Startups key for climate tech innovation, but funding opportunities limited beyond EV and energy

Startups have the potential to spearhead innovation in the climate tech sector, particularly on the software and tech side, said Ankit Jain, Co-founder and CEO of StepChange, an ESG management and reporting platform.

With ESG (environmental, social, and governance) goals a top priority for large corporations, tracking emissions, sustainability initiatives, and environmental impact is integral to business strategies. A lack of platforms for these tasks creates an opportunity for startups to innovate in environmental and sustainability reporting, said Jain, during a panel discussion at TechSparks Delhi, the first edition of YourStory's flagship startup-tech event in the capital city.

Jain, who held leadership positions at Ola and Ola Electric before launching StepChange, acknowledged that a lot of crucial problem areas within the climate tech domain remain unsolved by startups, and a lack of talent and education are to be blamed for it.

"We don't have enough time for the education system to train enough people, and we don't have a hundred years for solving this problem," he added.

One may think that there aren't too many entrepreneurs willing to venture into climate tech because there isn't enough money in the sector and that financiers are treading the water when it comes to investing in such a risky, hardware-led domain.

However, Sheetal Bahl, Partner at Merak Ventures, who was also part of the panel, disagrees with this view. He said large banks today have access to significant capital for climate-related initiatives via development finance institutions, large sovereign wealth funds, and pension funds.

The issue is there's an inherent lack of opportunities in India beyond the EV and renewable energy sector.

"This is one of those areas where there's a lot of intent capital, but there are not enough bankable projects," he said.

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While risk remains a consideration, Bahl said it is somewhat mitigated when he invests within the guardrails of what aligns with his risk appetite and understanding of the sector.

"There are six areas we've brought our thesis down to, such as agriculture, mobility, energy efficiency, etc., and we only invest in these six," he said.

"Then we think of how these companies will be able to raise money in the future from India, from outside. We've also put in some templates for ourselves, such as investing in companies where there's strong alignment with regulatory policies," he added.

Climate tech companies such as Cell Propulsion and RACEnergy are part of Sheetal Bahl, Ashish Taneja, and Manu Rikhye’s fund-1, growX Ventures.

Growth outlook

In the climate tech sector, Bahl said electrification of mobility, agriculture, and energy are likely to see a lot of funding action soon.

He reasoned that since the government is laser-focused on these areas in particular, there's bound to be a lot of money via subsidies and grants, which will attract corporate and foreign investors.

Software and emerging technology will also see a lot of innovation, particularly from entrepreneurs looking to do something on the tech side, added Jain.

(The story was updated to correct a factual error.)