“Climate change is everyone’s problem, but the risks are disproportionately faced by the poor, farmers, vulnerable and marginalized groups, and women.”
Here are a few highlights from the Climate Finance report by Green Artha,
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Specialised climate finance is needed to get climate innovations to the market - often a combination of grant, equity, and debt. But most importantly, it is important to ensure promising solutions get the time they deserve to mature and become mainstream.
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The report surveyed a few investors - and equity investors are the majority presence, clocking in at an overwhelming 94%. Debt and philanthropic investors remain a comparatively small constituent of funders, about 18% and 14%, respectively.
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Debt, equity, or philanthropy – are concentrated around the Pre-Seed to Series A funding stage. There still is a shortage of financing for Series A / B onwards and a clear continuum of capital gap. Here is some historical context around this.
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Cut to the present, the industry is seeing the application of demonstrated technology. For example, in the changeover from ICE to EV, EV growth will generate $76 -100 billion of new cumulative revenue opportunity and $8-11 billion of new profit pool across the value chain.
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Given long gestation periods, climate startups need funding to refine their prototypes and achieve market adoption. Lack of funds, misaligned PMF, and pivot failures are causes for 45-50% of startups to cease to exist before year 5.
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Besides capital, startups must comply with government regulations while building business models. They face the unique risks of changing procurement and facilities costs and supply chain unreliability. These challenges further blur the path to profitability.
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Investors must not only enable capital - but also gauge business models, extend execution help, impart insights on market adoption, and understand market competition and adoption, determining who will capture the largest market share in the portfolio.
Here is the link to the entire report - https://www.green-artha.com/_files/ugd/8c7f26_fa0a08397d7540ebb58abcaeefb6cc43.pdf