TLDR:
- According to Daria Saharova, managing partner at VC World Fund, green investment is not targeting the industries that need the most help in reducing emissions, such as agriculture, manufacturing, and the built environment.
- Currently, 48% of venture capital investment is put into mobility technology, which only accounts for 15% of emissions, leaving more polluting industries underfunded.
- Personal behavior change will only reduce 4.3% of emissions, while technologies already in the market will account for 49.8% — the remaining emissions need to be reduced by technologies that are yet to be developed and require investment.
- However, venture capital only contributes 13% of climate tech funding, with R&D accounting for 35% and private equity for 37%.
- VCs lack the necessary skills to identify the right investment areas, but World Fund has developed a benchmarking system called the Climate Performance Potential (CPP) to aid in this process.
The misalignment between emissions and venture capital investment in climate tech is a major issue, according to Daria Saharova, managing partner at venture capital firm VC World Fund. Currently, 48% of venture capital investment in climate tech is directed towards mobility technology, which only accounts for 15% of emissions. Meanwhile, more polluting industries like manufacturing, agriculture, and the built environment remain underfunded, receiving only 52% of funding despite producing 85% of emissions. Saharova emphasizes the need for investment in the technologies yet to be developed to reduce the remaining 46% of emissions. However, venture capital only accounts for 13% of climate tech funding, with the majority being allocated to R&D (35%) and private equity (37%). To address this issue, Saharova suggests that venture capitalists employ a benchmarking system called the Climate Performance Potential (CPP), which assesses a startup’s potential to reduce emissions and understand its impact within the market. By focusing on technology rather than the company as a whole, the CPP can be applied to large organizations as well. Saharova argues that an increase in private and public capital and the adoption of the CPP would help predict success in climate tech investments and ultimately create a more sustainable future.
