Mena climate tech offers opportunities for investors

Thomson Reuters Foundation

Climate tech hits a sweet spot for investors. As a sector, it has a strong focus on environmental, social and governance factors (ESG), while it is at an early stage when it comes to exploring the potential of technology. 

And critically, climate tech offers opportunities for significant financial returns married with social impact.

• Green supply chain finance is the sector’s next step
• Mubadala’s first-ever green bond order book hits $6bn
• Investment in Mena climate tech hits record $270m in 2022

Let’s be honest, there are still many investors who care more about financial returns than impact. But monetary gain and positive impact don’t have to be mutually exclusive – as long as you invest in the right companies.

The flagship product of Abu Dhabi-based FortyGuard, for example, harnesses AI to provide high-resolution heat maps and data analysis. The company argues that we cannot change what we cannot measure.

Flat6Labs, also based in Abu Dhabi, says it is the Middle East and North Africa (Mena) region’s leading seed and early stage VC firm, and has run several cohorts of climate tech startups.

Elsewhere, Catalyst Investment Management, based in Jordan, specialises in climate infrastructure and technology. 

Leading the way

The Frontier Technologies Readiness Index 2023, released by the United Nations, ranked the UAE as the top Arab country ready to adopt advanced technologies such as artificial intelligence with a focus on green innovation.

A total of $651 million was invested in climate tech across Mena and Turkey between 2018 to 2022, according to research from startup data platform Magnitt.

Climate tech startups in the UAE attracted about two-thirds of total funding, accounting for $401 million – equivalent to 62 percent of total regional investment during the five-year period.

Turkey came in second with $124 million, or about 19 percent of all deals, followed by Saudi Arabia with $68 million (10 percent), Egypt with $42 million (7 percent) and Tunisia with $6 million (1 percent), the report said.

The importance of AI

As elsewhere, much excitement surrounds AI adoption. Predictive analytics, data analysis and machine learning unlock advantages by incorporating back-end deep learning technology. Preventative measures can now be made through alerts and early detection in areas such as floods, carbon emissions and forest fires. 

The need is urgent. Mena is warming twice as fast as the rest of the world, according to the IMF. What’s more, the region is home to 12 of the planet’s most water-stressed countries, says the World’s Resources Institute. Removing CO2 is essential if we are to limit global warming.  

But there are pools of capital available to support innovation. For example, The Rockefeller Foundation has committed to investing more than $1 billion dollars into climate tech globally over the next five years.

It is important to look for funds that already have a specific investment thesis in climate tech, if you are not sure where your money will make the most impact. 

Although many climate tech discussions focus on energy, there are actually four systems that are essential to the wellbeing of the planet and its people: agriculture, health, finance and energy. 

Around 3.6 billion people lack sufficient access to affordable, reliable electricity. This challenge is labelled “energy poverty”. But the good news is that there are innovative ways to produce energy and improve peoples’ lives without accelerating the climate crisis. 

As an example, I was an early patron of the Acumen Fund, a global nonprofit changing the way the world tackles poverty by investing in sustainable businesses, leaders and ideas.

In 2020 Acumen invested in Husk Power. Its equipment converts rice husks into combustible gases, which then drives a generator to produce electricity. These technologies were focused on providing energy to rural areas of India.

We need to empower local entrepreneurs to support their communities against climate adversity.

As investors, we are not doing this because it is a “good” thing to do (although that in itself is a laudable reason to invest in climate tech startups) but because many innovations are scalable and can easily be utilised in other emerging markets.

Lucy Chow is secretary general of the Dubai-based World Business Angels Investment Forum and general partner of the WBAF Angel Investment Fund