Climate tech investment is booming in London, where the combined value of startups in the sector has almost tripled in the last year to $28bn – ahead of rival tech hubs in Europe and beyond.
London is second only to Silicon Valley in terms of the size of its ecosystem of climate tech companies, which is brimming with 416 such startups, according to a new report by London Partners and Dealroom.
Climate tech startups are classified as tech companies working towards reducing Green House Gas emissions or addressing the impacts of climate change.
After the agreement shifted a new investor focus onto green solutions, VC investment into the capital’s climate tech startups grew more than sixfold (x 6.3) to $3.3bn in VC investment since 2016 – faster than the (x4.9) global average.
And VCs are evidently prioritising the sector when it comes to their portfolios: London-based VCs have raised over half of all European dedicated climate tech funds in the last two years, and the city is home to 18 dedicated climate tech VC firms, more than anywhere else in Europe.
One example of the biggest names in climate tech investment in the UK is VC firm 2150, which focuses on tackling climate change in urban environments and recently raised the second-largest climate tech fund in Europe this year at $312m.
“London, and the UK in general, is clearly one of the leading centres for climate tech worldwide and it is exciting to see solutions and technologies that can have gigaton level impact at scale being built and backed here,” partner and co-founder at 2150 Christian Hernandez said.
All this means the UK now ranks 4th globally for climate tech investment, with $4.3bn invested since 2016. The US is miles in the lead with $48bn investment in the last four years, followed by China at $18.6bn, and Sweden, which was slightly ahead with $5.8bn invested.
Already this year, investors have poured $1.1bn into London climate tech startups – almost reaching the $1.2bn total for the whole of 2020.
Octopus Energy’s $600m growth equity raise in September helped fuel this growth, as did nuclear technology startup Nucleo’s $118m early VC raise in August, and food waste startup Olio’s $43bn Series B round in September.
And London ranks second in the world only to Silicon Valley for the number of rounds raised by climate tech startups – suggesting an encouragingly active early-stage ecosystem.
Remus Brett, partner at VC firm LocalGlobe, was optimistic that the current boom would translate into future solutions.
“With sustained investment and the right support, these companies will have the tools they need to successfully reduce greenhouse gas emissions and fight the climate crisis,” Brett said.