Climate tech companies are poised to play a significant role in the startup and fundraising ecosystem moving forward. 

Government-sponsored emission goals are providing opportunities for innovative entrepreneurs. To meet 2050 carbon emission reduction goals, some of the savings may come via the adoption of new technologies, including advanced energy storage, carbon capture, and sustainable materials. The remaining, meanwhile, may be accomplished by scaling existing technology such as solar and wind energy, and lithium-powered electric vehicles. 

Our 2024 Climate Tech Report – available for free download – explores how climate tech startups fit into the climate technology innovation landscape. Created by Value Creation Labs and presented by Fidelity Private Shares, the report covers emerging climate tech trends and market dynamics. 

Startups will play a significant role in demonstrating new technologies and filling the gaps in climate tech workforce education, consumer services, and SaaS platforms. 

Let’s dive into five climate tech trends featured in the report and add some actionable insights from the experts that put it all together. 

AI plays a multi-faceted role in the future of climate tech. 

Artificial intelligence presents an interesting dynamic in the context of climate technology.  

Predictive AI helps organizations maximize fuel efficiency, optimize design, and intelligently control infrastructure. AI insights could directly mitigate greenhouse gas emissions. 

But there’s another side of the coin. Generative AI tends to be very resource-intensive in terms of computing power. A single AI query can require more energy than a traditional web search. The surge in demand for AI is at odds with Big Tech climate commitments. 

New AI data centers must be optimized to reduce energy consumption. To bring it full circle, this conflict creates opportunities for other types of climate tech startups specializing in energy storage, water conservation, building material reuse, and zero-carbon energy sources.  

Emerging subcategories will grow in prominence. 

Certain climate technology subcategories are particularly ripe for innovation and investment. The report identifies energy storage, renewables, carbon capture, and sustainable materials as the sectors capturing the eye of the VC community. 

Energy storage 

Energy storage technologies, especially those focused on decarbonizing the electric grid and supporting renewable energy systems, are gaining prominence. The global battery energy storage market is projected to double in size by 2030. 

According to the report, federal and state-funded projects are accelerating the development of large-scale storage solutions, allowing communities to move toward zero-carbon energy systems. Key innovations include lithium-ion battery alternatives, domestic battery manufacturing capacity, and compressed air energy storage. 

Intermittent renewables (wind and solar) 

Solar and wind energy remain the most active categories in climate tech’s renewable energy space. In the US, renewable energy startups raised nearly $780 million in the first half of 2024, almost tripling the investment in 2023, according to Pitchbook data cited in the report. 

Sustainable materials 

Sustainable materials help reduce carbon emissions by replacing traditional materials within construction, manufacturing, and packaging. Startups focused on replacing cement, steel, oil-based plastics, and other high-carbon-cost materials are positioned to seize this opportunity. 

Large corporations are partnering with climate tech startups to test new sustainable materials, sustainable food, and clean fuels. Clean fuel is the U.S.’ largest area of sustainable materials investment, with over $1.4 billion in VC deals closed in 2023, according to Pitchbook data cited in the report. 

Carbon capture 

Carbon capture, utilization, and storage (CCUS) technologies are becoming a focal point for corporate sustainability initiatives. Utilization and storage methods allow this carbon to be used for a manufacturing process, turned into biofuel, or stored to prevent its release into the atmosphere. The Section 45Q tax credit has made carbon capture projects more viable, with significant investments being funneled into this space. 

Climate tech hubs take hold across the country. 

The United States remains a top source of climate tech funding. Out of the six most active climate tech investing groups in the first half of 2024, four are in the U.S., according to Pitchbook data from the report. 

The report highlights four climate tech hub regions as vibrant ecosystems that support climate tech startups and the fast-growing climate tech workforce: 

• The Northeast, 

• The Pacific Northwest, 

• Texas, and 

• Southern California. 

Kristen Craft, VP, Business Partner Manager at Fidelity Private Shares, highlights the importance of these epicenters in the report. 

“More so than in almost any other industry, climate tech founders need access to incubators and communities that can support their trajectory,” Craft said. 

“This need is driven by two factors: first, climate tech companies often sell into behemoth industries (like shipping or telecom), so they need access to the connections and networks that an incubator can provide. Second, given that so many climate tech companies require hardware (and other capital-intensive resources), they benefit from economies of scale when it comes to purchasing.” 

Brighter fundraising days could lie ahead.  

A string of underperforming climate tech IPOs from 2021-2023 put a mild damper on the climate tech fundraising outlook. One investor interviewed for the report cited that the climate tech space is “in need of a win.” 

However, there is optimism for a potential rebound in late 2024 and 2025.  

“With the Federal Reserve indicating that interest rates are going to start retreating, and more climate tech startups approaching the end of cash runways, 2025 is likely to deliver a wide range of outcomes and a burst of M&A activity,” the report reads. 

A sound fundraising strategy should be a priority for climate tech startups. 

A potential climate technology funding upswing puts the spotlight on sound fundraising practices for founders. 

“As with any industry, climate tech requires airtight cap table management and clean documentation on all financing,” Kraft said in the report. “This is especially important, though, when it comes to companies that seek grant funding and other sources of non-dilutive capital. Good documentation makes it easier to respond to an RFP, apply for a grant, or make sure the company is maximizing tax incentives.” 

One way to stay fundraising-ready is to invest in an all-in-one equity management platform like Fidelity Private Shares. Our software helps founders automate their startup equity management operations and financings in a single collaborative hub. 

Download The 2024 Climate Tech Report for all the latest climate tech trends 

Looking for more climate tech trends and insights? Download The 2024 Climate Tech Report for free! Regardless of whether you’re a founder, potential founder, employee, investor, or industry stakeholder, this report is geared to help you seize your opportunity in the climate technology space. 

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