The Global Startup Ecosystem Report Climatetech Edition
Mitigation is Not Enough: We Need More Scaling of Innovation to Adapt to a Changed Environment
This contributed article was prepared by Todd Allmendinger in his capacity as Director of Consulting and Research, Cleantech Group. The opinions expressed in this article are the author’s own and do not necessarily reflect the views or position of Startup Genome.
The WEF’s Global Risks Report 2023 identifies six of the top 10 risks over the next 10 years to be environmentally related. The top four are: failure to mitigate climate change; failure of climate change adaptation; natural disasters and extreme weather events; and biodiversity loss and ecosystem collapse. Furthermore, the perceptions around risk preparedness show that both the failure of climate change adaptation and failure to mitigate have the lowest perception of current effectiveness.
A recent study from Nature, “The global costs of extreme weather that are attributable to climate change,” looked at several different approaches to estimating the costs for 2000–2019. These include the DICE model, which uses a proportion of GDP and estimates the cost as over $4 trillion, and a different methodology that found climate change attributed costs of 185 extreme weather events from 2000–2019 to total $2.86 trillion. That is $16 million per hour. In 2021, reinsurance company Swiss Re suggested that climate change could cut world GDP by $23 trillion by 2050. These costs are tied to fire, flood, drought, heat, and storm. They hit insurance, finance, asset managers, supply chains, food and water supply, and infrastructure.
By 2050, more than 970 cities globally will experience average summertime highs of 35 degrees Celsius. In July 2023, United Nations chief António Guterres announced that the “era of global boiling has arrived.” The Adrienne Arsht–Rockefeller Foundation Resilience Center has been helping city and state leaders to make data-driven decisions that effectively address climate change impacts and minimize risks, pledging to reach one billion people around the world with resilience solutions to climate change by 2030. Additionally, cities around the globe have appointed Chief Heat Officers in an attempt to address rising temperatures. These include Miami, Los Angeles, and Phoenix, as well as Athens, Freetown, Sierra Leone, Santiago, and Melbourne.
But mitigation — trying to limit the amount of emissions and keep the global average temp from rising — is not enough. We need to continue these efforts, but more importantly we need to adapt to the realities of a changing climate. We need to increase the supply of innovators — from universities, labs, incubators, and garages around the world — and we need to connect them to the corporate partners and governments who can scale these innovations to have a sustainable global impact. This requires funding early-stage ecosystems, risk capital, growth and infrastructure capital, and policy support.
Collaboration is Already Underway
A number of corporations have already made efforts to support innovation, with climate-risk analytics providing insights for asset owners and financiers. Ratings agencies have also been acquiring innovators. Examples include S&P Global launching its Global Sustainable1 platform and acquiring The Climate Service. Moody’s acquired RMS, a provider of catastrophe risk modeling, and Four Twenty Seven, providers of data and intelligence on physical climate risks.
Multinational investment company BlackRock acquired physical climate risk models from Rhodium, a climate research group, and developed Aladdin Climate, a climate risk analytics service for clients. BlackRock also partnered with Baringa to use its climate change scenario model in the Aladdin Climate platform.
Similarly, reinsurance company Munich Re has developed an internal climate risk modeling platform, NATHAN, and is actively looking to improve and update its capabilities as part of its Location Risk Intelligence. Demex is a spinout from Munich Re and provides physical climate, financial risk analytics and risk transfer through parametric insurance and climate derivatives. Its focus is on already observable climate-related business disruptions, rather than disaster events. The Washington, DC-based company has raised over $18 million, with a recent Series B round of $5 million from Blue Bear capital.
Sust Global, a U.K.-based asset-level climate risk data company, leverages satellite-validation to bias-correct global climate models and develops API-first integrations to provide risk analysis and forecasting. It has raised $3.3 million to date from a global range of investors. Global futures exchange Intercontinental Exchange (ICE) launched
ICE Climate Risk, which allows investors in the U.S. municipal bond market to incorporate climate risk into project and investment decisions. It also acquired risQ and Level11 Analytics to expand its analytics capabilities.
Policymakers are also taking note. Miami Dade was recently selected as a regional tech hub for climate resilience, unlocking access to up to $ 75million, funded by the U.S. Economic Development Administration’s Regional Technology & Innovation Hubs Program (Funded by the U.S. CHIPS & Science Act 2022). The U.K’s Innovation Fund is investing $181 million in 25 projects addressing flooding and coastal resilience. The UN’s Adaptation Fund committed $998 million for climate change adaptation and resilience through 139 projects in developing countries.
Resilience Infrastructure is Essential to Tackling the Impacts of Climate Change
Identifying risk is one step, but building resilient infrastructure is another. Innovators around the world are working on novel solutions to address the effects of climate change. One example is Miami-based Kind Designs, which uses 3D printing and recycled ocean plastic fibers to create living seawalls with embedded sensors to collect data and mimic coral reefs and mangroves. The company recently raised $5 million in seed funding from Florida-based investors GOVO Venture Partners, M4 Investing, and the Florida Opportunity Fund.
A changing climate presents additional risks to infrastructure, with heat, fires, ice, and wind challenging existing technologies. Canadian RS Technologies is developing and deploying composite utility poles and electric transmission products designed to be more resilient, easier to install, and last longer. It has raised almost $110 million in equity, as well as $148 million in structured debt. ALD Technical Solutions is another example of innovation. It wraps existing power lines in fire-retardant material that mechanically and structurally reinforces transmission lines.
Rail networks are another key piece of infrastructure that will be impacted by climate change. With over 7% of the world's freight carried by rail, extreme weather is likely to cause serious challenges. French innovator Technocarbon has developed a low-carbon material to replace steel and concrete traditionally used in railway ties. The material can also be used in buildings and other infrastructure in place of concrete, steel, and aluminum.
Feeding people will become increasingly difficult in the changing environment, and Agtech & New Food innovation is vital. Swedish OlsAro is developing salt-tolerant and heat-tolerant wheat varieties that can be grown in coastal regions with rising sea levels and salinity. Saudi Arabian RedSea Farms is addressing sustainable agriculture with proprietary Hot Climate technologies that save fresh water and energy in high-heat, water-scarce environments. Red Sea Farms developed these technologies in collaboration with KAUST University, demonstrating the importance of collaboration among sectors.
Biodiversity is another key vector in resilience. The World Bank modeled the interaction between nature’s services and the global economy to 2030, showing that by a conservative estimate a collapse in select services such as wild pollination, provision of food from marine fisheries, and timber from native forests could result in a $2.7 trillion decline in global GDP in 2030. The World Resources Institute estimates that there are more than two billion hectares of degraded land worldwide, an area twice the size of China. Viridis Terra is a Canadian innovator working on reducing this, using biotechnologies, technologies, and social innovation to restore industrial sites, forest landscapes, and degraded lands. NatureMetrics utilizes eDNA at the microorganism level to provide nature monitoring and impact reporting. It has raised over $36 million to support activities in more than 100 countries.
The Importance of Ecosystem Support Organizations
Tech ecosystems are increasing the supply of innovators focused on adaptation and resilience, and support organizations including climate-focused accelerators and incubators play an important role in helping start-ups to scale. The EU’s EIT Climate-KIC, a pioneer in supporting climate-driven innovators, piloted its first Adaptation and Resilience Challenge and Accelerator targeting developing countries. The program started in early 2021 with climate competition support to 40 innovators, and a second stage supporting 16 innovators to support their investment readiness. Innovators in these programs include Kenyas’ Drop Access, which creates portable solar-powered fridges for healthcare and food, and India’s EF Polymer, which provides water-retention polymers made from biowaste to farmers.
Sustainable Ocean Alliance has accelerated 45 innovators through its Ocean Solution Accelerator, which has evolved into the Ecopreneur Network. Some of the innovators in the 2023 cohort include Reefgen, developing robotic nearshore restoration platforms; and Alora, growing crops in high salt conditions including ocean waters. Novarium is focused on building an ecosystem around the Blue Economy through the development of start-ups from the laboratory to the market and open innovation in industrial R&D. The FLOTS accelerator has supported innovators Blue Lion Labs, which identifies harmful organisms such as algae that can cause billions in damages and that are exacerbated by rising temperatures. Hoola One cleans plastic-polluted areas to restore healthy ecosystems.
There are many examples of innovators with solutions to address sustainability in a changing climate, but simply to be able to survive in a hotter, drier, stormier environment with diminishing resources, we need to increase this supply through development of Cleantech innovation ecosystems. We also need to help corporations and governments connect with relevant innovators and help them to scale.
