As the world strives to forge a more sustainable future, emerging technologies carry immense problem-solving potential. And because innovation requires investment, venture capitalists and other financial leaders will play a crucial role in the push for positive change.
Investments in emerging technologies that boost sustainability and address climate change are seeing rapid growth. Global climate-tech investments rose to USD 16.6 billion in Q3 2023, according to Bloomberg NEF, which noted that the strongest investment growth took place in companies focused on decarbonizing heavy industry.
In 2023, Mubadala commissioned Bloomberg Media to survey global investors and venture capital leaders to reveal which emerging technologies are believed to be most important to achieving a sustainable future, and to understand how investment is accelerating the development of these crucial technologies.
Which sectors do these decision-makers view as most important to achieving sustainability goals? What are the motivations behind their investments? What opportunities and obstacles do they envision?
Across global markets, venture capitalists and investors see investment playing a central role in supporting digital transformation in the years ahead.
However, one technology is front of mind for these investors due to its ability to accelerate digital transformation: artificial intelligence. In our study, investors saw artificial intelligence as four times more important to digital transformation than blockchain and nearly five times more important than automation and cloud computing.
That excitement is apparent in the investments that they’re making. According to Pitch Book data compiled for Bloomberg, the value of funding for AI companies climbed 27 percent globally, to USD 17.9 billion in the third quarter of 2023 compared to the year before.
TECHNOLOGIES SEEN AS KEY TO ACCELERATING DIGITAL TRANSFORMATION
Investment opportunities in climate technology have grown beyond solar panels and batteries to include food and agriculture, the built environment and heavy industry.
However, investors and venture capital leaders still see renewables and energy storage as the emerging technologies that are most important to supporting a sustainable future, outpacing sustainable infrastructure, connectivity and EVs in our survey.
EMERGING TECHNOLOGIES THAT ARE MOST IMPORTANT TO ACHIEVING A SUSTAINABLE FUTURE
These same two technologies—renewables and energy storage—are also seen as the ones that will attract the most investment in 2030. That view is consistent with Bloomberg NEF, which says that for the world to be on track for net zero, about USD 1.2 trillion needs to be invested in wind and solar every year between 2023 and 2030.
But perhaps what’s most interesting is that technology has not replaced the human factor when these investors are deciding which companies to invest in. Even in this era of data and analytics, our survey reveals that investors and venture capital leaders rely first and foremost on the company management team when making an investment decision.
WHAT TOOLS AND/OR INFORMATION DO YOU USE TO MAKE DECISIONS ABOUT INVESTING IN EMERGING TECHNOLOGIES?
The potential gains from emerging technologies are massive. According to Bloomberg Intelligence, the generative AI market could reach USD 1.3 trillion in 2032, and it is a dominant catalyst of positive estimate revisions and multiple expansion for most tech segments, including hardware, software and internet.
TOP MOTIVATIONS FOR INVESTING IN EMERGING TECHNOLOGIES
The survey reveals that investment in emerging technologies is driven by diverse motivations, including innovation, diversification, greater returns and first-mover advantage.
Overall, climate change lags behind these factors as drivers of investment in emerging technology, but not everywhere. In the US and the UK, investors and venture capital leaders list climate change as a Top 3 motivation for investing in emerging technologies.
One reason for this gap in the investment landscape around climate change could be the fear of the unknown. In our survey, investors and venture capital leaders both agree that a lack of defined standards and quality control are the biggest barriers to investment in emerging technologies.
These unknowns may be driving investors toward seeking short-term returns from their emerging technology investments and discouraging them from adopting the long-term vision necessary to finance the energy transition.
That’s where the public sector comes in. Whether through policies or incentives, most respondents see governments playing a primary role in achieving a sustainable future.
GAPS IN THE CURRENT INVESTMENT LANDSCAPE THAT COULD PREVENT THE ACHIEVEMENT OF A SUSTAINABLE FUTURE.
The amount of investment needed to achieve a net-zero world by 2050 is staggering. BloombergNEF estimates it could cost USD 196 trillion in investments for the world to reach net-zero carbon emissions by 2050, as many countries have pledged to do, to avoid catastrophic global warming.
In addition, BloombergNEF suggests annual green investments will need to nearly triple to USD 6.9 trillion by 2030 if we are to have any hope of hitting net zero by 2050. This transition means that consumers, businesses and government will need to swap gas-powered vehicles for EVs, and replace fossil fuel-powered energy with renewables like wind and solar, including new grids to connect them.
Emerging technologies can provide a powerful engine to drive the world toward this sustainable future. Our survey reveals a strong consensus among investors and venture capital leaders that sustainable goals are within reach and that technology will play the leading role in achieving them.
AGREEMENT THAT “TECHNOLOGY WILL PLAY THE LEAD ROLE IN THE WORLD ACHIEVING A SUSTAINABLE FUTURE”
If emerging technologies really hold the promise of a sustainable tomorrow, the key question is, how? One reason for optimism is the way emerging technologies intersect with megatrends, the powerful and transformative global forces shaping our future.
Investors must take a holistic view of these megatrends to understand how they interconnect with each other and how they will be impacted by emerging technologies to reveal risks and opportunities.
