UK set to double investment into climate tech in 2022, surpassing general UK tech investment growth

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Tech Nation, the UK’s leading growth platform for tech scaleups, has today published its Climate Tech Report 2022, to shed light on the state of UK climate tech ahead of COP27 this month. 

UK is a world leader in climate tech

Tech Nation’s Climate Tech Report 2022 has revealed that international investment into UK climate tech companies has almost doubled, rising from $4mn in 2021 to $7.5bn so far in 2022.

While the trend is increasing for the UK and on a global level, this is not the case for all countries. Investment in the US, Germany and Sweden seems to be slowing down; receiving $2.139bn, $4.458bn and $2.173bn less investment in 2022 so far (compared to 2021) respectively.

The UK is on track to see climate tech companies raising nearly $20bn per year by 2030. 

This means that UK climate tech investment is ahead of overall UK tech investment, as despite a strong start to 2022 (with a record first quarter for tech VC investment at $12.1bn), the rest of 2022 has been significantly down on 2021 figures. Q2 2021 saw $11.4bn placed into UK tech overall, while Q2 2022 was $9.9bn, and Q3 dipped even further in comparison to last year, just $4bn in 2022 compared to $11.9bn in 2021.

The UK is second only to the US for the number of companies working to address the climate crisis, with over 5,200 climate tech companies in the UK to date (compared with 14,300 in the US). 

The UK has 8 climate tech ‘unicorns’ (companies valued at $1bn+); Octopus Energy, Newcleo, Depop, ITM Power, Ceres, OVO Energy, Smart Metering Systems (SMS plc) and Vertical Aerospace. The UK has a further 19 future climate tech companies on their way to becoming unicorns, currently valued between $250mn – $800mn, showing a healthy pipeline of climate pioneers in the UK.

The UK now needs to focus on enabling ‘gigacorns’ to thrive; a new term used to describe commercially sustainable companies that can remove a gigaton of carbon from the environment each year.

R&D spending must be protected for continued climate tech innovation

The UK’s climate tech ambitions are dependent on policy to fuel continued innovation. Amidst concerns that R&D might be cut, Tech Nation is urging the Government that R&D funding must be protected to help drive us towards net zero, and an innovation-led economic recovery. 

A report from the IPPR suggests the UK lags £62 billion behind in R&D, with investment falling by a fifth since 2014 and with the UK now placing just 11th in the OECD in terms of total R&D investment as a percentage of GDP – well behind countries like Austria, Switzerland and the USA.

Gerard Grech, Chief Executive at Tech Nation, comments: “It is imperative we match the rhetoric ambition of making the UK a ‘forward-facing science superpower’ with the R&D commitment needed to achieve this. COP27 focuses the mind; new technology development is critical for solving acute global challenges such as carbon reduction and removals, and deep tech will be an ever more essential component of the tech ecosystem.”

Tech Nation also urges that policies such as the government’s ten point plan for a green industrial revolution, which promises more investment into the UK’s Net Zero tech companies, are not only followed but prioritised, in order to see further growth in UK climate tech. 

Climate tech companies are crucial to driving down carbon emissions across the world

Tackling the climate crisis has become a top priority for the majority of developed countries across the world. Globally, the quantity of emerging technology companies tackling the climate crisis has increased nearly 4 times by over 35,000 companies since 2010, to reach 44,595 in 2022.

The emission reduction potential of technologies represented by the 44,000+ climate tech companies applying 191 different technologies across the world is predicted to surpass 2019 emissions in 2036. It is also predicted to grow to 1.4x further by 2050, equalling 599,000 MMtCO2e per year. This means that by 2036, climate tech companies will be removing more carbon from the atmosphere than the world produced in 2019. The rapid scaling up of these firms is essential to accelerate this progress, as significant change will need to be made before this time.

Tech Nation’s Climate Tech Report 2022 also reveals that technologies combating energy have the highest cumulative emission reduction potential, with one emerging ‘top five’ technology being algae engineering; utilising algae to create biofuel, bioplastics and carbon sequestration.

As the Climate Tech Report 2022 emphasises, the contribution climate tech companies must play to help the planet reach net zero emissions is undeniable – and we must ensure investment into these technologies continues to increase. 

Tech Nation programmes to accelerate UK climate tech

Tech Nation is currently running its Net Zero and Net Zero X growth programmes for early-stage and late-stage climate tech companies respectively, and these trends are reflected in the newest company cohorts. Among their latest cohorts are companies who are working on algae engineering (such as KelpiPhycobloom and Phycoworks), and half of the companies joining each programme are working to decarbonise the UK’s energy sector (such as FiliaElectric Miles and Equiwatt). 

Tech Nation’s Net Zero programme has seen its first cohort of companies increase their collective funding by over £150 million since completing the programme (an average increase of £5 million each), while its second cohort has increased their collective funding by over £100 million in the past 6 months. Since joining Net Zero, these early-stage companies have grown so rapidly that over half of them (11 of 20) have been accepted into Tech Nation’s Net Zero X programme for late-stage climate tech businesses. 

Quotes:

Sammy Fry, Net Zero Lead at Tech Nation, said: “The outsized role technology must play in tackling the climate crisis is undeniable. There has never been a more crucial time to take action, and while we should be encouraged by the immense growth of the UK’s climate tech sector – along with the high carbon reduction potential of climate tech companies and the resilience of the sector in the midst of difficult economic times – this is certainly no time to be complacent. We must continue to fuel the areas curtailing emissions with investment and shape policy that allows real change to become possible. This is the only way to preserve our planet for future generations.”

Jo Parker-Swift, Founder & CEO of Solivus (a Net Zero X programme member), said:“There’s no climate silver bullet. The news that climate tech investment is bucking global investment trends is welcome but there is still a long way to go – especially when it comes to supporting hardware innovation. We will not solve the climate crisis with software alone, which means investors will need to embrace new levels of investment risk to back hardware solutions. State and non-state actors need to put their support behind this sector to accelerate the net zero transition and ensure the world realigns itself with a 1.5C trajectory, to safeguard the future of the planet.”

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