On the path to a carbon-neutral economy, technology-driven solutions (Climate Tech) are essential. A new study by Allianz Economic Research, Allianz X, the "Zentrum für Innovation & Gründung Unternehmertum" and "Unternehmertum Venture Capital Partners" highlights the enormous investment needed. To achieve its self-set climate goals, Europe will need an increase of investments in Climate Tech by approximately 700 billion euros annually compared to the previous decade. Of this, about 140 billion euros should come from public funds, and 560 billion euros from the private sector, according to the authors.

However, the annual investments from private equity and venture capital investors are still far from this target. In 2022, they amounted to 97.3 billion dollars. While macroeconomic uncertainties have affected investments compared to 2021, the decline is less pronounced than in fintech or health tech investments, according to the study. The situation is improving, with the authors estimating that global investments could reach 129.2 billion dollars in 2023, just above the record year of 2021.

In 2022, investments in the European market were 30% higher than in 2019 at 28.7 billion dollars but still significantly lower than the exceptional year of 2021, when 36.8 billion dollars were invested. The authors of the study expect a sideways trend in 2023 with around 29 billion dollars in investments.

In terms of the number of transactions, Europe slightly surpassed the USA in 2022 with 1,493 investments compared to 1,242 deals. However, a smaller proportion of global private equity and venture capital investments flow into European Climate Tech companies, particularly impacting larger companies, such as scale-ups and later-stage companies, creating a financing gap.

The investment process takes longer in Europe. European startups in their early phases represented 36% of global Climate Tech transactions in 2022 but received only 30% of global funding. Later-stage companies accounted for 32% of deals worldwide but received only 25% of the globally available funds. According to the study, one way to improve the situation for more mature companies would be to reduce bureaucracy. It takes a similar amount of time to finance a young early-stage startup in the USA and Europe. However, when it comes to investments in later-stage companies, the process takes about a year longer in Europe. The authors also recognize an imbalance in the allocation of funds, as they do not necessarily flow into sectors with the greatest decarbonization potential. The "Mobility and Transportation" sector, responsible for 15% of emissions globally, receives 48% of VC and PE investments in the Climate Tech sector, while solutions for industry and production, responsible for 34% of emissions, only receive 9% of the funds, according to the study.