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- 10 Urgent Areas of ClimateTech Ripe for Investment in Latin America, according to VCs
10 Urgent Areas of ClimateTech Ripe for Investment in Latin America, according to VCs
LatAm Climate Investors tell us the priorities for innovation in the region
Heat waves, droughts, extreme weather, and biodiversity loss are just a few of the devastating effects of climate change being felt across Latin America.
As the region looks to adaptation and mitigation technologies to minimise the impact, investors see an opportunity to invest in these scalable solutions and their founders.
As Ruben Altman @ Antom.la told us
Here at ClimateHack, we spoke to investors funding the climate finance gap in Latin America to hear which technologies startups should be working on and where they’ll invest next across:
Latin America is home to 40% of the world’s biodiversity; almost a third of the planet’s freshwater and 57% of the world’s primary forests. But it is also seriously under threat.
Here’s the technologies in biodiversity these 3 investors are prioritising:
Ruben Altman @ Antom.la
MRV for Biodiversity: Effective MRV platforms that let nature-based regeneration projects flourish with confidence.
Reducing Deforestation: Currently, land use and agriculture contribute to 45% of regional greenhouse gas (GHG) emissions. Despite decades of tree cover loss, commitments have been made to achieve an 80% reduction in primary forest deforestation by 2030 and a net forest growth of 100 million hectares by 2050.
Regenerative solutions and natural capital: Startups should focus on technologies that facilitate regenerative projects, emphasizing the valuation of natural capital as a financial asset. Innovations in this area could include developing platforms or tools that enable better management and monetization of natural ecosystems, thereby turning them into sustainable and profitable assets.
The Latin America and Caribbean region generated 63% of its electricity from clean sources in 2022 and the region has a growing role to play in the global energy transition.
Investors share which technologies they’re looking to invest for a clean energy future:
Smart Grids and Battery Storage: The growing demand for efficient energy solutions places a spotlight on smart grids and battery storage. Startups should explore advancements in battery technology and grid management systems. These innovations are crucial for improving energy distribution efficiency and harnessing renewable energy sources more effectively. Additionally, advancements in this sector can significantly reduce carbon emissions and enhance the stability of energy supply in Latin America.
Luis Gerardo Carvajal Fernandez @ Siemens Energy
Power-to-X: It encompasses the approaches to convert electrical energy into other forms of energy or products, mainly hydrogen-based, typically for storage, transportation or for use in industrial processes. It is considered as an essential component of the future of energy.
Energy Storage: as the installed capacity of renewable energy increases and many electrical systems transition into smart and more distributed topologies, energy storage gains more and more importance to stabilize the grid and ensure continuous renewable energy supply.
Condition-Based Service Interventions: Artificial Intelligence and the trend towards smart digitalization in all industries is highly relevant in the energy sector.
Energy Efficiency / Optimisation: AI-based solutions applied to the optimisation of energy consumption both in residential and industrial and alternative clean energy.
Grid Digitalization and Demand-Response Management: Electricity demand is projected to grow by 90% by 2050 with today's policy settings and by 180% to fulfill all pledges and targets, doubling the share of electricity in total final consumption. Higher levels of air conditioner ownership and rising EV sales impose higher risk of rapid variations in demand.
Andres Baehr @ Savia Ventures
Energy-Tech: If we take Chile as an example, the price of electricity is estimated to rise between 8-11% in 2024. This trend can be observed in most countries in the region, which is why there is an opportunity for entrepreneurs to develop renewable energy alternatives and energy optimisation solutions. These range from distributed solar (in a high radiation location such as Mexico, distributed solar is only at 4% of total energy generated), to energy savings and smart grid optimisation. Solfium and Splight are great examples of energy-tech startups taking advantage of this opportunity.
Accelerating sustainable and regenerative practices can have a global impact to reduce the sectors GHG emissions. The region accounts for 14% of global food production and 45% of net international trade in agrifood products.
Four technologies that are showing efficiency and now need to scale according to investors are:
Matias Peire @ GridX
Laminar flow bioreactors: To unlock the potential of biotech we need to disrupt the fermentation technologies. Laminar flow bioreactors are showing great progress and now need to start the escalation process.
Biofertilizers: There are already alternatives to synthetic fertilizers on the market, but they are not growing at the rate we must continue for them to truly become an alternative that allows for more sustainable agriculture.
Ruben Altman @ Antom.la
Reintroducing biodiversity: Platforms that enable the transition from an agricultural production system based on inputs to an agricultural system based on ecological knowledge, that enable the reintroduction of biodiversity in productive landscapes at scale (AI, Data Science, IoT, robots, etc)
Plasma has the potential to significantly reduce energy consumption and capture carbon.
Two LatAm investors are particularly interested about its applications:
Matias Peire @ GridX
Cold plasma: Cold Plasma as an emerging technology that could be a great alternative to capture CO2 or other greenhouse gasses.
Plasma x Hydrogen: The potential for plasma in the hydrogen economy is big, considering the test and developments we are seeing and the potential that plasma has to generate carbon neutral hydrogen from methane, a good way to decarbonize several industries with last mile hydrogen production.
The region is home to four of the world’s 25 longest rivers and contains some of the largest reserves of freshwater yet climate change is having a devastating impact on water resources.
As highlighted by the team at Dalus Capital and Savia Ventures:
Water Security: Countries in Latin America like Mexico will continue to become drier and therefore suffer water stress. We need more solutions to ensure water preservation, recovery, and resilience.
Andres Baehr @ Savia Ventures
Water Footprint: Latin America is running dry. From Petorca, Chile, to larger states such as Nuevo León, State of Mexico and Jalisco, the region is threatened by water scarcity, sometimes exceeding a 50% reduction of the total water supply. We recognise both the opportunity and the urgency to support entrepreneurs who seek alternative solutions to traditional food production, developing tech that manages to reduce 50-70% of the water footprint via different methods of generation of food and alternative proteins.
Transport emissions relative to economic output are higher in Latin America and the Caribbean than in any other region, except Africa.
Here’s how VCs believe we can decarbonise the sector:
EV Adoption: There has been an increase in motorcycles and other vehicles on the streets. Solutions that democratize the adoption of electric vehicles for this sector are fundamental to reducing emissions.
AI for Energy Transport and Distribution: The use of AI for smart grids is not new, but the power of current AI engines and the wider adoption of this technology around the globe, is allowing many startups to develop AI based solutions to optimize the transport in HV grids, to automate distribution and smart grids, to properly use energy storage in nodes and take the maximum juice of renewable energies.
Electrification of Transport and AI Integration: The increasing interest in electric vehicles (EVs) and their supporting ecosystem presents a significant opportunity. Startups should develop solutions for EV charging and management software, fleet electrification, and other related technologies.
Gabriel Guardado Zambrano @ Savia Ventures
Electromobility: This is going to be here later than expected. Transportation plays a key role in CO2 emissions and is a problem that can be attacked on different fronts. One example is Ruedata, a SaaS solution that optimises tyre consumption, thus reducing the carbon footprint of vehicle fleets and saving tyre costs.
Biofuels and Innovations in Public Transportation: These are other profitable examples of climate technologies that can be used while electromobility spreads out in the region.
Latin America and the Caribbean are rich in natural resources with large carbon sinks and high potential for nature based solutions.
One investor in particular was excited by the untapped potential:
Assisted-NBSs: Nature Based Solutions (NBS) for carbon capture and fixation into soil and oceans is the oldest and wider way we have as a planet to regulate the levels of CO2e in the atmosphere. Still, nature is not able to cope with the recent emissions post industrialization. Different solutions are on the go, but it is pretty much defined that we will also need around 6 GTns of CO2e captured from the atmosphere by 2050 to stay between the limit of Paris Agreement 1,5C. We are looking with massive interest several science based solutions that assist or enhance the role of nature, including BioTech, AI, Drones, BlockChain, New Sensors, Marine IoT and others. The ultimate goal is to assist NBS in order to scale and apply them at the level we need them.
Circular cities and circular economies offer opportunities to eliminate waste and pollution, upcycle materials and prioritise regeneration with less environmental impact.
Here’s how investors think we can create a more circular society:
Reduce and Reuse: Startups should focus on increasing the circularity of materials to maximizing the use of existing resources through practices such as recycling, repurposing, and reusing materials and reducing waste.
Consumer Awareness: The expansion of Extended Producer Responsibility laws in Latin America and rising consumer awareness will continue fostering corporations to work with startups that are developing circular solutions to reduce waste.
Latin America and the Caribbean hold over 1/3 of the global reserves and the production of critical minerals such as graphite, bauxite, nickel, zinc, lithium, copper, and neodymium are expected to surpass revenue from fossil fuel production before 2050.
Here’s what one of the VCs in the space told us:
Resources & Impact Management for Mining: Some of the largest copper mines are in northern Chile, where water scarcity is a critical issue. To capitalise on these opportunities, mining activities must adhere to high ESG standards and contribute to the well-being of local communities.
As the pillars of ClimateTech overlap, three areas of innovation are needed to enable the scale up and growth of startups.
Ruben Altman @ Antom.la
Tools: Financial tools like credits or insurances that facilitate the deployment of existing clean technologies at scale, like solar panels or water processing plants.
Higher Accountability: Companies can only act upon what they can measure. We envision a stronger focus on LCA (Life Cycle Assessment) / EPD (Environmental Product Declaration) through tech that automates the carbon footprint calculation in Real Estate and Construction
Smart Funding for Deep Tech Startups: DeepTech startups are a rare animal, and sometimes VC is not the right tool. There are other solutions like Venture Debt and Venture Client that we use and are well received from startups. We also need innovative capital solutions to support disruptive tech companies.
Agree, disagree or want to have your say? We’d love to hear from you.