Climate fintech startups raised a record $2.9 billion in new funding in 2022 as investment defied significant economic headwinds to more than double 2021 levels.
That’s according to new data from fintech specialist CommerzVentures, which reveals how several European markets have seen an increase in venture capital investment over the past 12 months as investors sought to capitalize on growing demand for fintech solutions that can support corporate decarbonisation efforts.
The report confirms that investment in carbon accounting technology more than doubled to $970 million while carbon offsetting businesses attracted $505 million – over three times 2021 funding levels.
Also, investments in climate risk management grew slightly to $343 million, sustainable banking reached $230 million, while investments in firms specializing in ESG reporting solutions remained unchanged at $186 million.
European climate fintechs raised 1.4 times more VC funding over 2.5 times as many funding rounds compared to their US counterparts. Firms based in France attracted a record $770 million, overtaking the UK – which attracted $562 million in investment – as the highest in Europe.
CommerzVentures also flagged how both Icelandic and Swedish startups punched above their weight relative to their host country’s economic size, with Icelandic firms receiving $117 million in funding and Swedish climate-focused fintech companies attracting a record $59 million last year.
The analysis of 563 climate fintech startups is based on interviews with founders and C-Suite level executives, a review of 21 leading climate and fintech publications, and funding data from the likes of Pitchbook and Crunchbase venture capital databases.
CommerzVentures said the results underlined the “extraordinary momentum” across the climate fintech sector.
Jacqueline van den Ende, founder and CEO of Carbon Equity – an investment firm questioned as part of the report – claimed that investors in climate fintech firms are won over by “attractive financial returns” and the knowledge that they are part owners of cutting-edge climate solutions.
“In the next 30 years, we need to transform from a fossil-based economy to a fossil-free one,” she told CommerzVentures. “That means we have to transform everything from the way we eat, to the way we travel, to the way we live. The demand for fossil-free or low-carbon solutions will be huge because we have no choice but to decarbonize.”
News of record fintech investment comes on the back of an ONS report which detailed how the UK’s low carbon and renewable energy economy grew by more than 30 per cent in 2021.
It also follows the launch last week of a new VC initiative, called Cleantech for UK, which aims to better coordinate support for the next generation of sustainable startups.
The participants in the new coalition, including Bill Gates’ Breakthrough Energy investment vehicle, together represent funds worth more than £6 billion.
