Climate Change Fuels Continued Investments in Greentech

Despite slowed funding across the tech industry, companies focused on environmental change are still pulling in venture capital.

Written by Ashley Bowden
Published on Oct. 19, 2022
Climate Change Fuels Continued Investments in Greentech
Image: Shutterstock

Over the past few years, it’s become increasingly challenging to turn a blind eye to the effects our modern lifestyles have on the environment. As the planet warms by fractions of a degree each year, heatwaves, droughts, severe storms and other inclement weather conditions have occurred more frequently than ever before. While people everywhere face blatant signs of climate change, innovators in the greentech sector are working nonstop to combat them.

Companies developing solutions for clean energy, waste reduction, sustainability and various other areas have kept moving at a steady pace to hastily solve this global issue. In addition to rising prices and interest rates, these measures come in response to venture funding raises in the tech industry becoming fewer and farther between over the past year. Though this pattern has been true for a wide array of tech companies, those working in carbon and emissions have consistently pulled in investors, as shown by recent PitchBook data.

This isn’t the first time greentech companies have pulled ahead in the funding game. This time it’s happening again as more of the world tunes into how imminent the irreversible environmental changes have become.

“I think our global society is recognizing that climate change is something that we have to accelerate dealing with, and that we can no longer wait,” Jimmy Samartzis, CEO of sustainable energy company LanzaJet, told Built In. “There’s a sense of urgency that we now sense in the industry, on a global basis, that is driving demand for what we’re doing.”

Demand for green solutions has increased across the board. The global market for greentech and sustainability is projected to grow its valuation from $10.9 billion in 2021 to $44.4 billion by 2028.

In the U.S., a newly implemented law will unlock billions in capital to fuel investments in these climate-centric tech solutions. The Inflation Reduction Act signed in August will invest around $369 billion in energy initiatives, carbon emissions and environmental justice. It also provides incentives for companies to produce and use sustainable fuels, Samartzis mentioned, which offers additional comfort for green investors.

While prospects for the future of greentech funding are bright, plenty of names in the space have already covered solid ground with capital raises this year. Venture capital has been well-distributed across several areas within the greentech industry. Highlighted below are a select few within this fast-growing space.

 

Carbon and Greenhouse Gas Initiatives

The U.S. saw a 6.5 percent increase in CO2 emissions in 2021 over 2020 levels, according to recent Statista data. The country’s energy consumption produced 4.87 billion metric tons of CO2 last year. With a footprint that large, companies like Project Canary are working to help organizations shrink their contributions.

Having secured two funding rounds within the span of a year, the Denver-based company most recently raised a $111 million Series B in February for its solution that measures companies’ greenhouse gas emissions. This tool helps drive understanding of the impact methane, nitrous oxide and other harmful gas emissions could have on climate change.

“When people think of climate or greentech, their mind often goes to the latest fusion reactor prototype, hydrogen creation process or breakthrough in solar materials. These are amazing developments ... but as a result, people can often overlook technologies that make a massive impact today,” Will Foiles, Project Canary’s co-founder and COO, told Built In via email. “To avoid the worst of climate change, we must focus on reducing the impact of existing energy infrastructure in addition to the large-scale, innovative energy alternatives.

Also working to help make existing practices more eco-friendly is Cambium Carbon, a Washington, D.C.-based company that connects organizations to locally processed and salvaged wood. Its carbon-conscious solution is an alternative to deforestation and polluting shipping methods. The company pulled in $3 million in March to advance its solution.

Future is a carbon company more focused on individuals. The Maryland-based platform raised a $5.3 million seed round in September to offer financial incentives to consumers who invest in low-carbon products.

“To avoid the worst of climate change, we must focus on reducing the impact of existing energy infrastructure in addition to the large-scale, innovative energy alternatives.”

 

Sustainability Initiatives

Although it’s improbable that people will collectively drop their environmentally taxing practices altogether, there’s no shortage of ways to make these habits more sustainable. For instance, electric vehicle adoption has been on the rise. The number of EVs in the U.S. has grown by 87.5 percent since 2021, increasing from around 500,000 to more than one million today. This trend gives companies like SparkCharge — which raised $23 million this past May — the chance to build more charging infrastructure to support the growing EV industry.

Another sustainable effort that’s more apparent these days is circular economies. Rheaply, a Chicago-based company that pulled in $20 million this past summer, enables organizations to offer their unwanted materials to other companies that could benefit from them. Instead of contributing to the millions of tons of waste that ends up in landfills, solutions like Rheaply help ensure items that can be recycled are used to their fullest potential.

Investors in sustainability-focused solutions have shown that a greener future is worth funding, having contributed to rounds that reach up to nine digits, including one that went to food company Gotham GreensThe Brooklyn-based company operates a network of greenhouses in urban areas across the country. Since its facilities use hydroponic growing methods for its produce, Gotham Greens uses substantially less water and land than traditional farms. It also cuts down on transportation emissions since its greenhouses are situated near the cities it serves. The brand was backed by $310 million in Series E funding last month.

 

Fuel and Energy Initiatives

Energy is at the heart of how people live. Everything relies on some sort of power source, from travel to keeping buildings functional. Unfortunately, the world is still heavily dependent on fossil fuels like coal, and what gets burned ends up polluting our air and water.

Tech companies are getting plenty of capital to help develop renewable energy sources to keep this pollution to a minimum. The world is working rapidly to achieve net-zero greenhouse gas emissions, and companies like fuel developer LanzaJet are heading the charge.

Equipped with $50 million from its January funding round, Chicago-based LanzaJet is building its first commercial-scale refinery for sustainable jet fuel and renewable diesel. The company, which spun out of LanzaTech in 2020, already has active projects in countries across the globe. Samartzis, CEO of LanzaJet, chalks this growth up to the world’s focus on transitioning to cleaner energy, as well as several nations now looking to ensure their energy sources’ security.

“We are able to produce sustainable aviation fuel ... from sources that are renewable and can deliver a 60 [to] 90 percent reduction in greenhouse gas emissions,” Samartzis said. “The aviation industry itself has acknowledged that [this is] the only way they’re going to get to their net-zero ambition by 2050.”

The aviation industry is one of many areas that are challenging to decarbonize. Construction is another. Massachusettes’ Electrified Thermal pulled in $4.5 million this summer to reduce the amount of fossil fuels that go into producing widely used industrial materials like steel. Decarbonization is also at the heart of what Intersect Power, which recently raised $750 million, does. Serving those in retail and wholesale energy, the company supplies businesses with low-carbon electricity and other solutions.

 

Tech Is Advancing the Climate Movement

The greentech space is vast and varied, but every solution is working toward a common goal — solving the global climate crisis. Investors have seen the industry’s drive to address this pressing issue and are aware of the potential impact these companies could immediately have. For this reason, this sector seems to have gained more funding attention than the rest of the tech industry, according to Foiles, Project Canary’s co-founder and COO.

“The indication from scientists is that we’re already at a tipping point,” Foiles said. “Some say it’s already passed, causing a heightened awareness that time is very limited for future generations to have a good quality of life. The younger generations are the ones who will live through the consequences of action — or inaction — with the ultimate cost being people’s lives.”

As LanzaJet phrases it in its mission statement, “someday is now.” Our time to solve climate change is limited, and there’s still much work left to be done. However, with this reignited sense of urgency, much of the world feels today’s innovations can help make this effort a winning battle.

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