Relative to other sectors, investments into the Environment Tech space saw a minimal impact of the funding winter in 2022. Funding in the Environment Tech sector dropped 5% year-on-year in 2022 while funding in other major sectors like FinTech, Retail, EdTech and HealthTech saw a drop of more than 35% in 2022 when compared with the previous year.

In 2021, the Environment Tech space recorded its highest-ever funding of $31.6 billion. However, funding fell 5% in 2022, to $29.9 billion. The decrease is largely due to the 5% decline in late-stage funding from $20.6 billion in 2021 to $18.4 billion in 2022.

There has been a flurry of activity in this sector in the past two years:

• 74 companies recorded $100 million+ funding rounds in 2022, compared with 68 in 2021
• 240 acquisitions took place in 2022, compared with 246 in 2021
• 2022 witnessed 13 IPOs, a sharp contrast from 43 IPOs the previous year
• The space witnessed 16 and 13 new Unicorns in 2021 and 2022, respectively

Y Combinator, Techstars, and EIT InnoEnergy are the overall top active investors in this space till date. Y Combinator, Lets Ventures and Global Founders Capital are the top seed-stage investors, while Breakthrough Energy, Lowcarbon Capital and Shell are the top early-stage investors. Temasek, The Rise Fund and CPP Investments are the top late-stage investors in this space in the last two years. 

In terms of total funding into the sector till date, the US tops the list. Environment Tech companies in the US have raised $87.7 billion till date. Other top countries in this list are China ($29.5 billion), ($8.9 billion, India ($6.2 billion) and Germany ($6.1 billion).

In 2023, so far, funding into this space has taken a hit. Total funds raised by companies in this space in 2023 till date is $6.5 billion, a sharp fall of 48% from $12.5 billion raised in the same period last year. This decline in funding is majorly due to a massive 60% decline in late-stage funding from $8 billion in 2022 to $3.2 billion in 2023 till date. 

However, growth in the Environment Tech sector has rapidly increased in recent years, with the growing focus on climate change. The majority of the funding in this space has been observed in the last two years, with over 40% of the investments observed after 2021. 

The rate of global warming and increased pollution has pushed countries to take strict measures to manage their emissions. This has paved the way for new technologies like IoT, AI, sustainable engineering and others that can help control the climate crisis. The Electric Vehicles (EV) segment is one of them, which is effectively replacing major emission sources across the globe.  

EVs, Renewable Energy Tech and Air Pollution Management Tech are the top-performing segments in this space. Countries and vehicle manufacturers have already started moving towards EVs, and new technologies in this space keep evolving to simplify the manufacturing and accelerate the mass adoption of EVs. Various states and central governments across countries have started including EVs in their public transport systems to combat emissions. 

Governments are also supporting these businesses with tax incentives for both manufacturers and the public to further accelerate the adoption. Under the US Inflation Reduction Act (IRA), $369 billion has been allotted for energy and climate projects to shift the American economy towards more sustainable energy sources. More such funds are being allocated by multiple countries like the UK, India, and others to combat the climate crisis.