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The corporate hunger for climate tech

Climate tech was inoculated against the worst symptoms of the 2022 startup funding contraction, but it wasn’t entirely immune. As the excellent Climate Tech VC newsletter reports, overall investments last year were about $40 billion, spread over an astonishing 1,000-plus deals. That latter stat spiked more than 40 percent in 2022 versus 2021, reflecting the diverse universe of climate tech innovation.

None of this probably surprises most Climate Tech Weekly readers, but this revelation might: According to BloombergNEF, a huge chunk of that money came not from venture capital firms but from corporate venture arms — such as ABB Technology Ventures, managed by Swiss engineering firm ABB, and SE Ventures, the venture arm of digital automation and energy management company Schneider Electric.

As of early December, ABB had invested at least $100 million in 10 startups, including energy analytics firm Tallarna, battery-maker Northvolt AB and green hydrogen venture Hydrogen Optimized, reports Bloomberg Green. “Clean tech investment is absolutely the place to be,” said Bloomberg Intelligence analyst Omid Vaziri. “The danger is that ABB could fall behind peers in capturing this opportunity.” 

While the total figures for corporate venture money focused on climate tech in 2022 haven’t yet been published, I suspect things will look much the same as a report published late last winter by Pitchbook, a research firm that catalogs VC investing trends. That research found that corporate funds put about $23.2 billion into climate tech during 2021 — that was double the amount in 2020. Among the most active corporations: Mexican cement company Cemex, Danish shipping giant A.P. Moller-Maersk, U.S. airline United, global tech powerhouses Amazon and Microsoft and U.S. automaker General Motors. It’s worth noting that the most recognized climate tech funder on this annual list is Energy Impact Partners, which takes its cue from dozens of corporate strategic partners, many of them with big legacy businesses in the energy and fossil fuels sectors.

The rationale for these investments by large corporations is pretty straightforward and self-interested: to accelerate the development of technologies that could contribute to corporate emissions reduction targets, with the potential for mainstream adoption — and maybe the option of an acquisition down the road that might serve the corporation’s needs.

But the venture approach isn’t the be-all, end-all. Alongside these corporate climate tech venture funds, there are dozens of startup accelerator programs being sponsored by multinationals. The promise equals assessing how quickly these approaches can scale.

Seeking real solutions

As I reported in June, one of the most high-profile corporate climate tech accelerators is the 100+ Accelerator, launched in 2018 by Anheuser-Busch InBev and backed (and co-funded) by AB InBev, Coca-Cola, Colgate-Palmolive and Unilever. The initiative supports a six- to eight-month-long field pilot with the chosen companies, funded at up to $100,000. If the project is successful, the corporate sponsor explores ways to scale it, AB InBev CSO Ezgi Barcenas told me. “We may be the first big corporate client for these companies.” 

The program last fall announced its biggest cohort yet — 46 startups culled from more than 1,700 applications, Barcenas told me. (The accelerator has so far worked with about 70 companies, so that is a big expansion.) More than 200 people were involved with screening and interviewing the applicants. “My team designed [the program] and is managing it, but the people in the roles that will benefit from these innovations are really the ones that are sourcing the solutions,” Barcenas said.

Rise Products

Generally speaking, startups are chosen because they address a specific challenge that at least one corporate partner is trying to address — circularity, smart agriculture, water stewardship, climate action and inclusive growth. Take the issue of food waste. Rise Products (from cohort 1) is working on ways of turning spent grain from the brewing process into high-protein flour. Or renewable power. Sunman Energy (from cohort 3) is commercializing lightweight, glass-free and flexible solar panels that can be installed on building facades that aren’t flat. Its modules have been installed at AB InBev’s brewery in Wuhan, China. 

Cohort 4 is the first one in which inclusive growth and biodiversity were used as a lens for selection. Three analytics and artificial intelligence firms represent the latter focus: Svarmi (which helps companies evaluate nature capital risks), BeeOdiversity (evaluating pollination processes) and Conservation X Labs (a wildlife monitoring organization).

I’ve already spoken with a couple of the startups in cohort 4, including Waterplan (which I wrote about in this piece about water tech entrepreneurs, or aquapreneurs) and Zafree Papers, a woman-owned company from Ethiopia.

Zafree is working on a business plan to turn pulp from agricultural waste such as barley and wheat straw or banana stalks into a source of “tree-free” paper for packaging. In its work with AB InBev, the company is working on a pilot to turn the material into folding cartons for six-packs of beer and other beverages, according to company co-founder and CEO Bethelhem Dejene. Much of the waste that goes into Zafree’s products today is usually burned, so this could provide another source of income for smallholder farmers, Dejene told me. “This market verification will see us work at a much bigger level than we are operating right now,” Dejene said. 

The biggest benefits of corporate accelerators like 100+ Accelerator come in the form of connections. Each participating company gets a project sponsor (the business division seeking some kind of tangible result) and project managers who keep the fieldwork on track, according to Barcenas. “Sponsors help with the costs, mentors help the founder with some aspect of the business where they might need support.”

One of my personal missions for 2023 is to pay closer attention to corporate venture funds and accelerators focused on helping corporations embrace and benefit from climate tech breakthroughs that will accelerate their own climate agenda. So, consider this an open invitation to reach out to me at [email protected] with suggestions of ones you think are writing the prescription for success.

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