#GoodMarkets_04: Climate Adaptation
Original Publish Date: Sep 6, 2022 on Revue
TL;DR 💚
The 2022 IPCC climate report points to continued concern for the planet’s future health — and recently sparked the US Senate to pass the Inflation Reduction Act (a revenue neutral spend of $300B, aimed at reducing US emissions by around 40% by 2030). Geekwire reports that the losses from tax, will largely fall on around 150 companies making north of $1B annually. This leaves the tax burden largely centered on around 50 large US owned manufacturing companies — according to analysis by the Congress.
The massive spike in solar and battery adoption, including a radical decrease per MWh, is likely being driven by policies around the developing world and consumer demand for better alternatives. But could Lithium Ion batteries be capable of meeting demand (see recent analysis by Molly Wood)? And will hydrogen be capable of storage and deployment, if we don’t get cheap fusion power or deep plasma wells at scale first? Will carbon credits help us mitigate faster?
How can startups participate in this shift in policy and economic stimulus?
The United States will accelerate financing of adaptation measures by contributing to and shaping new and existing multilateral and bilateral adaptation funds, supporting multiple climate risk finance strategies, strengthening capacity to access finance for adaptation and develop bankable investments, and striving to mobilize private capital. The White House PREPARE Program for Adaptation
But what opportunities exist for market participants, is still unclear. The summary of the new economic stimulus bill briefly mentions adaptation for agriculture.
Climate Adaptation is broken out in seven major categories in the Oxfam study below, with companies already building in this market — will share more below from the community, and reference a few from here too:
- Water Management
- Disaster Preparedness
- Agriculture
- Climate Information & Services
- Energy
- Coastal and Natural Resource Management
- Insurance
What excites me most about the climate adaptation market, is the green premium deals that the new climate bill that passed should stimulate. Among all of these larger categories, I also see more businesses building integrated solutions in energy efficiency, industrial processes, waste water, hydrogen infrastructure, and consumer goods attached to carbon reduction getting the biggest lift over the next 5–10 years.
Climate Adaptation Market
The climate finance market is massive. But the breakdown of financing going into adaptation may make up less than 10%, according to this climatepolicyinitiative.org 2020 report — with 90% going toward mitigation.
On the disaster preparedness side (non-finance), recovery and mass notification systems also make up a small percentage of funding — and this may change! However adaptation market size could be north of $20B annually alone, without the climate finance adaptation piece.
The global renewable energy market size was valued at $2T in 2019 according to this report, and is expected to grow at around 10% CAGR.
Issues & Opportunities
Measuring the size of the adaptation market looks like 10–20% of the total climate market. The more difficult question is should this be bigger, and will the market grow more on the adaptation side, in terms of ration of capture.
“Adaptation is smart. Every $1 invested in adaptation could yield up to $10 in net economic benefits, depending on the activity, according to a report from the Global Commission on Adaptation.” IMF 2021
If the IMF is right, and the unit economics of adaptation strategies are this attractive, not just capturing social costs — we could see a massive shift in the ratio of mitigation to adaptation.
The global opportunity may be in climate adaptation for poorer nations (up to 4B people who are expected to be adversely impacted by climate change in vulnerable communities), but how markets can interface with these opportunities at scale, may be part of the restriction in lifting the adaptation market.
Recent Exits and Closes
Recent Exits in Adaptation
Recent Closes
There’s been recent pickup in the funding for climate adaptation startups, after years of less capital deployed via venture. Through these examples and ones collected via my Twitter following, there does seem to be a lack of diversity in the founding teams in these startups — especially with closes in the past couple of years.
- Location: San Francisco
- Verticals: Big Data, Clean Energy, CleanTech, Green Building, Green Consumer Goods, GreenTech, Recycling, Renewable Energy
- Description: Normal is empowering small businesses to address climate change and lower their carbon footprint with an innovative robo-consultant.
- Top 5 investors: Anonymous
- Total Raised: $100k
- PreSeed close $100k (2021)
- Founded in 2020
- Location: Walnut, CA
- Verticals: Environmental Consulting, Environmental Engineering, Sustainability
- Description: Climatescape operates a community platform helping people find opportunities to dive into climate through jobs, community, and investment.
- Top 5 investors: Techstars, Techstars Sustainability, in partnership with The Nature Conservancy
- Total Raised: Unk
- PreSeed close Unk (2021)
- Founded in 2020
- Location: Los Angeles, CA
- Verticals: Clean Energy, CleanTech, Software, Transportation
- Description: Dispatch and deployment system providing on-demand repairs and maintenance support from trained and supported local workforces.
- Top 5 investors: Kapor Capital, Energy Impact Partners, The Fund, Trucks Venture Capital, Los Angeles Cleantech Incubator
- Total Raised: 2.75M
- Seed close $2.75M (2021)
- Founded in 2020
- Location: NYC, NY
- Verticals: Blockchain, Consulting, Cryptocurrency, Environmental Consulting, Environmental Engineering
- Description: Flow Carbon uses blockchain technology to put carbon offset credits on-chain, accelerating the scalability of climate change solutions.
- Top 5 investors: Mattia Astori, General Catalyst, Celo, BoxGroup, Fifth Wall
- Total Raised: $70M
- Series A close $70M (2022)
- Founded in 2021
Thanks!
Copyright 2022, All rights reserved, by Zecca Lehn via @posi2ive. No advice given here (e.g., financial / legal / business / other). All views expressed represent those of the author personally at the time of writing, and not those of any external business entity nor organization.
