How Can VCs Best Support Climate Tech? This Expert Says It’s All About Collaboration.
July 23, 2023
In the race to slow global warming, there’s no shortage of climate tech companies working to solve some of the biggest problems. There’s also no shortage of VCs looking to fund these efforts. And according to Freddie Sarhan, CEO of Sapphire Technologies, alliances and collaborations are the quickest way forward to achieving climate targets.
With a background steeped in technology, Freddie Sarhan, CEO of Sapphire Technologies, was destined to make a positive environmental impact. Sarhan, whose company’s recent collaboration with Tallgrass Energy resulted in the largest turboexpander installation worldwide, is dedicated to fostering progress in the climate tech space.
Emerging alliances between venture capital firms and climate tech startups, Sarhan told Ethos via email, are set to profoundly impact the sector’s growth. By offering crucial funding for research and development, and helping bring climate solutions to market faster, these collaborations can expedite the pace of innovation. Sarhan says venture capital funding can help climate tech startups expand their networks, forming partnerships that benefit their long-term goals of delivering optimal energy solutions with a focus on climate stability.
VCs, climate tech, and scaling innovations
“The alliance of VC firms and climate tech startups is poised to have a significant impact on the growth of the climate tech sector,” Sarhan says. “With much-needed funding for research, development, and scaling of innovative climate technologies, the pace of innovation can be accelerated, and promising climate solutions can be brought to market more quickly.”
He says the market validation of these technologies through VC investment could also lead to a chain reaction of further investment. “VC funding provides an opportunity for climate tech startups to expand their networks and form valuable partnerships. This opens channels for guidance, strategic advice, and industry connections that can benefit the ultimate goal of providing optimal energy solutions with climate stability at the forefront.”
The importance of climate tech in the current world cannot be overstated; with international targets for reducing greenhouse gas emissions becoming increasingly stringent, technological innovation will be pivotal in achieving these objectives. By funding and raising visibility for climate tech startups, investors play an essential role in increasing public awareness and media attention. Such exposure aids in fostering wider adoption of climate tech solutions, contributing to achieving net-zero emissions by 2050, Sarhan explained.
As an example of the power of collaboration, Sarhan cites the alliance between his own company, Sapphire Technologies, and Tallgrass Energy. Together, they embarked on a clean energy project set to install up to 72 turboexpander systems over three years, offsetting up to 144,000 tons of CO2e per year. Other corporate ventures are also investing heavily in emerging technologies, such as Chevron New Energies committing $10 billion to decarbonization technologies by 2028.
Green tech’s future
Sarhan perceives the future of climate technology as a bright one, with increased venture capital funding bolstering the climate tech market. But he also warns against seeing climate tech as a silver bullet.
That’s because the effectiveness of certain technologies may take time to be realized, and cost-effectiveness is also a significant factor to consider, Sarhan says. “However, with continued investment and support, climate technology has the potential to play a significant role in achieving a more sustainable future.” He emphasizes the importance of considering technological feasibility, scalability, and cost-effectiveness when relying on climate tech.
Sarhan also underlines the importance of broad, systemic changes in energy systems, transportation networks, and industrial processes. Addressing climate change will require a multifaceted, collaborative approach that acknowledges the complexities and potential resistance to these transitions.
For Sarhan, the role of governments and policymakers is also instrumental in supporting the growth of climate tech startups and the wider adoption of green technologies.
“Policymakers can intentionally create a framework around funding, incentives, and regulations to support the climate tech sector,” he says. “For example, governments can allocate funding specifically dedicated to climate tech startups through grants, subsidies, and competitive funding programs. Financial incentives, such as tax credits or rebates, can encourage businesses and individuals to invest in climate tech. This can alleviate the initial high costs associated with developing and deploying technology.”
Additionally, Sarhan says governments can establish “clear and consistent regulatory frameworks” that support the growth of climate tech startups and provide certainty for VCs that invest. “A prime example is the Biden administration’s recent announcement of plans to invest about $11 billion in renewable energy projects in rural areas. The initiative aims to support the expansion of clean energy infrastructure and create job opportunities in these regions.”
That funding will be allocated across various programs and agencies to facilitate the deployment of renewable energy technologies, including solar, wind, and geothermal power to reduce carbon emissions and promote sustainability while fostering economic growth in rural communities.
Sarhan, like other experts in the climate space, stresses that the clock is ticking. Based on the most recent UN IPCC climate report, current financing levels need to be three to six times higher to limit warming to 2°C or 1.5°C, he says.
“The growing venture market for climate technology has the potential to help bridge some of this gap,” Sarhan says. “However, the importance of public/private partnerships and a collaborative approach to climate financing cannot be understated.”
