The world moves into the framework of sustainable development. The global investment and financial system are also involved in the process. Climate and environmental issues will soon become part of the global economy.
The global economy is turning towards climate awareness. Climate technologies and actions already play a significant role in most economic sectors from contemporary manufacturing, energy, and farming, to customer choices, and company policies.
Current environmental situation makes any environmental or related efforts positive and supportive. The massive crises associated with atmospheric pollution are apparent. For instance, Paris authorities take emergency measures to restrict traffic due to smog every year. In Beijing and Shanghai, the mortality rate
from respiratory diseases is more than 50 times higher than in Tibet.
Climate action by companies, governments, and societies will be a determining factor in shaping the global economy. The global market is increasingly involved in a responsible investment that takes into account environmental, social well-being, and corporate governance politics.
Climate innovation has a significant impact on long-term decision-making in business. Climate technology is still a nascent sector in the venture capital market as a whole, (about 6% of total investment in 2019), investments in climate technology increased
from $418 million to $16.3 billion between 2013 and 2019. This growth was three times faster than the growth of venture capital investments in artificial intelligence. As AngelList
reports, investments in climate technology reached new records in 2020 in terms of transaction volume and capital.
Capital inflows and climate action popularity created a wide range of new venture-backed climate technology startups and companies. According to PwC
, there are 43 unicorns in clean technology. Climate innovation is now more reasonable than the cost of compensating for climate impacts. According to Reuters
, more than 215 corporations are reporting climate change-related costs with a joined value of trillions of dollars.
The environmental agenda provided the emergence of new economic sectors and improved the existing ones. As a result of the development of alternative energy, the share of solar, wind, and tidal energy in the EU increased up to 18% in 2018
. The responsible energy consumption trend caused the increase in the efficiency of traditional technologies. For example, over the past 30 years, the fuel consumption of the average new European car has decreased by more than 30%
, although the country remains the largest consumer of coal in the world, solar generation is rapidly developing. Now the share of non-fossil fuels in China is about 15%. In fact, if China maintains the same pace, the share of clean energy will reach 55% until 2060.
In addition to investing in deep technologies such as renewable energy, today's venture investors consider climate technology
in most spheres. They include agriculture and food, green transportation, and a wide range of business spheres that can affect greenhouse gas emissions.
Environmental, social, and management factors (ESG) are now becoming the standard in financial services. Now ESG is a part of the agenda of almost every global financial institution and risk manager as a source of strategic competitive advantage and as a factor in controlling investments
Recently, companies used to go through digitization to become attractive and efficient for investors and customers, but now companies have to focus on sustainability and climate action. According to a report by the Global Sustainable Investment Alliance (GSIA)
, the number of assets that are formalized in the management of ESG criteria
amounted to $30.7 trillion in 2018, an increase of 34% since 2016.
Climate technology starts at a micro-level that requires technical equipment and software. When the Internet of Things sensor systems regularly collect information about the environment, the company is fully accountable for its impact on the climate, developing directions to improve sustainability based on specific data. In addition to the Internet of Things, Blockchain technology
is used to protect data flows, and Big data and neural networks are used for processing.
Quality historical data can be used to test the wording of the strategy to characterize the financial and operational risk associated with climate, and accurately assess its significance. Supply chains
, manufacturing, energy, and other industries need to develop climate-oriented approaches and develop guidance based on climate models.
have transformed the market, and today's trends suggest that the next drivers of change are climate and ESG orientation.