Originally published here.

Nearly a decade on from the Paris Climate Accords, progress in reducing carbon emissions has stalled. Urgent action on climate tech and higher investment ambitions are critical to ensuring that the global economy has a future in which to thrive.

According to the World Meteorological Organization, the past 10 years were the warmest on record. That marks three consecutive decades where each was hotter than the last. Ocean temperatures continue to rise, glaciers are disappearing forever, and Antarctic sea ice is at its lowest level since records began, meaning the albedo effect, by which ice cover reflects solar radiation away from Earth, is in steep decline.

The goal of the 2016 Paris Climate Accords was to keep temperature rise below 1.5°C in order to limit the worst effects of anthropogenic climate change, but the U.N. estimates that, without drastic change, global temperatures are likely to rise 3.1°C this century. This corresponds directly to a bleak economic future. For every degree Celsius of warming, says the World Economic Forum (WEF) 12% of global GDP is lost, while the US National Bureau of Economic Research expects “precipitous declines in output, capital and consumption that exceed 50% by 2100.”

In 2023, investment in climate tech fell by 40.5%, compared with 2022, while in 2024, the COP29 conference in Baku delivered what the Oxford Institute of New Economic Thinking described as “a disappointment,” with governments agreeing to scant funding increases for nations in the Global South, and little in the way of coherent collective investment or action. Others were less measured in their criticism of the outcomes of the event.

While the present picture is far from rosy, there are more positive stories to be found in the world of green tech and climate innovation, where swift and intelligent investment may offer cause for hope. Already a US$20 billion industry, green tech is expected to grow nearly tenfold in the coming decade, and early movers have a competitive advantage that won’t last long.

There’s no single solution to this crisis. It requires widespread, fundamental changes to global infrastructure. Hard choices need to be made, and some industries will soon become far less significant, or phase out altogether. This means that the spread of investment opportunities is diverse.

The construction industry, for example, is ripe for reinvention. In Europe it accounts for 35% of all waste produced – some 850 million tonnes annually. To date, no recycling initiatives have been implemented to deal with this at scale. In addition to all the waste, construction faces a twofold problem in manufacturing new materials. First, the production of Ordinary Portland Cement (OPC) – humanity’s second most in-demand substance after water – is a heavily polluting process. Carbon emissions from construction materials account for 11% of the global total. Simultaneously, the world is running out of the raw materials used to produce OPC.

In light of these hard facts, construction giant Saint-Gobain developed a product line using 70% recycled glass, which results in 42% lower carbon emissions. Due to global sand shortages, recycled glass is now cheaper and easier to produce than the virgin product, and has become a highly sought-after construction material. Elsewhere, companies like Dutch materials specialists Front, are producing extraordinary ranges of high-end building materials entirely made from recycled construction waste.

There’s a pragmatism to embracing green technologies; resources are scarce. The shelflife for traditional energy production and huge swathes of manufacturing is limited, and it makes no sense to keep hoping for growth in these areas. Yet the world’s largest private banks funneled almost $7 trillion into fossil fuels from 2016-2023, and nearly half of that was on new expansion. This approach no longer makes sense.

Navigating this transition demands a major overhaul of key infrastructure, including fuel, automotive, plastics and the majority of the construction industry. Private investors, large banks, wealth funds, and governments all need to view decarbonization as an investment in our future.

But where exactly should investment be directed? There’s a healthy collection of seed and Series A companies finding solutions to precise, urgent issues. They’re making real progress in green steel, energy storage, and carbon capture technology.

Thinking purely about carbon, there are two broad challenges: using less carbon in day-to-day life and business, and reversing the carbon emissions already created.

There are seemingly endless opportunities to innovate for the first. The electric vehicle market has exploded, renewable energy is growing worldwide, and everyday companies are being challenged to track their footprints and make changes.

But it’s the second challenge that requires truly innovative thought. How to launch carbon recapture technology at scale? And what can societies do about the 39% of all carbon emissions that come from our built environment? All require capital-intensive solutions, requiring enormous investment just to bring them to market, long before they can generate revenue or become profitable.

These specific demands do not sit well with private equity, which has grown accustomed to investing in software – an inherently scalable product requiring little investment in physical goods, land, or resources. Certainly software companies like CO2 AI, Greenlyte, and xFarm are already modernizing and improving climate performance in certain industries. But this is an existential issue requiring many more players in the field, and an urgent need for funding models which identify promising post-seed or Series A companies and inject the volume of capital they need. Some of this can come from private equity, but further investment is needed from banks, sovereign wealth funds, and governments.

Indeed, large-scale infrastructure change can only come from governments, and ought to come quickly, but businesses will undoubtedly be forced to adjust to increasing regulations, and should have their own motivations to make change.

Some giants of industry are already taking action. Amazon Web Services AWS recently redesigned its electricity distribution in server rooms, lowering its carbon footprint and reducing the number of racks that could fail by 89%. These process innovations bring both efficiency and monetary gains, and they grew out of a clear need for greening. With real investment in startups, scaleups, and basic infrastructure, Europe can prove that it’s possible to achieve its carbon neutral goals without sacrificing innovation.

Sustainability isn’t just a regulatory checkbox, it’s the future of business. Companies that embrace ESG are unlocking powerful avenues for innovation, growth, and long-term value.

Climate and green tech present real innovation opportunities. Despite a lack of progress in reducing global emissions or large scale decarbonization projects in the past decade, there have been huge evolutions in the electric vehicle market and renewable

Young startups have also found innovative ways to solve thorny issues, from measuring corporate climate contributions to removing carbon from the atmosphere. Seed and series A companies continue to show what engineers and entrepreneurs can achieve.

The big challenge is scaling up. Current funding models don’t address the resource-intensive middle, where larger sums are needed to grow by relatively modest amounts. It requires a cohesive approach from governments, wealth funds, investment banks, and venture capital to take green tech startups from promising inventions to household names.

While other regions drag their feet, Europe is poised to take the lead. Climate change is one of the true existential challenges of our time, and the rare issue that most European citizens agree on.

A coordinated climate technology development plan – with real buy-in from the public and private sectors – would put European innovation in the spotlight again.