🇧🇷 Beyond Carnaval #03: Climate Tech is serious business
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Have you ever thought about how reactive most of us are? Think about an occasion when you had to make a big decision, like buying a property, moving to a new city, or breaking up. How did that work for you?
Now, imagine someone—not just anyone, but a person who dedicates most of their life to searching and studying one topic that could help you be proactive and anticipate many problems you could face if you hadn’t waited too long.
Well, this has been happening for thousands of years, since ancient Greece, but in a more scientific global approach, since 1896.
Climate Change is the topic.
{ If you were living in a cave and never heard this term, please, read this article }
Heatwaves, wildfires, hurricanes, floods, and I’m not even mentioning challenges related to health issues, migration, food shortage or economy.
It is hard to compete with wars and politics news these days. But since April 20th, Brazilians from the Rio Grande do Sul state are living another episode of what is being called “Extreme Climate Event”. If you are Brazilian, this is all you hear about since last week.
The devastating floods triggered by record-breaking rains, have led to landslides, collapsed infrastructure, and widespread destruction across the state impacting nearly 1,5 million people and more than R$ 6,3 billions in losses to the state.
Events like this may have a huge political factor and lots of institutions and people to blame - and we should blame them all. But honestly, we are still part of it and this Climate Change challenge won’t just fade away. So once again, we will have to be reactive. That’s how our society and also markets work.
But before sharing more about the Brazilian Climate Tech ecosystem, support the victims from Rio Grande do Sul (RS).
The Investment Market is Aware of Climate Techs’ Potential
As you and I know: markets are highly responsive to changes in supply and demand, and this is especially evident during times of disaster or crisis, but also creating new market opportunities.
This is exactly what is happening with startups called “Climate Techs”. These companies develop technological products and services to mitigate and adapt to climate change, usually removing existing carbon from the atmosphere, reducing future emissions or by increasing our resilience against the impacts of a changing climate.
Since addressing climate change requires transformation across all sectors, climate tech companies span a wide variety of end markets and business models, such as Energy, Mobility, Carbon, Food and Land Use and Industry per instance - so numbers here are not precise and this is not our fault.
The climate tech market has experienced rapid growth in recent years. In 2021, the total Venture Capital investment reached an impressive $56 billion spread across more than 1,600 deals globally. By the following year, it had secured over 25% of all venture capital transactions. However, in 2023, the sector faced significant challenges, experiencing a sharp decline in investment, with total venture and private equity investments dropping by 50.2%, and climate tech startup funding declining by 40.5%.
Despite this setback, by Q3 2023, the sector's share of private market equity and grant investment surged to 11.4%, maintaining an annual growth rate of 10%.
Fast forward to Q1 2024, and there's a notable resurgence, particularly in capacity expansion giga and mega rounds, hinting at a potential recovery in the sector.
Notable investments in companies like Northvolt and H2 Green Steel drove more than half of the quarter's total funding towards capacity expansion and facility construction. There is also a shift towards public funding opportunities and non-equity financing, which indicates a growing maturity in the market with a focus on innovative solutions and collaborations for climate technology advancement.
The Rising Brazilian Market for Climate Tech Investment
With slightly less maturity than other markets, Brazil offers a fertile ground for foreign investors and founders eyeing climate tech opportunities.
As Bill Gross from IdeaLab noted, the convergence of economic momentum, technological advancements, and cultural acceptance creates a good investment opportunity.
The country's current focus on sustainable practices, coupled with the rise of AgTech and FoodTech startups, underpins growth and innovation in the agricultural sector. Furthermore, Brazil's strides in renewable energies like solar, wind, and biofuels, particularly in regions like the Northeast and Midwest, provide a solid foundation for clean energy generation.
Leveraging climate technologies such as sensors and drones, Brazil can optimize water resources, improve soil use, and bolster carbon sequestration efforts. With its rich biodiversity, notably in the Amazon Biome, and ample freshwater reserves, Brazil offers a competitive edge for investments in environmental care and related technologies.
In the venture capital landscape, Brazil's emergence as a hub for unicorns underscores its potential for structured investments in climate tech. By combining science, technology, creativity, and nature-based intelligence, Brazil is poised to lead sustainable innovation, potentially becoming a new epicenter for global green transformation.
Brazil has reached an agreement with Paraguay at Itaipu Binacional Hydroelectric, deciding to forgo R$ 300 million annually to maintain current tariffs. This deal aims to strengthen trade relations and potentially lead to a comprehensive trade agreement, fostering economic growth and job creation.
Agrishow is an annual agricultural fair held in Brazil since 1994, showcasing the latest technology and innovations in the sector. The 2024 edition took place from April 29 to May 3, attracting over 800 exhibitors and generating R$13,608 billion in business intentions, a 2,4% increase in commercial transactions, and an audience of approximately 195 thousand people.
xFarm Technologies and Bunge, announced at Agrishow 2024 a partnership for one of the largest Regenerative Agriculture programs in LATAM. This collaboration aims to digitize 600,000 hectares of land in Brazil by 2026, utilizing AI-driven decision support systems to enhance sustainability in farming.
S&P has upgraded the Brazilian unicorn fintech Nubank's global scale rating to BB and its local scale rating to brAAA, reflecting the fintech's strong market position and growth in Brazil. Nubank in turn, announced reaching 100Mn users on its platform.
Yesterday, May 8th, annual retail sales showed improvement above the 5.2% consensus. The 5.7% growth is a breath of clean air for consumption data. The same goes for vehicles sales, growing 13.5% MoM, way above the 2.2% market expectations
It's earnings season. Stay tuned to watch the results of major companies in Brazil.
🇧🇷 Brazil
May 10th
Annual inflation | Previous: 3.93% | Consensus: 3.66% | Expectation: 3.7%
🇺🇸 The U.S.
May 13th
Inlfation expectations | Previous: 3% | Expectation: 3.1%
May 14th
Producer price inflation | Previous: 0.2%
Family debt balance | Previous: $17.5T
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