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Sustainable startups achieving 16% increase in valuations compared to other firms

by LLB Reporter
24th Aug 22 11:40 am

In spite of a few challenging years in the global markets, climate tech has remained a popular choice for investors who poured a staggering $8bn into sustainable startups in Europe last year.

This was seven times the total recorded in 2016, making it the fastest-growing region for climate tech worldwide. According to GovGrant, the UK scooped 18% of all climate tech investment on the continent last year, helping to cement its status as a leader in the space.

As testament to this, further data from leading global startup investment banking platform, JPIN, reveals that 43% of those looking for investment options in the UK are doing so in this sector. In light of this, Nayan Gala, Founder of JPIN, who’ve helped grow a number of climate tech startups in their portfolio worth $2.3bn, explains why investors are increasingly focusing on sustainability.

Fundamentally, prioritising ESG and sustainability has become vital for the optics of both investors and startups in a world where climate change has risen to the top of political and social agendas. New research from Amazon Launchpad found that 59% of investors have even turned down investment opportunities as a result of concerns surrounding a firm’s sustainability plans. Not only this, but the study also found that startups who focus on these areas can achieve increased valuations of up to 16% on average compared to competitors who don’t. In a landscape where valuations are plummeting across the board, it appears that making noise around sustainability has become a vital lifeline for startups across the globe.

However, for the UK particularly to benefit from the climate tech boom on the continent, both the government and startups must work to address the dire skills shortage the country currently faces. With employment in the worldwide energy sector set to increase to 100 million by 2050 – according to Hyperion Executive Search – there simply aren’t enough workers to fill this gap. Britain’s climate tech ambitions are therefore set to heavily rely on attracting skilled workers from the world’s most powerful talent pools such as India, with 25% of worldwide engineers and a majority of the worlds most powerful CEOs (Adobe, Microsoft, MasterCard, Twitter) hailing from this country. Realising the potential India holds in this area, UK Prime Ministerial candidate, Rishi Sunak, spoke this week at an event by Conservative Friends of India (CFIN), to highlight the importance of collaboration between the two countries.

Commenting on the growth of the climate tech sector, and what the future holds specifically in the UK, Gala said:

“It really is encouraging to see from an environmental perspective that almost 1-in-2 investors in the UK are choosing to back startups in the climate tech sector. At a time when startups are seeing their valuations plummet, the data shows that having a clear focus on sustainability could help combat this and it appears to be a real area of focus for investors currently.

“However, skilled workers lie at the heart of climate tech innovation and the UK is currently facing one of its worst shortages on record, which is undoubtedly stunting progress. I do believe though that positive strides are already being made to rectify this, and the potential FTA with India could accelerate the UK’s recovery in this area as it is home to a huge pool of skilled engineers.

“At JPIN we’ve had a focus on climate tech for some time and it has been fantastic to see first-hand how a small startup can grow exponentially to have a tangible and positive impact on the world. With investor appetite in this area clear, we will undoubtedly continue to see more fantastic climate tech solutions in the years to come both in the UK and worldwide.”

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