Australian startups harness climate tech momentum
IAs the global focus intensifies on climate change and net zero targets, the market for climate technology is rapidly increasing – worth around US$14 billion globally in 2021, it’s forecast to jump to almost US$148 billion by 2032.
And the case for investment in Australia is obvious, with established strong industries in both digital technology and the green economy providing a head start for climate tech innovators.
The country’s dynamic climate tech sector now numbers more than 170 companies valued in total at A$4.2 billion.
Last year alone, overseas investors poured more than A$700 million into the sector – reflecting a trend that has seen increasing international investment across all tech sectors in Australia.
“Climate pledges have driven the demand for solutions … and now capital is flowing to the climate innovators,” says Brer Adams, Managing Director of climate change investment and advisory firm Pollination. “Australia’s startup ecosystem will benefit from these tailwinds.”
Venture capital firm Investible, which invests in early-stage companies throughout the Pacific and Southeast Asia, is equally bullish about the climate tech opportunities in Australia.
“We believe climate change is the most monumental challenge of our time, and it also represents a once-in-history opportunity,” says Tom Kline, Co-head of Climate Tech at Investible. “Australia has a unique and exciting role to play in all of this. It’s long punched above its weight in the global tech sector, but its agricultural prowess, resource abundance and research capabilities present equally exciting opportunities.”
With Asia forecast to produce the majority of global emissions over the next decade, Investible also sees enormous potential for exporting Australian innovation into the APAC region. To this end, it’s creating a climate tech ecosystem and hub in Sydney – Greenhouse – “to accelerate the collaboration, adoption and impact of climate technologies on a global scale”.
The Climate Tech Industry Report 2022 says Australian companies in this space are looking outwards to capitalise on the growing need for climate solutions – more than a third project revenue growth of 500 per cent over the next 12 months.
“There is strong future interest to expand across international markets, particularly in the UK, Europe, North America and across Asia,” says the report. “Overall, 90 per cent of companies already are or intend to operate internationally.
“We see incredible potential for economic value, growth and scale in the year ahead.”
Leading the Australian charge are climate tech startups in the data and finance sector (21.1 per cent), followed by the circular economy (19.9 per cent) and agrifood (17 per cent).
Global investors have been quick to seize the opportunities on offer, with more than half the capital raised to date by local climate tech companies coming from overseas.
“There is a growing realisation within the market that climate tech is a huge opportunity to not only save the world but also to make fantastic returns,” says Cheryl Mack, CEO of investment platform Aussie Angels. “[In Australia], the bulk of climate tech companies were formed in the past three years, and we are going to see further strong growth over the next few years.”
Pollination’s Adams adds: “Interest in climate technologies has exploded in recent years, with deal activity in early-stage venture companies reaching US$400 million in 2021 in Australia – according to PitchBook Data, 10 times the rate of the year earlier.”
Pollination recently worked with iconic Australian fashion retailer Country Road Group to establish a A$1.5 million climate fund for innovative projects, social enterprises and startups that are tackling climate change.
“The fashion industry is a contributor to the climate crisis and has a real role to play in shaping a positive future – and that’s a future that’s fair, a future that has a safe climate and thriving biodiversity,” says Country Road Brand Sustainability Manager Fabia Pryor.
The University of New South Wales (UNSW) is similarly nurturing the next generation of climate innovators through its Founders entrepreneurship program. With 38 per cent of climate tech startups developing entirely new technologies, the program offers an important pathway to commercialisation and turning good ideas into great companies.
“It is more important than ever that we foster technological innovation and help those developing climate solutions to scale,” says UNSW Director of Entrepreneurship David Burt.