For impactful climate tech investment, investors need to align their investment strategically to emission guzzling sectors
Mobility and energy subsectors drew 94 per cent of the climate tech investment in India from 2019 till November 2023. However, an unequal relation between the emissions and the funding exists in other sectors.
The energy sector contributes 38 per cent of total emissions and attracted funding of 74 per cent on an average between 2019 and 2022. Industry, manufacturing and resource management, and the food, agriculture and land use sectors contribute 30 per cent and 20 per cent of the emissions respectively and attract only 4- 5 per cent of the total climate tech investments.
These findings in 'India's Green Revolution 2.0 – Trends Shaping India's Climate-Tech Sector', a report by FSG, a global consulting firm, call for a strategic re-alignment of investment.
Rishi Agarwal, managing director, head-Asia, FSG says, “As India prepares for the upcoming general elections, this report couldn’t be more timely. It highlights the role climate innovation and sustainable practices play in our nation’s future, underscoring the importance of prioritizing climate solutions in our national agenda.”
He adds, “As political parties draft their manifestos, they should incorporate policies that support and accelerate the adoption of climate-tech solutions, demonstrating a commitment to a greener and more sustainable future.”
The report highlights that even though the investment plummeted in the year 2020 to a 42 per cent due to economic breakdowns caused by the Covid virus, India’s climate- tech sector has shown resilience with an increase of funding by 29 per cent from 2019-2022.
Agarwal says, "The recent decline in late-stage investments reflects a sharper investor focus on profitability. While this may cause short-term deceleration, it also indicates a maturing market where investors are seeking sustainable and financially viable solutions. The slowdown also highlights the need for climate-tech companies to demonstrate clear paths to profitability to maintain investor interest in the long term."
The resilience of the climate tech sector is due to rising awareness among citizens, businesses and the governments about sustainability. The government has also increased incentives in the sector, which enhances investor interest.
To limit the global warming to a rise of 1.5 C, investors should strategically invest in the sectors that add more to emissions. The funding should be diversified towards industry, manufacturing and agriculture that have considerable emissions.