Last week, PwC released their State of Climate Tech 2024 report, detailing key stats and insights around sustainability in tech – and it paints a picture of a landscape in flux.
Evolving investor priorities and continuous technological innovation, combined with global economic pressures and high interest rates make for a challenging time. But it’s not all bad news. For organisations willing to put the work in, there’s still an opportunity to thrive in this sector.
With PwC revealing a decline in overall investment levels compared to pre-pandemic years, organisations must fully understand and adapt their operations in a way that allows them to do more with less. And talent will play a vital role.
Here’s everything you need to know:
The PwC 2024 Climate Tech Report reveals a concerning decline in investment in sustainability and climate tech compared to pre-pandemic levels. Notably, funding for large-scale industrial projects, such as carbon capture, utilisation, and storage (CCUS), has dwindled. This slowdown contrasts with the surge in 2021-2022, when ESG and purpose-driven initiatives dominated corporate and investor agendas.
This raises concerns. Investment into physical products that decarbonise is down, especially in industrial sectors. And this can be attributed to several factors, including the current economic climate – high interest rates and ongoing financial challenges have led to investors adopting a more cautious, short-term ROI-driven approach.
Many investors who previously overpaid for ESG initiatives before and during the pandemic are now prioritising commercial returns over purpose-driven spending. Ultimately, if the cost-benefit of an investment is not immediately obvious, it’s going to be hard to get investors to commit.
Despite the overall decline, however, one area is thriving – AI. The report highlights a growing preference for sustainability software and AI solutions, which require lower initial capital and offer quicker scalability and ROI.
Over 80% of climate tech startups now integrate AI to streamline operations and enhance sustainability outcomes. This trend aligns with broader business goals to reduce costs and boost efficiency, particularly in data-heavy industries like professional services.
Businesses looking to operationalise more and spend less on headcount in the face of economic challenges need AI. AI fits perfectly into this strategy. It helps companies make faster, more cost-effective decisions and track ESG initiatives, which is vital for attracting not only investors, but talent.
However, this rapid AI adoption is not universal. Sectors with complex physical supply chains, such as agriculture and manufacturing, face challenges due to limited digital infrastructure. In other words, it’s much harder for businesses with physical products to adopt AI compared to sectors where everything is digital. For those businesses, it’s about starting small, making incremental, basic changes that can best set you up for digital transformation, and ultimately climate tech adoption.
The shift in investment priorities will have a significant impact on hiring strategies.
Startups should focus on leaner growth strategies, hiring cautiously and prioritising roles that drive profitability and efficiency. Hybrid roles that combine commercial acumen with technical expertise will also be in high demand.
Essentially, companies must demonstrate profitability earlier, relying on a balance between generalists who can then upskill in technical areas, and specialists focused more specifically on AI, software and sustainability analytics.
Getting this skills balance right is challenging, but not impossible.
For startups, the key lies in how successfully you can build partnerships with strategic advisory or recruitment firms. The goal is to better understand and optimise your organisational structures and accelerate profitability through your talent strategy.
For Candidates looking to secure their next sustainability role, or break into the sector in the first place, look at your own skillset. Developing a mix of hands-on delivery skills, commercial insight, and scalability strategies. This will be crucial to standing out in a lean hiring environment.
Despite current market conditions, climate tech remains a crucial solution in the fight against climate change. Interest rates will eventually normalise, and investment will return. If I had one message for organisations in the climate tech landscape, it’d be this:
Don’t panic. Investment will come back. The sustainability challenge isn’t going anywhere, and we still need to power through. Use this time to prepare and get ahead for when the funding landscape improves.
To continue the conversation or find out how we could support your sustainability talent strategy, get in touch with me directly.
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