{"id":17049,"date":"2023-11-16T10:39:56","date_gmt":"2023-11-16T15:39:56","guid":{"rendered":"https:\/\/www.insightpartners.com\/?p=17049"},"modified":"2025-04-17T14:30:05","modified_gmt":"2025-04-17T18:30:05","slug":"climate-tech-investing","status":"publish","type":"post","link":"https:\/\/www.insightpartners.com\/ideas\/climate-tech-investing\/","title":{"rendered":"De-risking climate change with software: opportunities, challenges, and resources for innovation"},"content":{"rendered":"

As the world confronts the stark realities of climate change and the transition to clean energy accelerates, enterprises must undergo a pivotal shift.<\/span><\/p>\n

To meet the net zero mandates of regulators and institutional investors, optimize business models, increase shareholder value, or make a positive impact, <\/span>66% of the Fortune Global 500 have a significant climate commitment<\/span><\/a>. <\/span><\/p>\n

The portion of that group actively reducing their reported emissions <\/span>earned on average nearly $1B more in profit than their peers<\/span><\/a> (YoY), demonstrating that well-run businesses are choosing to follow through on their climate commitments. At the same time, large businesses and governments working toward decarbonization are also being forced to adapt to increasingly extreme weather events.<\/span><\/p>\n

The immediate challenge lies in managing two core climate risks: <\/b>transition and physical<\/b><\/a>. The former requires adapting to a lower-carbon economy, while the latter deals with the tangible impacts of climate change.<\/b><\/p>\n

\"Insight<\/p>\n

Climate software will play an instrumental role in allowing businesses and governments to adapt and thrive in this new environment. Of course, physical solutions, like electric vehicles, solar panels, more performant batteries, and carbon-sequestering materials will also be vital in tackling the energy challenges ahead of us. <\/span><\/p>\n

But software can harness the full potential of these physical assets, accelerating our transition to a new, more resilient economy that is inextricably linked with climate change.<\/strong><\/span><\/p>\n

The journey towards the economy we describe is a necessary evolution and one of the largest opportunities of this century. We are excited to back the software businesses enabling it.\u00a0<\/span><\/p>\n

The industry<\/h2>\n

Three big shifts illustrate the importance of managing both transition and physical risk in the 21st century and ways to turn those risks into opportunities for innovation and growth:<\/span><\/p>\n

    \n
  1. The grid transition<\/li>\n
  2. A net-zero economy<\/li>\n
  3. An extreme-weather economy<\/li>\n<\/ol>\n

    The grid transition<\/h3>\n

    One reason the clean energy transition is accelerating so rapidly is because it has become an economically viable means of matching increasing energy demand. Between 2010 and 2021, the <\/span>cost of solar declined by 88%, and onshore wind declined by 68% globally<\/span><\/a>. <\/span><\/p>\n

    Given these drastic price decreases alone, it is no surprise s<\/a>olar and wind will supply over 33%<\/a> of global power by 2030, up from 12% in 2023.\u00a0<\/strong><\/p>\n

    Let\u2019s consider the situation in the United States as a case study. According to the US <\/span>Department of Energy\u2019s new report<\/span><\/a> on virtual power plants, between 2023 and 2030, the United States will need to \u201cadd enough new power generation capacity to supply over 200 GW of peak demand\u201d. <\/span><\/p>\n

    For context, 200 GW can power all US households, up to 175 million homes, for a full year. We n<\/span>eed to meet this supply target in order to prevent power outages during peak demand and maintain reasonable energy costs for consumers.<\/p>\n

    In addition, according to the <\/span>US Energy Information Administration (EIA)<\/span><\/a>, 42% of grid generation will come from renewable energy in the US by 2050 \u2013 a result of lower prices, compliance carbon markets, the White House\u2019s target of eliminating fossil fuels as a form of energy generation by 2035, national energy security, and more. <\/span><\/p>\n

    Therefore, not only does the US need to drastically increase energy supply, it also needs to match that increase with renewable energy, driving many complexities and strains on the grid.\u00a0<\/strong><\/p>\n

    The US has released a large amount of funding to support this massive transition. <\/span><\/p>\n