Trying to declare COP26 a success or a failure is hard to do. While the last minute watering down of the language in the COP26 agreement is deeply disappointing, it will be the actions of countries, corporates and individuals in the months and years to come that will determine its ultimate impact on our future.
What is clear is that more action needs to be taken, and taken quickly. Despite new announcements, most reports still conclude that based on current pledges, we are still not on track to limit warming to the 1.5C targeted in the Paris Agreement of 2015.
What can be taken as a positive is climate action is now more in the public arena than ever before. The climate conversation has shifted dramatically. It’s no longer centred around the ‘why’ we should achieve net-zero emissions, but the ‘how’ and the ‘when’. We are now debating the specific approach and the milestones we’ll need to hit along the way.
Let us also not forget the progress that has been made: pledges to phase out coal production, end financing of overseas fossil fuel projects, end deforestation, the methane reduction pledge. They’re not perfect, nor are they universal, but they are an important step in the right direction.
Another significant development we have seen at COP26 is the shift from what previously was largely intergovernmental agreement to the engagement of the private sector. CEOs of multinational corporations from every sector were in attendance. The world’s largest companies have now realised that without embracing climate action and showing a path to net-zero, they will not be able to win customers or retain staff and their cost of insurance and financing will increase.
The other thing many of these CEOs realise — and the reason many entrepreneurs were in attendance — is that the climate transition represents an enormous investment opportunity.
Let’s face it, humans aren’t great at assessing threats years down the road, even if that threat could mean our demise. Where we excel, however, is in taking advantage of opportunities that are right in front of us. Solving the climate crisis is an enormous opportunity. As Bill Gates says, “We need to transform the way we do almost everything…” and this transformation and disruption is perfectly suited to entrepreneurs and startups. We shouldn’t rely on the stick, we should embrace the carrot.
Australia has a long history of creating world leading technologies (ultrasound, the bionic ear, WiFi, PERC solar cells). We also have a number of competitive advantages in the climate space; great renewable resources that will allow us to more easily decarbonise our grid, rare minerals for batteries, an agricultural sector that embraces technology, world-leading research centres and universities, corporates and consumers who want to take action and ambitious founders with game-changing ideas.
But in order to be a leader, we need to focus on funding early stage businesses and building capacity and skills across the ecosystem.
We can see the pathway. Many of the technologies we need to make this transition already exist and they simply need to be deployed at speed and scale. Energy from renewables is now the cheapest source of electricity — we just need much, much more of it. Electric vehicle performance has surpassed that of internal combustion engines (which are being outlawed in many jurisdictions and OEMs are discontinuing them anyway). You can now also pick up alternative and plant-based meat in just about any supermarket and even in fast-food outlets. We need to be supporting the startups that have the technologies that can help create and deploy these types of opportunities at scale.
Solving climate change does need some new technological breakthroughs, especially in the sectors hard to decarbonise like cement, steel, aviation and chemical production. Australian universities and research centres could make some of these innovations a reality, but without investors supporting seed and early investment rounds, many of these important climate solutions won’t make it out of the lab.
We need more support to help subject matter experts commercialise and scale new innovations. Investors need to share founders’ drive to have the greatest impact by supporting founders to be the most successful they can be.
For us at Investible, that vision and commitment will be realised by creating dedicated pools of capital for climate tech companies, supported by innovative projects like Greenhouse that bring together industry, academia, research, government, capital and ancillary services for startups. Initiatives like this will help Australia become a focal point for climate tech innovation. Encouragingly, the number of new startups in the climate tech we are seeing is rapidly growing each month.
Investors who support early stage climate tech startups are likely to be well rewarded. The traction is already tangible. According to Pitchbook, the first nine months of 2021 saw the value of climate tech venture capital exits surpass US$28 billion ($38.46 billion). The tailwinds behind this space are exceptional: undoubtedly, we are at the start of one of the largest reallocations of capital in history. Governments, corporations and consumers are all opening their wallets for positive climate technologies and products.
Blackrock CEO Larry Fink recently stated he believed the next 1000 unicorns will be in climate tech. Let’s help make sure we have a good number of green Australian unicorns in that count.
