Climate tech investment falls 40% amid economic uncertainty: PwC 2023 State of Climate Tech

  • The fall in investment reflects market conditions more than a deliberate move away from climate tech. Investment in other categories fell even more sharply - down 50%
  • The result: despite falling in absolute terms, climate tech investments as a proportion of start-up investments continued to rise
  • While there is still a way to go, investors are increasingly putting capital into technologies with higher potential to reduce emissions, with a shift towards technologies such as green hydrogen and carbon capture, usage and storage.
  • Despite challenging market fundamentals, 2023 saw a steady influx of first-time climate tech investors, highlighting the industry remains attractive as a whole.

LONDON, 17 October 2023 – Climate tech investments from venture-capital and private equity fell 40% in 2023 as economic uncertainty and geopolitical conflict dent investor confidence, according to PwC’s 2023 State of Climate Tech report, published today.

This year’s report analysed over 8,000 climate tech start-ups and over 32,000 deals worth more than US$490 billion. Our underlying dataset, PwC’s Climate Tech Investment Index, has been significantly expanded this year, with nearly double the number of start-ups tracked and a broader range of deal types examined compared to last year. It found that the fall in climate tech investment was significantly smaller than the VC and PE average fall of 50% across sectors. As a result, the share of VC and PE funding going into climate tech continued to rise, accounting for more than 10% of private market start-up investments in 2023, up from 7% in 2018.1

There are also signs that climate tech investment is becoming more mainstream, with seasoned climate investors (who have invested in five or more climate tech deals) taking up a smaller share of the total number engaging in climate tech, as the share of first timers increases. Meanwhile, for the first time, more deals are happening at the mid-stage than at the early stage.

“The development and scale-up of climate technology is an essential part of meeting the climate challenge. So, while it is not surprising that absolute levels of investment in climate tech have fallen along with the market, it is concerning. The good news is that the sector has performed well in relative terms, with investment falling less than in other areas. It is also encouraging to see a shift in the balance of investments towards technologies that can cut emissions the most. Now we need to see that shift continue, coupled with an increase in the absolute levels of investment in all technologies with the potential to cut emissions.”

Emma Cox,Global Climate Leader, PwC UK

Other key findings and themes from the report include:

A shift towards greater efficiency in spending for emissions reduction

Previous reports have noted that investment is not being allocated in proportion to emissions reduction potential of technologies - with a disproportionate share of investment going to technology with lower potential. While that pattern is still true, there is an encouraging shift in the right direction.

A notable change has occurred in the industrial sector, which accounts for more emissions than any other sector of the economy (34%). Investors directed just less than eight percent of climate tech venture funding to industrials between 2013 and Q3 2022. The share of investment into the industrial sector has almost doubled to 14% between Q4 2022 and Q3 2023.

Although overall investment numbers are down, we have seen a rise in the share of climate tech PE/venture capital and grants that investors are putting into startups working on higher emissions reduction potential technologies. For example, solar power’s share of investment is proportionally up 24%; while green hydrogen is up 64%. Carbon capture, utilisation, and storage is up 39% since 2022 although it still represents less than two percent of total climate tech funding. The proportion of capital going to technologies with relatively lower potential to reduce emissions has fallen, with light-duty battery electric vehicles’ proportional share of investment down 50% since 2022, and micromobility down 38%; though mobility in its different forms still accounts for 45% of investment.

Investors shift from early-stage deals, whereas first-time climate tech investors are on the rise

Our analysis has shown that in recent years investors have steadily shifted away from early-stage deals to mid-stage deals, for reasons including challenges around scaling or implementing capital intensive climate tech, as well as a challenging macroeconomic environment. Early-stage deals made up over two-thirds of all climate tech deals in 2018 and 2019, dropping to around 47% in 2023. Irrespective of challenging market fundamentals, 2023 also saw a steady influx of first-time climate tech investors, highlighting the industry remains attractive as a whole.

“A challenging macroeconomic environment, sinking valuations, and geopolitical turmoil has seen capital flows to climate tech ventures drop 40% at a time when climate tech needs it most. But while such industry and macroeconomic dynamics may cloud investor confidence, they also present significant first-mover opportunities for investors to engage in the current dip, as the need for climate tech innovations will only grow stronger.”

Will Jackson-Moore, Global Sustainability Leader, PwC UK


soct 2023

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Andrea Plasschaert

Global Corporate Affairs and Communications, Director, PwC Switzerland

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Dan Barabas

Global Corporate Affairs & Communications, Manager, PwC United Kingdom


Notes to Editors:

About PwC: At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 152 countries with nearly 328,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. © 2023 PwC. All rights reserved.


1 This year’s report analyses an expanded set of investment flows across Private Equity and Venture Capital, with more coverage of later stage funding and stronger coverage of emerging markets, including China. This expansion reflects the increasing maturity of climate tech investment and the availability of new data sources. As a result of the change in methodology, the data in this report is not directly comparable with previous reports, and so we have calculated new time series data to analyse trends.

Defining climate tech: We defined ‘climate tech investments’ base on a set of criteria:

  • The start-up has an emissions- or net zero–focused strategy
  • The start-up addresses a challenge area or lever of critical importance to net zero
  • The start-up could have a first-order impact on emissions
  • The start-up shows a level of innovation and/or use of technology

We then allocated start-ups to challenge areas and levers, based on the targeting of their products or services. In some cases, start-ups provided solutions applicable to more than one area. In these cases, we picked the company’s primary industry of focus.

We include only equity investments and grant funding by VC, private equity, corporate VC, angel, and government funders in the analysis. Debt funding has been excluded from our analysis.

Sectoral emissions. We have allocated emissions to sectors based on total anthropogenic direct and indirect GHG emissions. Under this approach, emissions associated with energy use are allocated to the end-use sector. For example, emissions arising from electricity use for industry has been allocated to the industrial sector.

Impact analysis. To assess the potential climate impact of each technology area, we provided an estimate for the cumulative CO2 equivalent emissions reduced or sequestered between 2020 and 2050, in gigatons—Emissions Reduction Potential (ERP). Where possible, we have used sources with defined and documented scenarios and assumptions, drawing primarily on the work of Project Drawdown. Given the long-term nature of the projections, the inherent uncertainty in ERP estimates is understandably very high. Our ERP values may be an underestimate. With increased VC investment or technological and/or policy driven breakthroughs, the earlier commercialisation of many individual technologies is possible, therefore abating even greater emissions.

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