On the first day of Expand North Star event, part of the GITEX GLOBAL 2024 event in Dubai, SOSV Founder Sean O’Sullivan dubbed climate change as an “urgent existential crisis for humanity” and called for the tech investor community to “make it work” through investments in climate tech.

He pointed out the increasing cases of air turbulence that have led to many injuries and even death, highlighting these incidents as a call to action to fight the impact of climate change.

“Air travels are generally safe, but not in the era of climate change,” he told moderator David Rowan, Founding Editor-in-Chief at WIRED UK.

“These events can make industries such as insurance go bankrupt unless changes are made; governmental and investment policies will flow into these areas to make sure that you have.”

But when it comes to starting climate tech investment, O’Sullivan recommended starting with the lowest hanging fruit first, without disregarding the impact of that investment.

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“There are low hanging fruits that area. But there are also really, really long term effects that also need to be made. They need some sort of governmental backing, at least to the point where they are able to scale,” he explained. “Venture capital as an asset class is actually quite small, something like less than one per cent of the financial capital is deployed. Therefore we need to leverage other sources of capital. We are starting to see that happening.”

He further explained how SOSV backed around 70 companies each year. In specific areas such as the Future of Food, the firm has several companies that are already at around US$100 million in revenue, growing at 50 to 100 per cent in various aspects.

But for climate tech companies that are working in the area of deep tech, O’Sullivan warned that they need to go “up and ahead” as 2024 is not a year to fundraise easily.

“There are fewer number of companies getting funded per quarter. So, it is a challenging time, and it is also 80 per cent less capital going into other areas that are not General AI. A lot of those companies are taking away from other computing sectors such as climate tech; we see less capital development,” O’Sullivan said.

Considering that many climate tech projects can only see results in the long run, O’Sullivan stressed the importance for investors to “realign” their expectations.

“You are going to be looking at a 15 per cent annual profit or 20 per cent annual profit versus, if you are holding onto it for 10 to 12 years, you can be looking at 25 per cent instead. So, if you are looking a little longer, you can actually make even better profits.”

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Another point that O’Sullivan stressed was the importance of reimagining different ways to produce the goods that we need today which he saw as where the low-hanging fruit is when it comes to climate tech investment.

“When you look at how long it takes to make a change, it took seven years to get just a million people to use street maps [that I created with my previous company]. But then, we looked at the iPhones and everything else that came out that enabled us to get into more places just another 13 years after that. Suddenly a billion people use it. So, we are already going to start this journey,” he said.

“We are already solving many parts of this challenge.”

Supporting climate tech investments through green bonds

At a separate panel discussion, Elvina Garayeva, Debt Director EECA Region at Incofin Investment Management, confirmed the increasing popularity of green bonds as one of the means to support climate tech projects, apart from venture capital funding.

“The statistics might vary, but we can certainly say that we have witnessed huge spikes in ESG funds and climate funds in particular, over the past years,” she stressed.

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Climate bonds were initially promoted and advanced primarily by international development institutions, governments, and municipalities, often to fund large-scale infrastructure projects. Over time, the private sector became involved as well, recognising the opportunity presented by the growing investor awareness of climate change.

Today, climate bonds are in high demand as they align with the priorities of investors who increasingly seek sustainable and environmentally responsible investments.

“They want their money to be invested in something good for climate, for the people. So, the requirement comes from large and electronic investors such as pension funds or insurance companies. It also led to the fact that the markets started to structure this type of products more and more,” she stressed.

According to Garayeva, another important factors include regulatory push such as the recent COP28.

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