Key takeaways

• US Securities and Exchange Commission (SEC) approved new climate disclosure laws: The US climate disclosure mandate was approved in March, two years after it was proposed. However, the new law takes a step back, excluding Scope 3 emissions and limiting climate reporting to those with a material impact. It requires all US-listed companies to disclose information on their material Scope 1 and/or Scope 2 emissions. 

• Funding hit three-year high, led by Northvolt’s USD 5 billion green loan: Next-gen Climate and Energy startups raised USD 7.5 billion in Q1 2024 (2.3x QoQ and 4.2x YoY). Around 76% of funding (USD 5.7 billion) stemmed from battery energy storage, including Northvolt’s USD 5 billion green loan to expand its manufacturing and recycling facilities. Hydrogen (USD 885 million; 1.7x QoQ and 4.2x YoY) and Conservation Tech startups (USD 113 million; 5.4x QoQ and 20.4x YoY) also attracted record funding. The CMS and CCUS industries showed early signs of recovery alongside regulatory tailwinds.

• First-ever ethanol-to-SAF plant and first-ever commercial e-fuel plant unveiled: We observed 36 product updates in Q1 2024 (compared with 37 in Q4 2023). Notable world firsts included LanzaJet opening the first ethanol-to-sustainable aviation fuel (SAF) plant and Infinium unveiling the first commercial-scale electrofuels (e-fuels) plant. Biofuel startups such as Infinium, LanzaJet, and Twelve focused on advancing commercial production facilities, while several others made product advancements (Type One Energy, Syzygy Plasmonics, and Dimensional Energy) and launched operations in new geographies (Energy Vault, Minesto, and Carbon Clean Solutions). After a surge in climate disclosure product launches last quarter in anticipation of new SEC regulations, the CMS space had a notably quiet quarter.

• Collaborations were prominent in Alternative Energy, EOMS, and Hydrogen: We observed 70 partnerships in Q1 2024 (compared with 105 in Q4 2023). Alternative energy collaborations increased (Q1: 18 vs. Q4: 15), with biofuel, battery energy storage, and third-generation renewable energy companies focusing on advancing commercial activities. Hydrogen mobility partnerships were also notable, with ZeroAvia continuing to pioneer aircraft development, while EOMS companies formed several partnerships to strengthen national grids. CMS and CCUS partnerships were limited, following a lot of collaboration activity last quarter. 

• There were only two M&A deals in Q1 2024 (compared with six in Q4 2023). Conservation X Labs, a provider of AI-powered wildlife monitoring tools, merged with Wild Me, a non-profit that develops AI tools for wildlife conservation, to combine their strengths in AI. ONYX Insight, a provider of wind turbine performance analytics, was acquired by Macquarie Capital.

• Hydrogen activity is set to accelerate, while battery energy storage and biofuels remain hotspots: The US Department of Energy (DOE) and EU Commission have together committed USD 14 billion+ over the last six months to develop clean hydrogen production. Such government funding and heightened VC activity, along with supportive legislation (US 45V Hydrogen Production Tax Credit and EU Clean Hydrogen Acts), create an environment conducive to developing green hydrogen production as well as support technologies such as fuel cells and hydrogen-based transportation.

• Meanwhile, battery manufacturers are consistently attracting high levels of funding (both VC and government), which is now being invested in large-scale battery capacity expansion and battery technology innovation. Similarly, several biofuel companies, including LanzaJet, Infinium, Twelve, and Braya Renewable Fuels have either begun operations or are in the process of building large-scale production facilities in 2024. 

• New SEC climate disclosure ruling likely to spark interest in carbon-related industries: In the lead-up to the approval of the highly anticipated SEC climate disclosure rule, carbon-related industries saw a flurry of partnerships and product development. Both the CCUS and CMS industries also gained record funding in 2022 (CCUS: USD 2.6 billion and CMS: USD 1.9 billion) after the mandate was proposed in March 2022. The newly mandated disclosure of Scope 1 and Scope 2 emissions by public companies in the US is likely to require further investment and technological advancement in both industries.