Legislation is driving innovation in the climate change ecosystem

One of the reasons that the climate tech investment space is so different and resilient at the same time is that a lot of the companies we see are backed by regulation. This creates a unique dynamic in this sector as you not only have corporate momentum and demand side pull from consumers but also black and white regulatory forces which create huge amounts of market stimulation for start-ups.

Undoubtedly the most obvious piece of umbrella legislation that has driven the sector is the 2050 net zero emissions targets enshrined by law in the UK. What this has effectively done is galvanize the corporate and public sector alike to the massive challenge that lies ahead. This is the biggest single impetus for the corporate sector as companies large and small are figuring out for the first time how to measure carbon in their operations and supply chain and then how to start reducing it.

So, what do we see in terms of the start-up ecosystem? In 2022 this has led to a plethora of carbon accounting startups, SaaS platforms and SaaS/consulting hybrid businesses that try to solve the carbon accounting piece – you might call this phase one of the transition to a low carbon economy.

Some of the early winners in the startup space will be based around the carbon accounting requirements as we drive to net zero. We have Earthly in our portfolio who offer both carbon accounting and nature-based offsetting (nature-based solutions or NbS) with a strong Saas platform offering. This is potentially a proposition that can access millions of customers via banking partners and consumer facing businesses.

In 2030 new petrol and diesel car sales will be outlawed in the UK. This has been a huge stimulus for change across the transport industry from EVs, charging technologies, battery technologies and battery storage and everything electric from E-scooters to E-cargo companies. To give you an idea of how quickly these nascent models are growing – the global E-cargo bike market will grow from a fledgling market to a 2 billion USD market by 2030 with a CAGR of 13.7%. We were proud to recently support Zedify in their continued growth to become a major E-Cargo player in the UK.

Innovation in sustainable packaging is a really big area where we are seeing a lot of innovation. Single use plastics were banned in Scotland in August 2022 and from 2022 the plastics tax came in on all plastic packaging components that don’t include 30% recycled plastic. The reality is we are likely to see the total replacement of the fossil fuel derived plastics packaging industry over the next 10 years. There is huge corporate demand in this area as big players spend budgets on R&D and pilot projects to develop sustainable packing formulas going forward. We will be supporting the Bath based bio plastics R&D company Kelpi in our next tranche of investments.

For more information on OnePlanetCapital please contact Declan@oneplanet.capital