India’s climate technology ecosystem urgently needs financing for both early-stage growth: report

By our representative

According to a report by the Indian Institute of Management-Ahmedabad (Ventures) and MUFG Bank of Japan, India’s climate tech ecosystem, home to over 800 startups, is in dire need of both early-stage and growth-stage financing to realize its full potential. Despite a solid early stage funding landscape, with around two-thirds of climate tech startups receiving seed capital, there remains a critical lack of growth-stage investment.

The report highlights that only 2.5% of these startups successfully raised series A+ funds, mainly in the electric mobility sector. While more than 80% of these startups focus on emission reduction solutions, offerings aimed at increasing climate resilience are significantly limited. He highlights that the challenge of securing growth-stage capital is a significant barrier for these companies in their efforts to scale innovation and maximize their impact.

The report highlights sector concentration in the climate tech space: transportation and mobility segments dominate, with over 350 startups capturing almost 85% of total climate tech funding. Meanwhile, other critical areas such as industrial decarbonization, waste management and alternative fuels remain underfunded despite their significant potential to combat climate change.

Future prospects

The analysis identifies promising areas for innovation and growth, including decarbonization technologies, waste-to-value initiatives and alternative fuels such as biofuels and hydrogen. Released on September 20, 2024, the report titled ‘Impact Innovation: Indian Startups Powering Climate Action’ was presented at the Climate Action Summit – Building in India, for the World. It offers a comprehensive look at India’s rapidly growing climate technology sector and the vital role startups play in solving climate challenges.

A cry for support

As the seventh most vulnerable country to climate change, India stands at the crossroads of challenges and opportunities in its climate technology landscape. The report highlights the urgent need not only for increased financial support, but also for supportive policies that will enable startups to thrive.

Chintan Antani of IIMA Ventures said: “The $3.6 billion raised by startups over the last decade underscores the significant potential of this sector and the critical need for increased support to help scale innovative solutions. Since 2012, IIMA Ventures has been supporting climate action, helping over 100 startups and filling knowledge gaps to support collective efforts.”

The report also highlights five transformational areas that are expected to reshape India’s climate technology innovation: carbon capture technologies, waste-to-value solutions, the development of alternative fuels, and the urgent need to develop innovative financing strategies to address the projected financing gap with climate worth $1 trillion over the next decade.

Commitment at the top

The Climate Action Summit brought together a diverse group of stakeholders, including investors, entrepreneurs, corporate leaders and sustainability experts. Prominent figures from the sustainable development sectors engaged in discussions on how to collaborate to advance climate technology solutions.

MUFG’s Takuya Senoo emphasized the importance of climate finance to achieve India’s net zero goals: “It is imperative that we help climate tech startups scale up. By investing strategically, we can support sustainable growth and resilience for all.”

The Climate Action Summit has emerged as a key platform to foster economic growth and innovation in India’s climate technology ecosystem. Both IIMA Ventures and MUFG are committed to supporting this growth through the India Climate Tech Initiative, a program aimed at supporting startups in tackling climate-related challenges.