5 Climate Tech Startups to Watch

Original Article Published in Japanese on Aug 03, 2023.

Climate tech, which refers to technologies and businesses focused on combating climate change, such as reducing CO2 emissions and combating global warming, is gaining momentum, especially in the United States.

Although the amount of investment in startups has begun to decrease in 2023 due to the declining macro environment, a large amount of funding was raised between 2021 and 2022.

Climate tech funding has increased significantly. (Reference.)

The climate tech space is gaining momentum due to government policies, including regulatory reforms and incentives for climate tech companies, aimed at decarbonizing the economy.

Many major developed countries have declared “carbon neutrality” as their goal by 2050.

The U.S. has announced a 200 trillion yen investment in carbon neutrality efforts, China a 170 trillion yen investment, and Europe a 130 trillion yen investment. Japan has also announced a 2 trillion yen Green Innovation Fund, although the amount is smaller than the aforementioned countries. It can be said that regulatory reforms and preferential treatment for climate-tech companies by governments around the world have progressed rapidly.

Governments’ Views and Stance on Carbon Neutrality (Reference.)

Larry Fink, CEO of BlackRock, the world’s largest asset management firm, said that 1,000 unicorns will emerge from the climate tech space. (Reference.)

The market size of climate tech in the U.S. was $16.8 billion (1.848 trillion yen) in 2020. The company estimates that this will be $20.7 billion (¥2,277 billion) in 2025 at a low estimate, $24.2 billion (¥2,662 billion) at a standard estimate, and $301 billion (¥3,311 billion) at the maximum expansion.

Climate-tech market forecast (Reference.)

In this issue, we will take a look at startups in the climate-tech market from the United States. Among them, we have selected five companies that are developing software services to reduce greenhouse gas (GHG) emissions.

We hope this article will be helpful to those who want to know more about the startup scene in the U.S. and those who are seeking new service ideas.

Five Climate Tech Startups from the U.S.

1. Persefoni: GHG emissions calculation, visualization, and analysis platform
2. One Concern: Disaster risk visualization platform
3. Wren: Carbon offset platform that can be started by individuals
4. Pachama: Plantation carbon offset platform
5. Blocpower: building a decarbonization platform

1. Persefoni

Persefoni, a startup founded in 2020, is a SaaS platform for calculating, visualizing, and analyzing greenhouse gas (GHG) emissions.

Now in its fourth year of operation, Persefoni has branches in Japan, the United Kingdom, Germany, Canada, and Singapore, in addition to its headquarters in the United States, and is working across four continents to promote a decarbonized society.

Persefoni has also established a branch office in Japan to support Japanese companies in their efforts to decarbonize their businesses.

Overview of Persefoni’s efforts (Reference.)

There are many startups in the field of carbon accounting, and competition is intensifying, but the company stands out from the crowd with about 150,000 of the most important emission factors in the field of carbon accounting. Persefoni has raised $100 million and is currently working on R&D to develop a more precise carbon accounting system.

Carbon accounting, like financial accounting, must be reliable.

No one will use financial accounting software that cannot produce correct figures. Similarly, carbon accounting will require audits and assurance in the future, so the company’s top priority is to develop reliable software.

2. One Concern

One Concern, a startup founded in 2015, offers a Resilience-as-a-Service (RaaS) solution that improves decision-making by combining disaster science with AI and machine learning.

The company operates in the U.S. and Japan, and its mission is to “minimize the damage caused by any disaster. By quantifying resilience to large-scale disasters, the company helps local governments and businesses assess, mitigate, and monetize risk.

One Concern’s product UI (Reference.)

As the need to adapt to climate change risks due to global warming increases, One Concern’s disaster forecasting services will become increasingly necessary.

3. Wren

Greenhouse gasses are emitted through daily life and economic activities.

Carbon offsetting is an approach to compensate for excess emissions of greenhouse gasses that cannot be compensated for by individual efforts to reduce emissions by investing in emission-reduction activities.

In Japan, while efforts are spreading among companies and organizations, some may be wondering where to start on an individual level.

Wren, a startup established in 2019, operates a carbon offsetting platform that allows participation at the individual level.

By answering a series of questions about your daily life, the platform calculates the amount of carbon dioxide you will emit in a year.

It then provides a list of projects in which you can invest to offset your emissions. Projects include rainforest conservation projects, reforestation projects, wildfire prevention projects, and more, with monthly subscription plans available.

Strengths of Wren’s offerings (Reference.)

Through the company’s activities in the last six months, 84,490 tons of carbon dioxide have been reduced and emissions deterred. The number of subscribers to the newsletter has also doubled, with approximately 10,000 people worldwide subscribing to the newsletter. (Reference.)

4. Pachama

Restoring and preserving the world’s forests is one of the easiest, least expensive, and simplest ways to reduce greenhouse gases in the atmosphere. There is a startup that solves this challenge.

Founded in 2018, the startup Pachama operates a marketplace for forest-based carbon offsets.

The company is a member of Breakthrough Energy Ventures, a fund founded by Microsoft founder Bill Gates, and the Climate Pledge Fund, a fund founded by Amazon founder Jeff Bezos. The company is a highly regarded startup that has raised a total of $15 million from several investors, including prominent business leaders such as “Breakthrough Energy Ventures,” a fund founded by Microsoft founder Bill Gates, and “Climate Pledge Fund,” a fund founded by Amazon founder Jeff Bezos. (Reference.)

Pachama’s marketplace (Reference.)

Pachama is a technology company that not only operates a marketplace but also provides a solution for calculating and verifying how much CO2 has been recovered from forests that are eligible for carbon credits by analyzing 3D data from sanitary images and drones using proprietary machine learning technology.

5. BlocPower

BlocPower, a startup founded in 2014, provides leasing services to replace old heating and cooling systems in outdated buildings with new, high-efficiency, low-cost systems.

Older buildings use older heating and cooling systems that are based on fossil fuels. These older systems are fuel inefficient and cause greenhouse gas emissions and air pollution.

According to the company, replacing them with new systems can reduce energy costs by 30-50% and greenhouse gas emissions by 40-70%, even in older buildings.

Benefits of BlocPower (Reference.)

The company also addresses the lack of financing options available to low-income borrowers, who are often perceived by banks as being at “high risk of loan default.”

Based on its unique insights into how to best measure the risk of non-payment, the company partnered with Goldman Sachs to develop a financial product that makes it easier for borrowers to purchase green homes based on their payment history.

The product, likened to a “green mortgage,” spreads the risk of default across multiple borrowers and allows building owners to implement the company’s recommended retrofits. This makes it easier for borrowers to purchase green homes, and the company benefits from increased revenue opportunities.

Conclusion

In this issue, we have introduced five startups related to Climate Tech.

Among them, we highlighted startups that are developing services with software as their strength in the climate tech area, which often requires hardware.

Various technological innovations will be needed to achieve the goal of net-zero GHG emissions by 2050. This is an area that will continue to gain momentum over the medium to long term.

As a design firm with offices in Japan and the U.S., btrax will continue to provide information on the latest startup trends in the U.S., as well as useful services for service design, branding, and marketing.

If you are interested in our services, please feel free to contact us.

Written by Takaaki Sako