India’s climate tech start-ups need capital at both seed and later stages to make an impact: Report

IIMA Ventures (formerly IIMA-CIIE) with MUFG Bank have released a pivotal report titled ‘Innovation for Impact: Indian start-ups driving climate action.’ As India ranks as the seventh most vulnerable country to climate change, the report emphasises the urgency for climate tech start-ups to step up. India’s climate tech ecosystem, with over 800 active start-ups, holds significant potential but faces critical barriers, particularly in scaling their impact.

While early-stage funding is strong—two-thirds of funded start-ups secure seed rounds—there’s a glaring gap in later-stage financing. Fewer than 3% of start-ups have managed to raise Series B funding or beyond, signaling a pressing need for growth-stage capital and policy support to help them scale.

The report, unveiled at the Climate Action Summit, focusses on five sectors of India’s climate tech landscape: energy generation & consumption, food & agriculture, transport & mobility, industrial decarbonisation, and waste management & circularity. The transport & mobility sector leads, accounting for nearly 85% of climate tech funding, primarily driven by the rise of electric mobility. There are over 350 start-ups in this sector.

To unlock the full potential of these start-ups, the report calls for enhanced funding opportunities and stronger government policies, positioning India as a global hub for climate solutions.

Start-ups highlighted in the report include Fourth Energy Partner, Smart Joules, Bharat Rohan, Absolute, Euler, Hygenco Banyan Nation, among 80 climate tech start-ups showcasing the diversity and innovation within the sector. 

“India’s climate tech sector is not just a rapidly growing industry but a vital force in the global fight against climate change. The $3.6 billion raised by start-ups over the past decade highlights the sector’s significant potential and the pressing need for enhanced support to scale breakthrough solutions. IIMA Ventures has been pushing the needle on climate action from as far back as 2012. We have supported more than hundred climate tech start-ups and each of them is taking on some of the hardest challenges, while our research is bridging the knowledge gaps to impel collective action”, says Chintan Antani, IIMA Ventures.

The report also identifies five breakthrough areas poised to reshape climate tech innovation in India: Decarbonisation, projected to become a $10.3 billion market by 2032 with a focus on carbon capture and storage technologies; Circularity and Waste-to-Value, supported by the $ 15 billion waste management industry, offering new opportunities in recycling and sustainable materials; the rapidly growing Alternative Fuels sector, including electric vehicles, biofuels and hydrogen; and the need for innovative financial solutions to close the $1 trillion climate finance gap over the next decade. Additionally, there is increasing demand for AI and IoT tools for climate tracking and reporting.

Takuya Senoo, Regional Executive of MUFG India said, “A notable takeaway from the report is the importance of climate finance in achieving India’s net zero aspirations as well as supporting climate tech start-ups in scaling up and achieving growth. Our expertise in ESG financing and investment track record in Asia Pacific’s digital and fintech ecosystem puts us in a unique position in supporting these two long-term goals.” 

“As the climate crisis accelerates, investing in innovative solutions is more crucial than ever. At MUFG, we recognise the transformative potential of India’s climate tech start-ups and are committed to help them thrive through strategic investments and partnerships. Together, we can drive sustainable growth and create a resilient future for all.” he added.