As global efforts to combat climate change intensify, the spotlight falls on the pivotal role of climate technology, commonly known as "climate tech." This broad term encapsulates a diverse range of innovations, from renewable energy sources like solar and wind energy to emerging solutions such as engineering carbon dioxide removals and alternative proteins. Climate tech stands at the forefront of our battle against climate change, offering pathways to reduce greenhouse gas (GHG) emissions, promote the sustainable use of scarce resources, and adapt to changing climatic conditions while at the same time also opening up opportunities for countries and businesses to drive economic growth and technological leadership in a world that moves towards decarbonized economies.
In this context, we had the privilege of interviewing Ms. Tokple, an expert in the field of climate tech. Ms. Tokple is currently a Project Leader at Boston Consulting Group's (BCG) Climate and Sustainability practice. She has supported both private and public sector clients in their decarbonization efforts, low-carbon business development ambitions, and broader climate action across the globe—from Europe to Africa and North America. Her insights shed light on the current state of climate tech, the challenges we face in scaling and deploying these technologies, and the potential paths forward with a focus on the US, where she is based today. Our conversation explores not only the technological aspects but also delves into the multifaceted challenges involving finance, policy, project development, and cross-sectoral collaboration.
Ms. Tokple, what drives you personally to be involved in the climate space—and what entails your work?
I have been engaged in the climate space with a focus on the energy transition for more than a decade. It started with being a youth activist and youth representative at international conferences such as the UN Climate Conference COP14 in 2008, to study mechanical engineering—focussing on clean energy—and later energy policy, to working on various clean energy topics across the globe—including electric mobility, decentralized renewable energy systems, and sustainable production and consumption—and today my role as a Project Leader in BCG's Climate and Sustainability practice.
The pivotal role of energy in shaping our world has always captivated me. It influences geopolitics, shapes national policies, and underpins our daily lifestyles, which rely on an uninterrupted energy supply. Moreover, energy access is crucial for socio-economic growth and reducing poverty. I've witnessed firsthand—in my time working in South Africa or when visiting relatives in Western Africa—how the absence of energy access severely restricts people's lives in numerous ways. Conversely, the energy sector is a significant contributor to rapid environmental deterioration and climate change. For instance, I spent some time in Beijing for research and work, and I won't forget its harsh, smog-filled winters. The city was often engulfed in thick, grey smog emitted from large coal plants, industrial sites, and heavy traffic, obscuring the sky and causing me headaches. To me, this was a tangible demonstration of how our energy needs and consumption could pose a direct threat to our health and environment.
Therefore, achieving environmental balance while fostering sustainable economic and social progress through clean energy systems and innovative ways of consuming energy to power societies in both developed and, even more so, less developed regions of the world presents one of our generation's most formidable challenges. It's a subject that has consistently ignited my passion and continues to do so. In my current role as an expert in Climate and Sustainability at BCG, I serve clients in the public and private sectors—particularly in the energy and industrial sectors—and support them in their sustainability strategy development and implementation, decarbonization efforts, and low-carbon business development—across the globe, from Europe to Africa to today the United States. A lot of my work includes supporting clients in the development, deployment, and/or investment in a broad spectrum of climate tech and low-carbon business opportunities.
When we talk about climate tech—what do we mean by it—and what is the difference between clean tech and climate tech?
Climate tech encompasses both established and emerging technologies dedicated to mitigating climate change and enhancing resilience to its effects. This field includes a wide array of innovations aimed at reducing GHG emissions, promoting sustainable resource utilization, and facilitating adaptation to evolving climatic conditions. To simplify it, you can bucket climate tech under the following areas: Transitioning energy supply to renewable or low-carbon sources; moving toward zero-emissions transportation; reducing the impact of buildings and other infrastructure on the climate; cultivating sustainable agriculture, forestry, and land use; and decarbonizing industrial processes.
For instance, renewable energy sources such as solar and wind power, electric vehicles, and energy-efficient appliances are exemplary of climate tech. Emerging, novel tech that is receiving increasing attention—of which many of the readers have probably already heard, such as low-carbon Hydrogen, carbon capture utilization, and storage (CCUS), direct air capture (DAC), or alternative proteins. In terms of the difference between climate tech and clean tech—clean tech is a broader term that encompasses technologies aimed at reducing environmental impact and enhancing sustainability. You could see climate tech as a subset of it, while clean tech also covers areas like water purification, pollution reduction, and sustainable materials. Hence, clean tech is not just about addressing climate change but also about minimizing environmental footprints and conserving resources.
Can you put into perspective how much we need climate tech in combatting climate change?
Urgently! According to the International Energy Agency's "Net-Zero by 2050" report, approximately 90% of the GHG emissions reductions needed to achieve Net-Zero and avert severe climate change impacts rely on the widespread adoption of both mature climate tech and those technologies still in developmental or pre-commercial stages. More specifically, 40% of the emission reduction needed by mid-century requires the broad adoption of already mature (meaning already commercialized) tech such as solar energy, wind energy, and electric vehicle solutions—while another 50% of the reduction requires the broad adoption of technologies that are currently still in early development stages—thus still need to be further matured and commercialized—such as DAC, CCUS, sustainable aviation fuels. And this is only looking at climate mitigation.
If we also take climate adaptation into account—which will be increasingly important as the more severe impacts of climate change unfold—the need for innovative climate adaptation solutions becomes even more urgent. It is important to highlight that a lot of the tech we are talking about is capital-intensive technology—so physical infrastructure, steel in the ground—we are not talking about asset-light solutions or software. Think of your large-scale wind installation or your CCUS facility. The fact that we are talking about highly complex technologies—that often require the construction of large-scale infrastructure, often also necessitating the integration into existing complex technical processing or engineering structures—means that development, commercialization, and broad adoption of those technologies is often a very challenging undertaking.
Can you please elaborate a bit more on the need for both novel and mature tech?
I work with clients across sectors who rely on both mature tech (for example, deployment of renewable energy like geothermal, wind, and solar energy to decarbonize their power supply) but also more novel solutions—especially in hard-to-abate sectors, such as green Hydrogen in the petrochemicals and steel production. Depending on the industry or sector, mature climate tech can already address nearly all or the majority of emissions. So, as mentioned earlier, around 50% of the emission reduction needed to get to Net-Zero and limit global warming to 1.5 degrees Celsius can be done with tech we already have, but we need to find ways to deploy this tech broadly at scale.
However, there are those sectors, applications, and processes (for example, heavy-duty transport, high-temperature processes, and cement or steel production) that will simply require new solutions. At the same time, it is also important to highlight the economic opportunities that exist for a business—or an entire nation—in exploring some of those climate tech business models and products. In South Africa, for example, I worked with clients in the petrochemicals sector, exploring ways to tap into the opportunities of a growing global market for green Hydrogen and Hydrogen-based products—which South Africa, with its excellent renewable energy resources, could be well-positioned to benefit from.
You mentioned that the climate tech we most need is usually very capital-intensive and requires complex infrastructure to be deployed - which makes commercialization and deployment challenging. Where are we today with the deployment of such climate tech in the US?
Since 2017, the United States has seen an investment of over $120 billion in the national climate tech sector. Investment growth has been substantial, with a sixfold increase from 2017 to 2022 (~6 billion to ~36 billion), driven in part by late-stage investors becoming more comfortable with maturing climate tech, such as solar and wind energy, and energy efficiency measures. Furthermore, significant policy initiatives such as the Inflation Reduction Act (IRA), which allocates $370 billion for climate and energy initiatives in the United States over the next decade, demonstrate the government's commitment to fostering an innovative, energy-resilient, low-carbon economy. However, despite these advancements, there remains a conspicuous barrier to the commercialization and broad adoption of climate tech in the United States.
Numerous innovators who work on capital-intensive climate tech face challenges in securing sufficient or the right type of funding for their initial commercial deployments. Those first commercial deployments, which include pilots, demos, and first-of-a-kind commercial facilities, are extremely important milestones to reach for those companies in their commercialization journey. With approximately 3000 climate tech startups in the United States approaching or at the Series B stage—where first commercial deployments typically occur—the funding shortfall could potentially amount to ~$150 billion to ~250 billion. If those startups cannot secure the required mid-growth funding, they are pretty much doomed to fail - and with them, the climate tech we need.
What do you see as the reasons for those funding shortfalls?
There are several multifaceted obstacles to scaling up climate tech, encompassing—in a nutshell—aspects such as finance, project development, project economics, policy, and regulations. In terms of financing, capital providers often lack the necessary underwriting capabilities, are not sufficiently syndicating on deals where it makes sense, and often face misaligned incentives among investors across the capital stack. Regarding project development, operators often only have limited capabilities in project development and often encounter engineering and integration challenges that they are not able to address. From a project economics perspective, market uncertainties, such as questions around robust offtakes or feedstock supply security, make those projects riskier. Lastly, the uncertain landscape of policy and regulations can significantly impact the economics and feasibility of those projects—think of, for example, permitting processes for large infrastructure projects.
What needs to happen to overcome those challenges?
We are talking about a complex set of challenges. If we single one out—the financing piece—the following will be important: we need to convene a diverse array of investors across the capital stack, off-takers (so those who commit to buying the respective product) and innovators and strategic partners to jointly derisk projects, align interests, and create the right financing solutions. Derisking those projects will require numerous things, most importantly building capacity among innovators, locking in robust offtake agreements, deploying catalytic capital to reduce risks that market-rate participants cannot take, but also many other things like leveraging novel insurance products and derisking the contracts between operators and the executing engineering, procurement, and construction firms.
Corporates play a crucial role as strategic partners, offering capital, engineering, and market expertise and potentially acting as off-takers, benefiting both climate tech companies and corporate off-takers' decarbonization efforts. Additionally, redirecting catalytic capital towards underfunded areas in a standardized manner is vital (today, catalytic capital providers seem to often go towards what is "en vogue" vs. where their highly valuable capital is needed most). Furthermore, it will be important to establish well-capitalized funds with the right science, engineering, and policy expertise and the right incentives across all levels (for example, Limited Partners need to give their General Partners the mandate for substantial investments in innovative, but also often riskier, early commercial climate tech deployments, while also creating incentives for investors on an individual level to invest in those opportunities).
What's next—what do you want to personally address next to ensure those barriers are removed?
Looking ahead, I'm eager to tackle these barriers by addressing the multiple layers of the challenge. A critical piece of this involves supporting the creation of a platform that brings together diverse stakeholders from across the ecosystem and fosters collaboration in derisking and investing in climate tech scale-up projects. There is a particular need to get corporates more into the game—leveraging their assets, expertise, and demand is crucial in derisking many of those capital-intensive climate tech early deployments.
In addition, I see a significant need for robust capacity building among innovators. By empowering these pioneers with essential skills and knowledge around the development of capital-intensive, complex infrastructure-heavy projects, we can boost the confidence of later-stage investors and accelerate the commercialization and broad deployment of climate tech. Lastly, I think it is critical to translate those learnings into other parts of the world where different but also to some degree similar challenges hold back the deployment of both mature and novel capital-intensive climate tech—such as the deployment of climate tech in emerging markets. The urgency of deploying both established and emerging climate tech is a need across the world, and I hope I can effectively contribute to breaking down barriers and accelerating the global adoption of climate tech.
