the past two years as rising interest rates choke off the flow of cheap cash into start-ups.
Investment into start-ups based in London slowed to $8.6bn across the first nine months of this year, well down on the $19.2bn injected the capital in the same period last year, according to a report from HSBC Innovation Banking.
Firms across the UK have raised $14bn, a far slower pace than the $31bn raised across an already sluggish 2022. In 2021, London startup investment reached a record high of $25.5bn.