🌏 A simplified mental model for climate tech

Climate tech is in its early stages, and the capital pouring in is still figuring out how to approach wide-ranging opportunities in this space. Shayle Kann, Managing Director at Energy Impact Partners, has (very helpfully) broken down his mental model and capital allocation approach for climate tech into 1) Understand 2) Mitigate 3) Deal.

1) Understand it

Before taking steps to mitigate or adapt to climate change, we first need to gather information and generate insights about our planet and how it changes from emissions. Shayle outlines the below subcategories focused on understanding climate change and its impacts. We listed a few examples of technologies within each sector (some of which we’ve featured):

Climate risk analytics: Evaluate exposure to climate change (e.g., flooding, wildfires, drought). Innovators: ClimateAi (see feature), Jupiter Intelligence, Cervest
Corporate GHG management & accounting: Examine companies’ emissions from all direct activities (scope 1) and indirect activities (scope 2 and 3). Innovators: SINAI Technologies (see feature), Emitwise, Persefoni
Methane emissions monitoring: Measure different emissions (not just CO2 but also methane). Innovators: Kairos Aerospace, MethaneSAT
Consumer carbon labelling: Signal to buyers the climate impact of their purchases/habits. Innovators: Climate Neutral (see feature), Quorn, Amazon

2) Mitigate it

The second task, which is really the core of climate tech (and therefore should receive the lion’s share of climate capital allocation), is mitigation. This is by far the hardest to define and segment, as GHGs are emitted at all stages of the value chain within the five essential industries that contribute 86% of emissions. Shayle proposes the table below to classify mitigation solutions, arranged by industry on the top and value chain steps on the left.

We can apply this framework in Transportation to the Electric Vehicle value chain:

Production (stop emissions at the source): Battery makers which provide the key input that converts electricity into mobility (see our battery coverage here). Innovators: Quantumscape, Solid Power, Ionic Materials
Delivery (change how goods and products are delivered to the customer): EV charging networks and fleet management software enabling the electrification of vehicles. Innovators: Chargepoint, Volta, Viriciti
Consumption (buyer-driven changes in behavior or use): Auto OEMs generating consumer demand for electric vehicles. Innovators: Rivian, Lucid Motors, Nio
Accelerant (the enabling layer that provides incentives for, and verification of, decarbonization): Business models to catalyze the shift to EVs. Innovators: Plugshare, Flux Auto

Sometimes one company has the ability to fit within multiple steps along the value chain. Tesla, in this example, has made a tremendous effort to vertically integrate from production to consumption. Value chains within different sectors can also be heavily dependent on one another (e.g., electricity and heat supplies the energy for EVs) and may even lead to decarbonization feedback loops (e.g, renewables supply clean electricity, which fuels non-emitting EVs, which then act as energy storage units for more reliable electricity production).

3) Deal with it

For climate problems that are past the point of mitigation, we need tools which can deal with or adapt to them (see our coverage on adaptation and wildfires). This is the area of climate tech that may unfortunately grow over time as our planet reckons with the emissions already released into the air.

Grid resilience: Enable a grid more resilient to unexpected events. Innovators: Enchanted Rock, Scale Microgrid Solutions, Switched Source
Natural disaster preparedness & response: Forecast and respond to the increasing risk of natural disasters. Innovators: One Concern, ZoneHaven, LaderaTech
Insurtech/climate tech overlap: Protect the financial risks associated with greater climate instability. Innovators: Kettle, The Demex Group