Companies are facing pressure from stakeholders to reduce their environmental impact. As a result, startups are emerging that help businesses reach their sustainability goals. There are nine technology startups that analysts and investors are “betting on” to help reduce emissions. As the planet warms, tech companies are looking for ways to mitigate their environmental impact.
The technology industry is particularly expensive for the environment. (So-called) cloud technology companies use massive data centres that require a lot of electricity. Hardware and chip manufacturers secure mineral extraction opportunities, and also use water and land for production. A peer-reviewed study published in the data science journal Patterns in 2021 found that the aforementioned companies combined generate more than 2% of global greenhouse gas emissions, which is similar to the carbon dioxide emissions of the aviation industry.
In 2019, the climate disclosure non-profit organisation CDP estimated that the climate technology business could reach a value of 2.1 trillion USD.
Startups are getting involved in tidying up business operations. Since 2021, venture capital firms around the world have invested more than $30 billion in climate technology startups that offer various services, such as remote sensing tools for calculating carbon emission offsets and emissions-tracking software. A climate budget of nearly $370 billion, included in the Inflation Reduction Act, could help stimulate the creation of hundreds of clean technology companies.
Many companies, such as Salesforce and Intel, have developed plans to achieve net-zero carbon emissions by 2050. Sustainability activities and efforts will only grow as customers, investors, and employees pressure tech companies to disclose information about their environmental impact.
“Now, more than ever, there is talk about efforts to produce and use software in a more sustainable way,” Abhijit Sunil, a green technology analyst at Forrester, told the Insider portal.
However, A. Sunil pointed out that decarbonising companies can be complicated. Data reported by a company on emissions may not be accurate, and calculations are and can be very complex. A. Sunil explained that many companies lack teams to handle sustainability management; this means employees lack the skills needed to track data, troubleshoot problems, and gain insights from them.
Climate-oriented tools could be useful for companies to collect data and identify processes for improvement
“Corporations will look for the newest, most aggressive startups that will be able to drive change in their industries,” said Ludwig Pierre-Schulze, a partner at venture capital firm Alumni Ventures, who invests in green technology.
Several analysts and a venture capital investor were surveyed and asked which companies are innovating in the field of green cloud computing. Some of them provided insights on green cloud computing, which were taken into account when compiling a list that includes companies producing decarbonisation software, carbon emission reduction measurement tools, and data centre cooling technologies. All data is in accordance with PitchBook, unless stated otherwise.
Here are the climate technology startups that analysts and investors believe are worth betting on, listed from the smallest to the largest amount of capital raised:
1. Sinai Technologies, USA, California, San Francisco
2. Climate AI, USA, California, San Francisco
3. Astraea, USA, Colorado, Boulder
4. Perennial, USA, Colorado, Boulder
5. Green Revolution Cooling, USA, Texas, Austin
Below are the four most valuable startups in this field
6. Pachama, USA, California, San Francisco. Valuation: 355 million USD, according to information provided by the company.
(Explanation regarding Pachama. Why it is a good solution: Forests are effective carbon sinks, which means they can store huge amounts of carbon from the atmosphere. But climate change threatens to destroy them. Companies that support sustainability have the opportunity to grow and protect forests by buying and selling carbon credits, or permits that grant the right to emit a certain amount of greenhouse gases. However, critics of the carbon credit system argue that it is difficult to measure how much carbon dioxide is sequestered as a result of forestry projects. Without accurate data, companies may be sceptical about where their credits are going.
A representative for the venture capital firm Breakthrough Energy, which invests in the company, stated in an email that Pachama is “building a transparent, comprehensive carbon dioxide emissions reduction market for companies and jurisdictions that want to achieve carbon neutrality”.)
7. Clarity AI, USA, New York. Valuation: $450 million.
(What the company does: Clarity AI develops a sustainability reporting tool to help investors and companies measure and understand their carbon dioxide emissions footprint. Using machine learning and big data, as well as metrics such as financial risk and energy savings, Clarity AI aims to calculate the costs of carbon emissions.
Why it is a good choice: Policies such as the Paris Agreement and the Sustainable Finance Disclosure Regulation in Europe are creating pressure on companies to disclose information about their environmental impact and to reach their environmental goals.)
8. Persefoni – USA, Arizona, Tempe. Valuation over $500 million (the exact value is not disclosed).
(What the company does: Persefoni is climate management software that combines automation, climate trajectory modelling, carbon accounting, and analytics. These tools generate data and reports on emission reductions.
Why it is a good choice: Persefoni has partnered with Workiva, a financial reporting software platform, to add Securities and Exchange Commission forms that companies are required to complete to the platform. It is working with companies such as financial services firm Stripe and electronics company IBM to integrate carbon dioxide emissions accounting into their platforms.
Persefoni – “will serve in the future as a platform for a wide variety of interesting climate tools”.)
9. OneTrust – USA, Atlanta. The largest startup in the sector. Year founded: 2016. Total funding: $920 million. Valuation: 7 billion USD
(What the company does: OneTrust is data management software that aims to bring company teams together to protect data and manage privacy. The company provides a set of tools for cloud platforms related to carbon dioxide emissions accounting and the management of environmental, social, and corporate governance programmes to track their progress in achieving emission goals.
Why it is a good choice: Since emissions from indirect sources are known to be difficult to measure, tools like OneTrust can help prepare more accurate reports and report on sustainability progress when receiving ambiguous data.
OneTrust has raised funds from investors such as KeyBanc Capital Markets, Goldman Sachs Group, SoftBank, and Insight Partners. The company claims that its software is used by more than 12,000 customers, including cloud computing giants such as Cisco and Oracle.)