Giant Leap for climate tech despite economic slowdown
Bucking economic headwinds, the climate crisis is a key driver of growth in Australian startups, a benchmark report shows.
Research by impact investment fund manager Giant Leap found climate technology is surviving the global venture capital slowdown as more consumers and businesses want products and services that are sustainable.
Impact investing targets something new that will create a social or environmental benefit as well as a commercial financial return.
"Many are addressing fundamental issues in society and the environment that will exist well beyond this downturn," Giant Leap managing partner Will Richardson said.
The fund manager has collected data from 6000 pitches by would-be entrepreneurs since launching their first fund in 2016, and two-thirds meet the "impact" criteria.
More Australians are grasping how to re-imagine industries, but more needs to be done to encourage and support founders from under-represented backgrounds, Mr Richardson said.
After a growth spurt in 2021, when publicly reported Australian venture capital investment more than tripled to $10 billion, activity fell to $7.4b in 2022 as inflation soared and the value of many tech firms dropped.
But the report found resilience in the climate tech sector and forecast more money would flow as government net-zero commitments translate into business activity.
The emissions reduction push from the Albanese government and Victoria's $2b fund focused on climate and health technology is expected to be a boon for new startups, Giant Leap said.
Globally, funding for climate tech in 2022 mostly went to batteries ($42.7b) invested) and electric vehicles ($17b), followed by agriculture and renewable energy.
Locally, demand response technology to support households and industry to match energy use with generation, and sell excess power into the grid, is a hot spot.
Australian startups include Powerledger for trading power and Amber Electric for smart-home systems linking rooftop solar, home batteries and electric cars.
Brisbane-based Endue is developing on-site hydrogen production and storage to replace diesel generators in remote workplaces.
In NSW, Hysata is developing electrolysers to make green hydrogen and HydGene Renewables is making fuel out of rotting organic waste.
But renewable energy also brings new problems and startup Relectrifys plan to recycle old EV batteries.
A push by regulators to crack down on greenwashing - exaggerated claims about green credentials - and new requirements for reporting climate risks has also created a need for new software and services.
Over the past two years, more startups have come up with ways to help consumers make sustainable purchases and support businesses to measure and minimise their carbon footprint.
The proportion of impact startups compared to broader venture capital activity remains high at almost a quarter (22 per cent) and, compelled by climate change or social goals, Giant Leap expects continued growth and development in Australia.
As more Gen Z and millennials take charge of their wealth, pressure is expected to build on superannuation funds to invest fairly and sustainably, the report said.
And with more people looking to work with a purpose, mission-driven bosses are expected to be in demand.