The UK has ranked as the third biggest destination for climate tech venture capital, according to a new study.
The data was revealed in PwC UK’s Net Zero Future50 report. It noted the UK received over £6.5 billion of VC funding from 2013 to June 2021, and its climate tech startups received more funding than any other European country.
In addition, the period from the second half of 2020 and the first half of 2021 saw the UK bring in a record-breaking £2bn of capital.
Currently, the UK only falls behind the US and China when it comes to attracting investment to climate tech.
Head of Disruption & Innovation at PwC Leo Johnson said: “As climate challenges grow ever more urgent, climate tech innovations are helping to bend the emissions curve and accelerate decarbonisation.
“The UK has been pivotal in climate tech’s growth over recent years and with COP26 highlighting the need for climate technology as part of the Glasgow Breakthrough Agenda, the space is emerging rapidly.
“Technology is not the panacea, but climate tech is a critical mechanism to get us on track to meet the 1.5-degree goal, and the UK is at the forefront.”
With investment predominantly focused on well-proven technologies and near-term profitable outcomes, the report warns of a ‘Carbon Funding Gap’.
PwC noted that critical funding gaps are also present within the built environment, industry, manufacturing & resource management and GHG capture, removal and storage.
Mobility and transport is another area facing funding gaps – for example, funding into low-GHG aviation and shipping is significantly less than electric vehicles (EVs).
However, despite disproportionately more funding than every other sector in relation to its emissions abatement potential, the sector is still far from fully decarbonised.
The same can be seen in Food, Agriculture and Land Use, where large-scale investment has gone into alternative meat startups and less focus on natural carbon sequestration through methods such as oceanic ecosystem restoration.
However, this also presents an opportunity to focus greater pools of capital on certain innovations across high-carbon sectors like Built Environment to Food, Agriculture and Land Use (FALU).
To support the acceleration of this, further progress is needed to channel and align national and global policies, especially with agreeing the rules and guidelines for a global carbon credit market.
Johnson concluded: “Investment is needed across all sectors, but the challenge is implementation, speed and scale.
“It will take engagement and action from policymakers as well as investors to deliver the potential of these climate tech breakthroughs.”