Business with purpose. Climate-tech start-ups are hot, thanks to signals from COPs 

There are some who believe that COP conferences are not of much practical use.

Indeed, after 27 Conferences of Parties (signatories to the United Nations Framework Convention on Climate Change) and despite repeated warnings by scientists (through IPCC reports) and bodies like the United Nations Environment Programme, the world is set to get warmer—by at least 2.4 degrees Celsius— than average temperatures recorded in the pre-industrialisation era of the later 19^th century.

And this, when scientific consensus is that anything beyond 1.5 degrees is bad and going upwards of 2 degrees is dangerous. 

Therefore, people who have lost faith in COP meetings could be excused for doing so. However, there is another side to the story. A lot of good things happen in the wake of COPs. They may not be enough, but are a lot better than nothing. 

No more chasing funds

One such unfolding trend is the beginning of the era of climate start-ups, whose merit is indicated by the fact that they have venture and private equity funds chasing them, rather than them chasing the funds—which captures the zeitgeist of the current times. What used to be ‘cleantech’, essentially renewable energy, has now got subsumed into ‘climate-tech’. Today, climate-tech start-ups are hot. You only need a pair of eyes to discern this. 

Climafix Summit

Last week, a Chennai-based consultancy, Energy Alternatives India (EAI), in collaboration with IIT Madras Research Park, organised Climafix Summit 2022, a sort of a get-together of over 200 climate-tech start-ups and 100-odd investors. The conference revealed the deepening interest of financiers in climate-tech businesses. 

One investor who requested not to be named because he was not authorised to speak to the press, noted that the rationale behind investing in climate-tech is quite clear: the world urgently needs solutions to climate change and the climate-tech start-ups are providing them — how could they not make money? The general return expectation of venture capital funds of climate-tech start-ups is “at least 30 per cent.” 

Allure of ‘low carbon’

While most of the funds are going into e-mobility—renewable energy seems to be less fancied, presumably because the returns are no longer that attractive. The emerging blue-eyed boys of investors are the ‘low carbon building materials’ guys. 

For example, Zerund, a Guwahati based start-up that makes eco-friendly bricks from plastic waste, received in September ₹7.8 crore in seed funding. GreenJams makes carbon-negative building materials from crop residues and industrial by-products — which also helps slash construction costs by about half, and improves the buildings’ energy efficiency by 25 per cent, using crop residues such as paddy and wheat straw. GreenJams has raised $24,000, in four rounds of funding — a small amount but there is more to come. While these are but two examples from India, there are many more from elsewhere.  

Japan wants to resolve big issues

Anjani Bansal, Partner and Country Head, Global Brain Corporation of Japan, which has its own fund and also manages that of 11 other Japanese companies — $2 billion in all — told businessline that Japanese investors are keen to “solve a big problem”. Global Brain has not yet done a climate-tech investment in India, but is close to it. Bansal said Japanese investors are also bullish on agri-tech and food. 

There is no proper estimate of funds that have flowed into climate-tech. Many investors told businessline that the funds started looking into this only less than two years ago. 

To loop back to COP, it is less likely that all these start-ups would have got into business without the high decibel noise generated by COP meetings and the sensitisation of people to dangers of climate change. One might argue that the collective work of all start-ups still falls short of what is needed. But nevertheless, a slow-moving wheel is better than one stuck in the mud. 

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