Key role for Venture Capital in industrial decarbonization

Summary

Industrial decarbonization will require massive amounts of capital investment over the next 30 years. Venture capitalists believe there are significant returns to be made for first movers. Institutional investors and asset managers are in favor of playing a part in the net-zero transition, as long as returns look like what they would get under a business-as-usual scenario. The urgency of decarbonizing hard-to-abate sectors means there is no time to wait. Investors are not interested in funding high-risk technologies and projects. Evidence of technology maturity and effective de-risking are prerequisites for institutional investors.

The risk profile of pilot plants or early-stage technologies does not match what institutional investors are looking for. For the next decade large investors will leave the financing to governments and VCs, as they have traditionally done. BlackRock has launched Decarbonization Partners, a JV with Temasek to help scale innovative climate-tech startups.