Climate Tech: Driving climate solutions through innovation.

Introduction  

As the impacts of climate change and global warming become increasingly evident worldwide, the urgency to find and develop innovative solutions continues to intensify.

Which is why, for three years in a row, the Massachusetts Institute of Technology (MIT) has published a list of climate tech companies to watch out for.  Climate tech is a term used to define a new generation of innovative technologies created to solve specific greenhouse gas challenges across varied sectors, think carbon capture, a smart energy grid, hydrogen, etc.

It focuses on issues such as the energy transition and climate mitigation and adaptation across agriculture, transportation, water, industry, and more. With the rising concentration of emissions in our atmosphere, warming the planet to a level that is becoming dangerous, climate tech companies have become an essential part of the solution.  

How are climate tech companies part of the solution?  

Climate tech companies drive innovation; it is as simple as that. Through their innovation, they create new capacity to adapt to climate change and enable leaders to make better-informed decisions for their communities.

For instance, advanced computing and climate modelling can help assess climate risks and identify opportunities to strengthen resilience. As shown in Figure 1, every industry is exposed to some level of physical climate risk. This necessitates sector-specific solutions, an area where climate technologies prove to be particularly effective. 

Figure 1 - All industries are exposed to some level of climate risk through acute and chronic hazards. 

Figure 2 illustrates the rise of climate tech companies since 2010 in line with increased environmental awareness. From 2012 to 2019 alone, over 12.000 climate tech companies have been founded worldwide.  With such rapid growth, MIT’s list of the ten climate tech companies to watch becomes particularly valuable. 

Figure 2 - Total Number of Climate Tech Companies, 2010-2022. 

Our Top Picks

#1 Sodium instead of lithium in batteries

The top company featured in MIT’s 2025 report is HiNa, based in China. As we previously discussed in our recent post, the shift toward electrification has become a central strategy for decarbonising economies worldwide. However, this transition has driven up demand – and consequentially, the price – of lithium batteries.

Since lithium is not an abundant material, identifying alternatives has become increasingly urgent. HiNa addresses this challenge by developing sodium batteries, which use an element with similar properties to lithium but one that is far more available and affordable.   

#2 Low-carbon Cement

Cemvision, based in Sweden, is the third climate tech company to watch according to MIT. Cement manufacturing is one of the world’s largest sources of emissions, despite being an essential material for building cities. With an estimated 4 billion tons of cement produced annually, the industry accounts for around 5 to 8% of global greenhouse gas emissions, making it a major contributor to global warming. Cemvision has taken on this challenge by developing what it calls the ‘world’s most resource-efficient’ cement.

Instead of using virgin limestone – the main raw material in traditional cement – Cemvision uses industrial by-products to produce a fully circular alternative. The company estimates an 80 to 100% reduction in CO₂ emissions compared to traditional methods. Moreover, Cemvision has developed the technology needed to electrify the manufacturing process, helping eliminate any remaining sources of CO₂ emissions within the industry.  

Companies like these highlight the potential of technology to tackle some of the most complex challenges arising from climate change. Scaling their impact depends on their ability to grow and attract investment, which in turn relies on governments fostering an enabling institutional environment for innovation.  

The need for governmental support  

In business, a group of companies operating within similar sectors and located near one another is called a business cluster. Climate tech companies are no exception. Six climate tech clusters have been identified based on their distinct strengths and areas of expertise.

San Francisco is the biggest in terms of number of employees and capital raised. New York’s strength lies in its finance and marketing talent, along with public policy support. The Houston-Austin region specialises in energy and industrial manufacturing. Berlin has an extremely dynamic sector with two-thirds of its climate tech companies founded in the past five years. London’s strength comes from its globally central location, which facilitates a highly connected network of experts. Lastly, Tel Aviv’s expertise lies in the STEM fields. 

These hotspots for climate tech companies highlight the need for these countries to adopt a robust, long-term approach to climate adaptation that prioritises innovation and development. With half of the world’s climate tech hubs located in the US, it is concerning that the Trump administration weakened US climate policy, for instance, by withdrawing from the Paris Climate Agreement, dismissing Environmental Protection Agency scientists, cutting funding for the National Oceanic and Atmospheric Association, and issuing executive orders that paused the implementation of the climate-related Inflation Reduction Act. Trump appears to overlook the fact that, since 2015, the US has experienced 190 weather events, each causing at least $1 billion in damage.  

As seen in Figure 3, global investment in climate tech peaked in 2021 but has since experienced a sharp decline. 

The decline can be attributed to several factors, ranging from economic uncertainty to reduced exit activity. However, it can also be linked to the perceived risks associated with climate tech companies in certain sectors, including agriculture, the built environment, and industry. Climate technologies in these sectors target extremely complex challenges, with returns on investment expected only over the long term, which fails to attract investors looking for ‘quick wins’. Combined with ongoing policy and regulatory uncertainty, it has become increasingly difficult for climate tech entrepreneurs to secure capital.  

Figure 3 - Global investment flows and deal volumes posted year-on-year decreases, as of the third quarter of 2024. 

According to Endeavor Insight, there are several ways that policymakers can foster a more supportive environment for climate tech companies:  

1. Enact founder-friendly legislation: streamline start-up procedures, expand access to venture capital, and develop visa schemes that attract entrepreneurial talent. 

2. Secure supply chains: encourage domestic manufacturing of essential hardware components to reduce dependency on imports. 

3. Learn from other markets: compare and adapt successful practices from leading climate tech ecosystems in other regions and from other sectors.  

4. Support the scaleup stage: increase funding and support for growth-stage firms with proven, scalable technologies that offer significant climate benefits.   

5. Accelerate the green transition: stimulate market demand for clean technologies through stricter sustainability standards and targeted consumer incentives.   

By creating an environment in which climate tech companies can scale their technologies and solutions, governments will reap the benefits through increased economic returns, job creation, and reduced costs of climate mitigation and adaptation. For instance, the Coalition for Urban Transitions estimates that low-carbon investments in urban sectors across six major economies could deliver up to $12 trillion in net economic returns by 2050, driven primarily by energy and material cost savings alone. The OECD echoes this finding, noting that stronger environmental policies and more ambitious Nationally Determined Contributions (NDCs) can help decouple emissions from economic growth.  

The Limits of Technology

We've covered at length why new technologies for addressing climate change are so promising - and by doing so we've only barely scratched the surface of what climate technology has to offer. What we haven't covered for instance, is the vital nature of technologies that are already available and being deployed as we speak, such as electric vehicles, heat pumps, renewable energy sources - but also technologies that aren't especially new but have a critical role to play and would massively help by being more widely used.

That includes technologies as simple as bicycles for transport, as universal as instrumentation and control equipment for creating resource efficiency gains, or as positive for nature as regenerative agriculture. The idea that new technologies can solve climate change can however be a dangerous one - technology requires many steps to be developed as many associations, businesses and professionals may already know - from inception, to viability in a laboratory setting, and then commercial viability and maturity. This process can take years, if not decades - think of the internet, electric vehicles, solar panels, smartphones... all those technologies have taken a long time to develop into the products we know today.

There is a long way to go for technologies being developed now, and society is faced with two options when it comes to accommodating for this: we can try to accelerate R&D, scaling and uptake, or we can build transition / net zero / decarbonisation plans that tolerate late blooming of such new technologies. In the first case, the most effective way (combined with the 5 points of the previous section) is likely the combination of public - private funding - but funding that goes into promising technologies wouldn't go in the scaling and deployment of existing technologies (renewable energy, electric transport, regenerative agriculture, etc). In the second case, where we account for long development and scaling timeframes for new technologies and build transition plans that rely on current technologies, we need to consider downscaling our energy demands - Mike Berners-Lee explains in A Climate of Truth that following current trends where energy use increases and low carbon energy increases by 4.1% only every year, fossil fuel use will not even begin to fall. The only way forward is either to double the pace of renewable energy deployment, or to maintain the current pace in combination with a 2% yearly reduction in energy use. Technology is important, and new technology offers hope - but they need to be treated as assets that are limited, and as data points in the bigger picture. In essence, technology isn't a silver bullet.

In summary

Investing in climate tech is not only a matter of environmental urgency, but also an economic opportunity. Countries that commit early to building robust policy frameworks for innovation and sustainable development will position themselves as leaders of the green economy while ensuring resilience in the face of climate change. Climate tech represents a significant opportunity in addressing the climate crisis. As demonstrated by companies such as HiNa, and Cemvision, technological innovation is already reshaping key sectors that are facing high climate risks. Governments, therefore, play a crucial role in enabling the growth of climate tech ecosystems. By adopting entrepreneurial-friendly policies and ensuring consistent regulatory and financial support, they are well positioned to bridge the gap between innovation and large-scale deployment. Doing so would not only accelerate the global transition to a low-carbon economy but also generate tangible economic and social benefits.  

However, while innovation and scientific progress are essential, they are not sufficient on their own. The ability of these technologies to scale depends heavily on the institutional and financial environments in which they operate. Moreover, even in favourable environments, new technology always needs to be placed back in context of how it's used, how long it takes to reach maturity, what's the environmental costs, the commercial viability. And above all, it needs to be combined with efficient processes and serve reasonable uses.

About CAFA

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