The report mentioned that the lower in funding displays market situations greater than a deliberate transfer away from local weather tech.
It comes as financial uncertainty and geopolitical battle dent investor confidence.
PwC additionally discovered that the autumn in local weather tech funding was considerably smaller than the enterprise capital and personal fairness common of fifty% throughout sectors.
Instead, the share of funding going to local weather tech continued to rise, accounting for greater than 10% of personal market start-up investments in 2023.
Emma Cox, international local weather chief at PwC UK, mentioned: “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.
It is also encouraging to see a shift in the balance of investments towards technologies that can cut emissions the most
“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.”
Elsewhere, the analysis discovered a shift in direction of larger effectivity in spending for emissions discount though a disproportionate share of funding continues to be going to know-how with decrease potential.
While general funding numbers are down, there was an increase within the share of local weather tech personal fairness and enterprise capital in addition to grants for start-ups engaged on greater emissions discount potential applied sciences, PwC mentioned.
The report discovered that solar energy’s share of funding is proportionally up by 24% whereas inexperienced hydrogen is up by 64%.
Elsewhere, carbon seize, utilisation and storage is up 39% since 2022 although it nonetheless represents lower than 2% of whole local weather tech funding.
Meanwhile, the proportion of capital going to applied sciences with comparatively decrease potential to scale back emissions has fallen.
While such business and macroeconomic dynamics might cloud investor confidence, in addition they current vital first-mover alternatives for buyers to interact within the present dip, as the necessity for local weather tech improvements will solely develop stronger
For instance, light-duty battery electrical automobiles’ proportional share of funding is down 50% since 2022, and micromobility (transport like e-bikes) is down 38%.
However, mobility in its completely different types (transport) nonetheless accounts for 45% of funding.
The industrial sector, which is among the highest emitting sectors within the economic system, noticed a surge of funding in local weather tech enterprise funding.
Investors had beforehand directed lower than 8% of local weather tech enterprise funding to industrials between 2013 and Q3 of 2022, in line with PwC.
But the evaluation discovered that the share of funding into the sector has virtually doubled to 14% between This autumn 2022 and Q3 2023.
It additionally reveals that buyers have steadily shifted away from early-stage offers to mid-stage offers, for causes together with challenges round scaling or implementing capital intensive local weather tech, in addition to a difficult macroeconomic atmosphere.
Early-stage offers made up greater than two-thirds of all local weather tech offers in 2018 and 2019, dropping to round 47% in 2023, the report mentioned.
Will Jackson-Moore, international sustainability chief at PwC UK, mentioned: “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.”
