Net Zero Future50

The heat is on.

In the 2015 Paris Agreement, 197 countries agreed to try to keep temperature rises to 1.5°C to avoid the worst impacts of climate change. The policy backed pledges made at COP26 in Glasgow still leave us on course for 2.4°C of warming according to Climate Action Tracker. We now need globally to decarbonise at more than five times our current rate, according to PwC’s latest Net Zero Economy Index, achieving 12.9% reductions in intensity every year from now to 2050, compared with the 2.5% rate of reduction that we have managed since 2000.

The rise of climate Venture Capital (VC).

There is a new ecosystem forming rapidly around climate tech start-ups; The State of Climate Tech 2020 report highlighted the rapid increase in the climate tech VC market, growing from £313.5 million globally in 2013 to £12.3bn in 2019. At the global level, climate tech now accounts for 14p of every venture capital pound.

The UK is emerging as a global climate tech leader.

The UK has been at the forefront of a global boom in climate tech investment since the Paris Agreement – ranking top in Europe and third globally, behind only China and the USA, for total climate tech Venture Capital funding between 2013 and H1 2021.

However, there is uneven distribution across sectors. For example, in 2021, alongside private sector investors, the UK Government backed a world first programme to build an operational hub for Net Zero air taxis and delivery drones, yet lags behind in other critical areas, like EV battery production, where manufacturing in China dramatically outpaces the world.

Investment has also been skewed towards the “low-hanging fruit” of well-proven technologies, leaving a series of sectors underfunded, where there are commercially viable approaches with high carbon abatement potential.

The UK Carbon Funding Gap.

While the overall inward investment environment within the UK is increasingly healthy, climate tech investment in the UK mirrors the global pattern of uneven flows captured in SOCT21, with decarbonisation funding mismatched to the carbon abatement opportunity. As PwC's SOCT21 shows, a high proportion of climate tech investment appears to have focussed on prioritising near term commercial outcomes rather than longer term, higher carbon impact solutions.

Source: Net Zero Future50