Climate Technology Finance

📣 Breaking Down Capital Structure in #ClimateTech Startups Understanding the capital structure in climate tech #startups, particularly those hardware-based, can differ greatly from digital startups. 👇 Hers’s an illustration of the evolution of capital types over time - equity, grants, and debt - with actual 💶 figures. Key takeaway: The name of the game is Non-Dilutive Capital ⭐ 1️⃣ Embrace Non-Dilutive Capital: Scaling with equity alone is a non-starter. There's insufficient climate-dedicated VC money out there and it's far from the most efficient way to finance CAPEX due to ownership dilution and the Cost of Equity. 2️⃣ Optimise Timing: With careful planning, each funding round can be delayed, allowing your company value to mature by achieving higher TRLs. Leverage grants wisely and delay equity funding rounds. 3️⃣ Strike a Balance with Grants: While grants are attractive, an overdose can divert you from your main focus of selling products and turn you into an R&D centre. Exercise caution! 4️⃣ Consider Debt Early: It's rocket fuel for growth. Proper measures can ensure you secure it even before hitting TRL9. 💡Tips for Raising Non-Dilutive Capital: General: - Begin early, it takes time - Build a solid funnel (4:1 ratio is a good rule) - Engage experts, it saves time and ups your chances Grants: - Be prepared to have some fresh equity to unlock certain grants - Participate in competitions - every sum counts and it's free exposure! Debt: - Sign off-takes to significantly boost your chances - Get in touch with your regional bank - they look at more than just ROI. It's time to rethink and redesign your capital strategy! #venturecapital #funding #innovation

What's going to close the $7 trillion gap in climate finance? One of my favorite reports each year from Climate Policy Initiative has some ideas for scaling the investments needed to align with a net-zero pathway. To my mind, this is the best report each year on the state of climate finance. It shows you: -Where financial flows are going from (across public and private sources) -Where money is going to (in industry, location, and activity) -What our estimated needs are across sectors and regions -The mitigation potential to unlock across sectors -Strategies for scaling both public and private investment. Here's a look at the sector gaps we are seeing to date and how they can be overcome. Energy systems- need a 2.5-fold increase in mitigation finance to align with average 2024 to 2030 needs. This sector has the highest emissions reduction potential, requiring investment in renewables, grid modernization, and storage solutions. Transport- also requires an almost 2.5-fold increase in mitigation finance, alongside a significant shift away from high-carbon investments. With a mitigation potential of 3.2 GtCO2e, priorities include electric mobility, public transport expansion, and freight decarbonization. Buildings and infrastructure- mitigation finance must rise nearly 4-fold. This is sector is generally climate-aligned, but further investment can realize its 3.2 GtCO2e mitigation potential. Focus areas include efficiency upgrades, sustainable construction, and low-carbon heating and cooling. Industry- a nearly 24-fold mitigation finance increase, along with reallocation from high-carbon activities, is needed to tap the sector's 4.4 GtCO2e abatement potential. Key areas include clean hydrogen, low-emission manufacturing of cement, steel, and ammonia, and carbon capture, and storage. AFOLU- holds great untapped emissions reduction opportunities—mitigation flows should increase 64-fold from USD 18 billion to USD 1,170 billion annually through 2030 to realize this potential. There is also a need to improve definitional boundaries and enhance tracking of finance flows to this sector. Check out the full report here along with the data and dozens of interactive charts: https://lnkd.in/esqBmpfe #climatefinance #climateinvestment #netzero #decarbonization #climatepolicy #climateaction #emissions

Today, we’re proud to release the Bill & Melinda Gates Foundation’s latest white paper on climate and development. It offers a clear path for aligning investments to help the world’s poorest countries make faster, smarter progress toward shared global goals. The paper highlights how countries can tackle three imperatives: development, climate adaptation, and climate mitigation. By matching the right type of financing to the right investments, we can maximize impact, no matter the country's distinct needs. Take Ethiopia, a nation that has made remarkable strides but is now struggling under multiple crises—from climate shocks to health emergencies. For such countries, we need new approaches to funding—approaches that don’t pit climate action against human development. This paper outlines a blueprint for policymakers, donors, and institutions to work together, ensuring that resources are directed where they’ll make the most difference. It’s not just about funding more—it’s about funding better. https://lnkd.in/eaqf2GRb #GlobalDevelopment #ClimateFinance #DevelopmentFinance

Financial Value of Climate Risks and Opportunities 🌍 Companies are under increasing pressure to reflect climate risks and opportunities in financial decision making. This is essential for embedding sustainability into strategy and unlocking measurable business value. ERM highlights that financial valuation of environmental and social factors enables companies to align investment decisions with long term performance. Value is created through energy efficiency, circular models, responsible sourcing, and workforce inclusion. These actions contribute to resilience, innovation, and cost efficiency. Sustainable products are experiencing significantly higher growth rates than conventional alternatives. Efficiency measures can reduce operating costs by up to 30 percent, while green finance instruments can lower the cost of capital. These gains can be captured directly in financial models and forecasts. At the same time, climate related risks are increasing in scale and frequency. Physical risks already account for over 270 billion dollars in annual damages. Transition risks may result in stranded assets worth hundreds of billions. The broader economic cost of unmitigated climate change could reduce global GDP by up to 18 percent by mid century. ERM presents two complementary approaches. Value creation focuses on capturing upside through efficiency, innovation, and market expansion. Risk mitigation addresses downside exposure by incorporating climate risks into business planning and decision processes. Both require integration of ESG into financial structures. This means applying standard financial tools such as internal rate of return and discounted cash flow to evaluate climate related actions. It also involves including environmental risks in sensitivity testing, pricing models, and capital planning frameworks. Translating these impacts into financial terms enables clearer comparison and stronger governance. Capital markets are moving toward companies that manage climate exposure effectively. Lower financing costs, stronger investor confidence, and increased access to sustainability linked capital are all benefits of a robust ESG integration strategy. Quantifying the financial value of climate related risks and opportunities enables companies to move from qualitative ambition to strategic execution. Those that lead in this area are better prepared to compete, attract capital, and deliver long term results. Source: ERM #sustainability #sustainable #esg #business

This week, the COP30 Brazil Circle of Finance Ministers, led by Minister Fernando Haddad, published its report on the Baku to Belém Roadmap to 1.3T after months of work. The document addresses important issues in climate finance across five priorities: ✅ Scaling Up Concessional Finance and Optimizing Climate Funds; ✅ Reforming Multilateral Development Banks to Scale up Sustainable Finance; ✅ Boosting Domestic Capacity and Investment Frameworks for Climate Finance, including Country Platforms; ✅ Developing Scalable and Innovative Financial Solutions for Private Capital Mobilization; ✅ Strengthening Regulatory Approaches for Climate Finance The collaborative effort of over 30 Finance Ministers reflects the imperative of reinforcing multilateralism, pushing the international financial architecture to function more coherently as a system, and advancing climate action in the renewed spirit mutirão in support of the Baku to Belém Roadmap, the COP30 Action Agenda and the implementation of the Paris Agreement. The ministers wrote beautifully in their statement: “As the cost of inaction on climate change rises, it disproportionately exposes the world’s most vulnerable populations — who have contributed least to historical emissions — to escalating climate risks, highlighting inequities embedded in climate change. Every year of delayed climate action raises both the investment needed and the risks faced.” The report will make a vital contribution to the Baku to Belém Roadmap, which we are co-authoring with the COP29 Azerbaijan Presidency and will publish in the coming weeks. As we move from words to action, this work reminds us that the transformation of the global financial system is both urgent and possible — if we act together, with purpose and solidarity.

Urgent climate action is needed in Asia as the world's most disaster-prone region, With millions at risk from sea-level rise, food insecurity, and climate-driven health issues. The Rockefeller Foundation is proud to support local research and advisory organizations like Digital Futures Lab in uncovering how AI can be a powerful tool for climate resilience across Asia. Here are the key takeaways from their 10-month study: 1️⃣ Each country requires a tailored approach With varying levels of digital readiness across Asia, from advanced AI ecosystems to emerging frameworks, each country needs a customized strategy for climate action. 2️⃣ Equitable data access is essential Bridging the data gap through investments in data-sharing and local collection can help ensure all countries have access to the benefits AI can offer. 3️⃣ Collaboration is key Addressing Asia’s climate challenges requires interdisciplinary partnerships among scientists, policymakers, and communities to create solutions that are context-specific and impactful. 4️⃣Localized, community-driven solutions work best AI applications are most effective when they move from top-down approaches to models that integrate traditional knowledge and address local needs. 5️⃣ Ethics and sustainability must guide AI development AI solutions need to balance environmental and social costs while protecting against monopolies and ensuring fair access. The Rockefeller Foundation remains committed to advancing bold ideas and transformative solutions including the use of AI to help reverse climate change not only in Asia, but in all parts of the world. Through continued support of innovative research and actionable strategies, we aim to foster a more equitable, resilient future for all. To learn more about this study, click the link in the comments

NEW ANALYSIS: Clean energy investment isn’t slowing for a simple reason: the economics are here. 55% of low-carbon technologies are already cost competitive in most situations (or will be soon), and another 10% are only marginally more expensive. From 2016 to 2024, companies pursuing green growth achieved higher revenue valuations, according to new Boston Consulting Group (BCG) analysis. Climate tech is moving from “nice to have” to “smart capital allocation.” The winners will be those who build or back scalable solutions now across energy, materials, industrials, and the infrastructure that underpins them. Full analysis here: https://lnkd.in/eu9_BGmk

Alastair Marsh's recent thought-provoking piece in @Bloomberg highlights critical challenges with the current climate tech investing landscape Climate tech projects are capital-intensive with long timelines. Unlike software, much of climate tech requires massive upfront capital for R&D, pilot plants, and manufacturing before significant revenue. This demands longer development and deployment cycles (often 7+ years to scale) that exceed typical 5-7 year VC exit horizons. The classic VC model - built for rapid, asset-light scale-ups - often misaligns with the realities of many climate tech solutions, especially "hard tech." While there’s an abundance of early-stage VC capital for entrepreneurs, later-stage growth that bridges these projects from venture to infrastructure stage is basically absent—that’s called the missing middle. We need to adapt and supplement that approach by layering in other types of capital and bridge the "missing middle." A broader array of financing instruments is essential for climate tech to scale, including patient equity and growth capital, project finance, blended finance, and specialized debt models. Marsh’s piece lays out how family offices are uniquely positioned to be catalyzing players in this space. Their flexibility allows them to deploy capital across diverse segments, filling the gap and driving significant financial returns alongside impact. https://lnkd.in/gUf85Bwy

Africa is building an 8,000 km long wall. Not of concrete, but of vegetation and restored land. What started as an idea in 2005 became an African Union-led movement in 2007, and today, it's changing millions of lives in the Sahel region. The Great Green Wall Initiative (GGWI) is Africa’s boldest response to desertification, climate change and land degradation, stretching across 11 African countries from Senegal in the West to Djibouti in the East. Building this green future isn’t cheap. USD33 billion is needed to fully realize the GGWI by 2030. The African Development Bank Group has committed USD6.5 billion, while the International Fund for Agricultural Development (IFAD) has already invested over USD500 million. Other important backers include the The World Bank, Green Climate Fund, Global Environment Facility and multiple governments. This initiative uses green finance to support land restoration, climate-resilient infrastructure, capacity building for local communities and small & medium-sized farms. The GGWI aims to restore 100 million hectares of degraded land, sequester 250 million metric tonness of carbon and create 10 million green jobs by 2030. Progress is already visible. Between 2007 and 2018, the initiative restored 20 million hectares, created 350,000 jobs and generated USD90 million in income across the 11 countries. The GGWI is as much about the environment as it is about the people. This project strengthens food security, improves water availability, reduces poverty and mitigates conflicts over limited resources. The initiative directly contributes to 15 of the 17 UN Sustainable Development Goals (SDGs) making it one of the most comprehensive sustainability projects in the world. The GGWI is proof that Africa can lead on climate action and green finance. We can build solutions as big as the problems we face. PS - Follow me Ben David for more African green finance insights.

Blackrock just took a big write-down on its Global Renewable Power Fund III. Because of two ill-fated investments in Northvolt and SolarZero. Surprisingly, a $4.8 billion fund saw its internal rate of return plummet due to just two portfolio companies faltering. This fund was BlackRock's third flagship GRP fund, part of its bet on the energy transition and a push towards renewable energy and infrastructure. Many of the funds’s assets are early-stage climate infrastructure investments in: EV charging, renewable generation, and power storage and transmission. Are they simply making bad investments or is this a prequel to what to expect? What this tells me about climate tech investing: 1. The significant impact of two companies on a $4.8 billion fund suggests that traditional risk models needs reevaluation. The conventional playbook for diversification doesn't quite work in climate tech. When companies in your portfolio are all betting on similar technological advances or regulatory shifts, they tend to sink or swim together. Traditional risk models might be missing these hidden correlations. 2. The Northvolt situation is a wake-up call - throwing money at climate tech isn't enough. These companies need investors who roll up their sleeves and get involved. We're seeing a shift from passive to active investing, where deep operational expertise is just as crucial as the capital itself. 3. SolarZero, a major player in New Zealand Energy Sector, was far from an early-stage startup when BlackRock acquired it in 2022. Despite its 50-year history , something went wrong. It hints at a broader challenge: global funds rushing into new markets might be overlooking local market dynamics and regional complexities in their eagerness to deploy capital in the renewable space. As this sector matures, we need a new framework for resilient investment strategies that can better weather the failures of individual companies while capitalizing on the overall growth trend in clean energy. #climatetech #VC #investment #newbook #fundclimatetech #blackrock Link for the news in the comments.