Climate Tech Investors Catalyzing the Startup Carbon Software Market for Long-Term Value Creation

The year 2023 faced a fall in climate tech investments to 40% due to economic uncertainty, but other categories took a bigger hit down to 50%, according to PwC’s State of Climate Tech 2023 report. In absolute terms, startup investment continued to increase, and climate change is becoming one of the biggest opportunities for long-term solutions to regenerate the natural world. As the carbon market matures and becomes more mainstream, investors are injecting capital into software and technologies geared toward reducing emissions.

• Persefoni: C-1 financial funding announced in August with US$50 million led by TPG Rise, raising over US$150 million from 2020 with participation by Clearvision Ventures, ENEOS Innovation Partners, NGP Energy Technology Partners (ETP), Prelude Ventures, Parkway Venture Capital, Rice Investment Group, Bain & Company, EDF, and Alumni Ventures. PersefoniGPT was also launched, the company’s Artificial Intelligence (AI) co-pilot product for carbon accounting and management.

• Plan A: Capital of US$27million received in September from Lightspeed Venture Partners, Visa, and others to increase headcount and expand market presence across Europe.
• Normative: Focused on carbon emissions from large enterprises, Normative has received funds from the European Investment Fund (EIF) of €40 million in Blume Equity, a female-founded fund climate tech growth fund.
• Klimate.co: Copenhagen-based carbon management solution startup Klimate.co secured €3.5 million in October to develop the team, scale internationally, and develop the software platform.

Carbon accounting software solutions are focusing investments on customer base expansion, building expertise, and technological enhancement through AI and automation.

Every industrial sector and company emits Carbon Dioxide (CO2), the main constituent of Greenhouse Gases (GHGs), so taking responsibility is the first step to mitigating catastrophic climate-related disasters. The GHG Protocol is a global standardized framework to measure and manage GHG from private and public sector operations, value chains, and mitigation actions, quantified as the total of Scope 1, Scope 2, and Scope 3. Carbon management tools use the GHG protocol to identify, measure, report, and verify the flow of a company’s carbon emission across the lifecycle of business operations. The tools automate the calculation process, saving a company time and resources, while accurately measuring the environmental impact.

International government policies and regulation around climate change, decarbonization, sustainable development strategies, and green plans that target limiting enterprise GHG emissions are the main drivers for software implementation. As new decarbonization technology develop, organizations are proactively using the carbon management software to maximize operational efficiency and financial advantages. Carbon accounting empowers a business to quantitatively measure direct and indirect carbon emissions, identify hotspots in the supply chain, and develop strategies to reduce emission and risk mitigation. The insights equip a business to increase resilience and efficiency over the entire supply chain, future-proofing the company from climate-related financial risk. By demonstrating carbon footprint reduction, the company improves its reputation for sustainable future development with demonstrable environmental and social benefits, directly impacting the bottom line.

ABI Research values the global carbon management software market revenue at US$1.1 billion in 2023 and forecasts that it will reach US$5.5 billion by 2032 with an advancing Compound Annual Growth Rate (CAGR) of 19.7%. The market is saturated with legacy providers like Cority, Enablon, IBM Envizi, Sphera and Workiva, to name a few, providing overlapping Environmental, Social, and Governance (ESG) reporting and carbon management software. Small and Medium Enterprises (SMEs), startups, and industry-specific data management tools like FigBytes, Greenly, Net0, and YuzeData, in addition to those listed above, are providing stiff competition. Lower license costs, integrating advanced domain-specific data management tools, actionable insights, and AI capabilities are gaining attention from investors and increasing the customer base. Currently, the suppliers and user base are predominantly in Europe and North America, and those regions will continue to dominate over the next few years due to early adoption and rigorous emission policies. The influx of capital alleviates the critical barriers to implementation of carbon tools, namely competitive licensing costs, competency building, comprehensive emission datasets, and closing the gap on Scope 3 emission accuracy—estimated at an average error rate of 40%.

Please refer to the following ABI Research reports for more information on applications, solution providers, and carbon accounting: Sustainability Software Markets and Technologies (AN-5916) and Life Cycle Assessment (LCA) Software Tools and Vendor Analysis (PT-2741), and Decarbonization Technologies for Industries (AN-5912).