The threat of climate change is becoming more dire every day. Although there’s growing public awareness of the issue and governments frequently acknowledge the need to take greater action, the trends are alarming. If we stay on our current trajectory, the planet will surpass critical warming thresholds too quickly – an outcome that will have severe consequences for food production, land and ocean ecosystems, coastal infrastructure, and much else.
While governments must take more immediate action on climate change, the private sector has an integral role to play in the mitigation of climate crises. Despite what seems like a constant stream of bad news, the amount of innovation taking place to address climate change is extremely encouraging. For example, wind and solar power have become far more affordable, reliable, and efficient in recent years – a development that’s only gaining momentum. According to Bloomberg NRF, global solar investment has skyrocketed to almost an annualized US$500B run rate. There are also novel solutions to climate problems in fields as diverse as software and insurance, which is a reminder that important contributions are coming from unexpected places.
These are a few of the reasons Titanium Ventures is thrilled to support companies that are working toward a cleaner and more sustainable future. We can’t address climate change through government policy and behavioral change alone – as with countless past crises, human ingenuity will be a critical resource in the years to come.
Building on a fundamental energy transformation
There have been remarkable cost reductions and efficiency gains in the renewable energy sector over the past decade and a half. Between 2009 and 2019, the cost of solar plummeted from $359 per megawatt hour (MWh) to just $40 – a 89% decrease. The cost of wind fell by 70% over the same period. It’s no surprise that adoption rates are on the rise, and in 2022 the renewable energy supply rose by almost 8%.
There are now over 4 million people working in the solar industry alone, climate warriors keen to execute the energy transition. Opportunities abound for investors to drive innovation in this field. For example, we are an investor in OpenSolar, which provides design software for solar installers in over 130 countries. OpenSolar offers digital tools (such as 3D design technology) that allow installers to accurately plan solar PV installations and manage these jobs to completion. Even non-technical users are capable of using the platform to create proposals, which can be in customers’ hands in just a couple of minutes. This drastically increases the number of jobs solar contractors can do and streamlines their business processes.
There are many other areas where VC investment is pivotal, from generating and analyzing data on renewable energy procurement to emission-free manufacturing and transportation to new forms of infrastructure resilience and risk management. These are all exciting sectors that merit investment.
Many industries and companies have a role to play
Hardware investment in panels, turbines and storage are critical to the energy transition, but software also has a significant role. When we invested in DocuSign in 2014, it didn’t seem like a climate tech company. But the company’s now ubiquitous digital document services have saved 73 billion sheets of paper and 7 billion gallons of water, while eliminating 389 million pounds of waste and 5.6 billion pounds of additional CO2.
There are other companies that streamline operations and help customers reduce waste, such as Enable – a collaborate rebate management software network which helps manufacturers, distributors, and retailers build more efficient and data-driven supply chains. The electrification supply chain flows through Enable’s software, meaning that streamlining processes has a material role to play in scaling the transition.
We also believe that renewable power purchase agreements (PPAs), which facilitate the sale of energy at fixed prices over many years to hedge against market volatility, are well overdue for innovation. Pexapark provides daily data on renewable PPAs searchable by technology (offshore wind, solar etc), location and tenor. This data is critical to enable investors in renewable projects to be able to sign PPA agreements faster, and therefore secure debt financing to enable these massive projects to be built. PexaMonitor also provides software for investors in renewables to dynamically understand the risk they face as government subsidies are gradually removed. We believe this will be essential to these large investors and leaders like Octopus Energy, Low Carbon, Ardian and Glennmont have already adopted it.
How the climate investing landscape is shifting
While huge strides have been made towards reducing emissions, we aren’t moving anywhere near fast enough. According to the latest Intergovernmental Panel on Climate Change (IPCC) data, the world is currently on track to see warming of 3.2 degrees celsius by 2100 – a number that far exceeds the target of 1.5 degrees above pre-industrial levels. It’s vital to keep working toward that target, but companies and governments must also prepare for the possibility that warming will take place too quickly.
Simultaneous investments in climate change mitigation and resilience are necessary, which is why we’re proud to support reThought Insurance – a company using a sophisticated proprietary underwriting methodology and risk assessment platform to insure high-value properties exposed to potential flooding. This allows reThought to generate accurate resilience scores and achieve lower loss ratios than other companies in the industry. We can see parallels with using climate data to consider the incidence of other natural disasters in a warming world like bushfires. Companies like reThought are helping the world prepare for the realities of climate change, and sadly they have lots to do.
Climate change is a frightening subject, and it will only become more urgent in the years to come. But the climate crisis has promoted radical innovation, and investors need to continue funding new technologies which can reduce carbon or deal with the consequences for the sake of a cleaner, healthier, and more stable world.