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Mapping the Climate Adaptation Technology Frontier

A survey of VC and PE professionals reveals potential investment hotspots

AI-generated via DALL-E

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  • Climate adaptation technology (CAT) is primed to boom in response to a projected increase in extreme weather events and chronic stressors

  • The emerging market for these technologies could prove a profitable hunting ground for early-stage investors

  • Venture fund Mazarine conducted a survey of venture capitalist and private equity professionals to understand how they are approaching the CAT opportunity

  • Two-thirds of the 100+ respondents said CAT solutions to climate-induced water risks are a top priority

  • 43% of respondents are looking to build hardware-oriented portfolios, while 13% are focused solely on software opportunities

What do investors think about when they think about climate adaptation technology?

It’s not the easiest question to answer. The space is new and ill-defined, and some tech companies that contribute to adaptation may not be actively positioning themselves as climate champions, preferring to frame their activities as responses to particular natural hazards, or as AI and data plays.

However, the scope and scale of current and future climate physical risks means climate adaptation technology (CAT) is primed to boom over the coming years. In a December report, Boston Consulting Group found that adaptation and resilience solution providers achieved median valuations of nine times revenue, with some generating valuations as high as 77 times revenue.

This knowledge has led venture capital (VC) and private equity (PE) firms scrambling to identify the technologies and sectors with the juiciest opportunities. After all, getting in on the ground floor of an early stage company that offers protection from the sort of climate-driven hazards that could cripple local, national, and international corporations could yield billions.

However, there are obstacles to overcome. “Attention, investment, and technological innovation in CAT is undoubtedly growing, yet CAT remains a disproportionately small slice of overall climate tech activity and even smaller fraction of overall venture activity,” says Alex Laplaza, an advisor at Lowercarbon Capital and vice president of strategy at Kettle, a climate risk analytics and insurance startup. “I believe a primary reason is that the business models are still evolving to more fully create and capture value from emerging CAT solutions.”

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