Net zero tech investment outlook

2021 was a year of record-breaking tech growth – one of record global tech investment, deal-making, and unicorns. While this momentum carried through to the first quarter of 2022, as the months pass, geopolitical tensions, macroeconomic turbulence and regulatory change are impacting the tech sector. Global stocks have fallen, and investors are scaling back investment in private markets. 

Despite these headwinds, the impetus for transition to net zero will ensure continued investment in the technologies needed to enable net zero. There is an urgency to achieve net zero as the impact of climate change becomes more apparent, the West looks for alternatives to Russian fossil fuels, regulation is introduced and climate risk disclosure mandated, and businesses take action in response to demands from stakeholders. The new reporting regimes applicable to banks, asset managers and listed issuers and the focus of stakeholders on net zero transition plans will ensure scrutiny of capital allocation decisions and progress against published targets. In addition, many areas of investment have a medium to long-term focus and will not be seen to be subject to the short-term macro-economic headwinds that are affecting other parts of the tech sector. 

Net zero tech encompasses a broad range of technologies and opportunities for investors. While cutting-edge developments in deep science such as carbon capture and alternative fuels could have the greatest impact on achieving net zero when deployed at commercial scale, businesses can make a more immediate impact in managing climate risk and regulatory obligations and reducing their carbon emissions with the use of data-driven technology solutions. By June this year, investment in this type of data-driven technology solutions had surpassed the record level of investment in 2021. A notable example was the recent investment into Ecovadis, a business sustainability ratings platform, which raised US $500M in a Series D round this month. 

In our Tech Legal Outlook – 2022 Mid-Year Update we consider the outlook for net zero tech investment, and broader tech sector trends and regulatory developments.