Investment in climate technology falls by 40%, study says

Climate technology investment has fallen by 40 per cent globally over the last year as investors focus on funding ideas with the greatest potential, a report by financial consultancy PwC has found.

The investment that has happened was spent on technology seen as having potential for higher emissions reduction, the study said.

The State of Climate Tech report said that the decrease in investment levels reflects market conditions more than a deliberate move away from climate tech.

“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.

“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.

“Now we need to see that shift continue, coupled with an increase in the absolute levels of investment in all technologies with the potential to cut emissions.”

Investment in climate technology fell by 40 per cent in the last year, PwC found. It added that the fall in climate tech investment was significantly smaller than the venture capital and private equity average of 50 per cent across sectors.

Meanwhile, the share of funding going to climate tech rose, accounting for more than 10 per cent of private market start-up investments in 2023.

There was a rise in the share of climate tech private equity and venture capital for start-ups working on tech with potential for higher emissions reduction, PwC said.

The report found that solar power's share of investment is proportionally up by 24 per cent while that of green hydrogen is up by 64 per cent.

Spending on micromobility – a sector that includes e-bikes – is down 38 per cent. The National.

Carbon capture, use and storage was up 39 per cent but still represents less than 2 per cent of total climate tech funding.

Meanwhile, the proportion of capital going to technology with relatively lower potential to reduce emissions has fallen.

For example, the proportional share of investment for light-duty battery electric vehicles is down 50 per cent since 2022, while that of micromobility – a sector that includes e-bikes – is down 38 per cent.

However, mobility and transport in its different forms still accounts for 45 per cent of investment.

Will Jackson-Moore, global sustainability leader at PwC UK, said: “A challenging macroeconomic environment, sinking valuations, and geopolitical turmoil has seen capital flows to climate tech ventures drop 40 per cent at a time when climate tech needs it most.

“But while such industry and macroeconomic dynamics may cloud investor confidence, they also present significant first-mover opportunities for investors to engage in the current dip, as the need for climate tech innovations will only grow stronger.”

Early stage deals made up more than two thirds of all climate tech deals in 2018 and 2019, dropping to about 47 per cent in 2023, the report said.

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Will the pound fall to parity with the dollar?

The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.

Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.

New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.

“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.

The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.

The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.

Bloomberg