By Jeremy Liddle, Executive Director of climate, tech, and finance PR & marketing agency, Third Hemisphere
At the COP28 Summit in 2023, the Australian Government recommitted to a clean energy future in front of the world.
Australia is also now a frontrunner to host the prestigious COP31 summit in 2026, should all the powers-that-be decide to take it on.
But reaching this clean energy future and leading on climate action globally will require accelerating and scaling our own climate technologies. Promisingly, we are already making some progress.
For instance, Australia’s largest climate tech VC fund Virescent Ventures provides critical support to climate tech companies on behalf of the Clean Energy Finance Corporation.
As an example, Virescent recently participated in a $23 million Series A funding round for Novalith Technologies, the creator of a novel lithium extraction process that avoids the harmful by-products and waste of traditional approaches.
Companies like Greenhouse – Australia’s most ambitious climate action ecosystem – are helping some of our “hardest to abate” industries become carbon neutral, with initiatives such as the Greenhouse / WEF Near Zero Steen Challenge.
Even (some of) our banks are getting up to speed. National Australia Bank (ASX: NAB) recently celebrated a decade of carbon neutrality, and announced it will no longer offer traditional lending to fossil fuel companies without credible plans to cut all emissions.
But we still have many hurdles to overcome before we achieve adequate funding for climate tech – an area containing incredible growth potential for investors.
A Short-Term Approach Lacking Certainty
Australia’s Technology Investment Roadmap earmarks $20 billion in low-emissions technology investment until 2030. However, the absence of longer-term plans or post-election certainty could raise concerns for investors, complicating decision-making on where to allocate funds.
This lack of long-term clarity – combined with investors’ strict criteria on risk tolerance and ROI goals – creates a disconnect.
Because in the absence of a bold and enduring national legislative infrastructure that guides, regulates and evaluates the volume and impact of climate tech funding, our country’s ambitions will face obstacles.
Onshore raises like Novalith’s could become rare if initiatives like the highly attractive $734 billion US Inflation Reduction Act (IRA) start driving Australian entrepreneurs offshore to greener pastures.
In fact Sally-Ann William, CEO of Australia’s pioneer deep tech incubator Cicada Innovations, even warns of a potential brain drain if we don’t address our funding gap for deep tech companies solving the world’s biggest problems – including climate change.
But what do we stand to gain if we solve this problem?
The Climate Tech Opportunity
Global investment and private equity firm, The Riverside Company, recently sold a provider of energy market software Energy Exemplar to Blackstone and Vista Equity Partners, for a deal that was worth $1.8 billion. Its original investment in Energy Exemplar helped it grow by thirty percent every year since 2018, which is a phenomenal lighthouse moment for Aussie climate tech and its investors.
This is just one example of how, in the face of a broader market downturn, our local climate tech sector presents a promising opportunity for investors.
In fact, ASX climate stocks are surging due to the worldwide shift toward a low-carbon future, offering lucrative opportunities for private investors. The growth is evident across renewable energy, clean tech, and sustainable resources sectors, which is starting to translate into financial gains for investors.
The latest insights from the 2023 Australian Climate Tech Industry Report by Climate Salad also reveal that founders are aiming to raise a massive $1.5 billion in the next 12 months.
The report also shows the sector has demonstrated resilience, despite the abovementioned hurdles, with total capital raised jumping an impressive sixty-four percent from $338 million in 2021 to $553 million in 2022.
Over 3,000 new jobs have also already been created by the growth of climate tech in Australia, and an additional 2,400 are expected in 2024 – representing an 80 percent surge.
Crucially, seventeen percent of these soon-to-be-created jobs are expected to be based in regional areas, ensuring the socio-economic impact is diverse and widespread.
And it’s an industry with global potential. Forty-seven percent of Australian climate tech companies are already operating on an international scale, and a whopping ninety-four percent harbour ambitions for global expansion.
Australia therefore has the potential to become a global hub and net exporter of climate solutions.
So how do we actually achieve these ambitious goals?
A multi-faceted approach
Achieving our climate tech ambitions will take a multifaceted approach that could involve the establishment of federal and state Climate Tech Acts (or something similar), that catalyse many more public-private partnerships and climate tech funds.
A Climate Tech Act could function like the aforementioned US IRA, offering enough capital (via various funds and partnerships) to supercharge rapid R&D, commercialisation, and scaling up of homegrown clean and sustainable technologies.
It would facilitate partnerships between government agencies, academic institutions, and private industries. A unified effort will accelerate progress and ensure the best minds are working together towards sustainable solutions.
Such legislation would attract and retain excellent researchers, scientists, engineers, entrepreneurs, investment managers, and the entire gamut of talent required.
And it would in turn make the sector significantly more valuable for investors in both private and public markets.
With such definitive mechanisms in place, we would stand a significantly better chance of hitting our climate action targets, and be in a position where we actually deserve to host COP31 in 2026.
