Adaptation Is Climate Tech Funding’s Biggest Blind Spot

(Bloomberg) -- Climate tech venture capital funding has increased dramatically over the last decade, but one sector is consistently overlooked: adaptation. 

Startups focused on preparing for the impacts of climate change only received 7.5% of global climate tech funding during the period of 2019 to 2020, according to a new report from the Oxford Climate Tech Initiative in partnership with the Skoll Centre at Oxford. 

The research mirrors recent findings from the United Nations Environment Program, which found a global funding shortage of up to $366 billion for projects that could help society adapt to climate change.  

Adaptation solutions are an important piece of the climate tech puzzle because even if the world were to magically cut greenhouse gas emissions to zero tomorrow, some global warming is already baked into the climate system, putting many under-resourced countries at risk of extreme weather events. The lowest-emitting countries often experience the worst impacts of climate change, ranging from sea level rise and extreme heat to flooding. Those countries also have the fewest resources to adapt, and the climate tech industry could help address the shortfall.

“Climate tech has an important role to play in filling the adaptation funding gap, yet there is little sector-wide consensus on what the adaptation solution set looks like,” report authors wrote. “Fleshing out the scope of adaptation technologies and the specific barriers they face is a critical step in ensuring more equitable development of climate tech.” 

By contrast, the transportation sector received the bulk of climate tech venture funding, with a disproportionately lower share of dollars going towards other high-emitting sectors like the built environment and agriculture. 

The mismatch between the solutions that need the most funding and the ones that actually receive it could be due to familiarity bias, said Jamil Wyne, the founder of the Climate Tech Bootcamp and co-lead of the Oxford Climate Tech Initiative. 

“We’ve had transportation startups for a long time, we understand how that system works,” Wyne said, pointing to the success of Tesla. “People can wrap their heads around that a lot faster than [they would] building resilience in our global food system.”

Climate tech funding is over-allocated to the mobility sector compared to its share of global emissions because it has a “hype engine” that lures investors focused on celebrity founders rather than business fundamentals, said Tom Chi, managing partner at At One Ventures who didn’t contribute to the report. Some investors like Chi are trying to course-correct by prioritizing overlooked solutions and metrics for assessing impact beyond carbon emissions. 

Report authors interviewed over 60 climate tech experts and surveyed nearly 150 people working in the industry, including investors, policymakers and scientists, emphasizing perspectives from the Global South. 

There’s a “massive gap” in both knowledge and funding when it comes to climate tech outside of wealthier countries, Wyne said. 

“Most research when it comes to climate tech focuses heavily on just emissions and mitigation,” he said. “When you step outside of these OECD countries, the need for adaptation is so immense.”

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