Climate tech funding is down. Time for a bold move?

The need for climate tech innovation, especially in high-emissions sectors, makes start-up funding crucial to the fight against climate change. But with a year-over-year decline of more than 40% in total capital deployed, the amount of funding reaching climate tech start-ups in the first three quarters of 2023 has fallen to a level not seen since before the 2021 boom, according to PwC’s 2023 State of Climate Tech report. This drop is part of a wider collapse in private market activity: total venture and private equity investment in 2023 was down 50% from the previous year, a decline driven by geopolitical uncertainty, rising inflation and interest rates, and shrinking valuations.

Still, leading climate tech investors interviewed as part of the PwC research suggest that the current deflated market could present an opportunity. Lower valuations mean there are bargains to be had, and funding promising climate tech start-ups could help corporate investors meet their own sustainability goals, as well as help address climate change and potentially deliver returns.

What are the implications for the C-suite? The downturn could mean that some of the climate solutions—including carbon capture, electric vehicles and batteries—that corporations need to achieve their own emissions-reduction targets will be slower to reach the market. But C-suite buyers who are thinking about how their company can compete during the transition to a sustainable economy might also see this environment as a chance to make bold moves. By investing in or acquiring climate tech startups, large businesses could gain a foothold in burgeoning markets for climate solutions before their competitors do.