Report: Climate tech investments surge fivefold since Paris Agreement

Ever since the Paris Agreement came into effect, climate tech investments have surged around the world, growing nearly five times from $6.6 billion in 2016 to over $32 billion in 2021.

According to a study conducted by promotional agency London & Partners and Amsterdam-based database management company Dealroom, the U.S. has been at the forefront of this shift, with climate tech companies in the country drawing a total of $48 billion during the five-year period. China ($18.6B), Sweden ($5.8B), the United Kingdom ($4.3B), and France ($3.7B) continue to follow loosely behind.

The figures clearly show how important companies that are applying technologies to reduce greenhouse gas emissions or impacts of climate change have become in the global economy and in the eye of investors. In the US and Canada region, climate tech investments grew nearly six times, from $2.9 billion in 2016 to $17 billion in 2021. Meanwhile, Europe and Asia have seen nearly sevenfold and twofold growth, respectively.

U.S.: The climate tech hub

London & Partners and Dealroom examined over 5,100 global startups to understand the growth of the climate technology segment since the Paris Agreement — aimed at limiting global temperature rise to 1.5C by 2050.

The firms found that American climate tech startups have been more successful not only in drawing venture capital but also at scaling. As many as 43 unicorns currently operate out of Greater Los Angeles, Greater Boston, New York, and the Bay Area, which cumulatively drew close to $31 billion over five years. Plus, 61 more are on track to hit unicorn status in the near future.

No other part of the world is close to having these many climate tech unicorns or this much investment.

“This demonstrates both the growing demand for more sustainable technologies from consumers in the U.S. and how the U.S. is leading the way for producing solutions to tackle climate change,” Stephen Feline, director of North America at London & Partners, told VentureBeat in an email.

“The U.S. has a more mature climate tech ecosystem than anywhere else in the world, and its scale-ups are producing game-changing companies in this space. We anticipate investment levels to continue to rise as a focus on climate change dominates the political landscape, business community, and the public at large — thus attracting the increasing attention of global investors,” he added.

Energy, transportation remain focus

Globally, the report notes, about 80% of the climate tech investment has been directed to the energy and transportation sectors, which covers companies such as Tesla and Sunnova. The remaining 20% remains unevenly distributed between food, enterprise software, and the circular economy startups. The latter includes companies working in the fashion and home living industry, as well as those operating in secondhand, refurbished product segments.

Meanwhile, in London, most of the focus has been on the energy sector. The city continues to be the U.K.’s climate tech hub, with more than 400 active startups and more than sixfold investment growth over the last five years.

“Home to the largest cluster of climate tech companies in Europe and a thriving ecosystem of dedicated VC funds and accelerators alongside world-class researchers and talent, London’s tech sector is coming together to tackle the global climate crisis,” Laura Citron, CEO at London & Partners, said in a statement.

“London and U.S. cities like the Bay Area, Los Angeles, and Boston are amongst the leading hubs for climate tech, and this creates lots of opportunities for us to share ideas, talent, and innovation,” she added.