VC & Climate Tech

QUESTION POSED TO GOOGLE

I read an article that said venture capital (VC) is investing in climate change tech. The statistics showed they were investing in oil and gas.

ANSWER

It can appear contradictory, but your observation highlights a complex and often misunderstood aspect of climate finance. Venture capital (VC) is indeed investing heavily in climate tech, but significant portions of that funding involve, or are led by, the oil and gas industry.

This phenomenon, often called "energy transition investing" or "corporate venturing," is driven by a combination of diversification, compliance, and the need for new technologies to make legacy operations cleaner.

Image created by ChatGPT, inspired by Chagall

Here is why your statistics show a mix of climate tech and oil/gas:

1. "Big Oil" is a Major Investor in Climate Tech 

Oil and gas corporations have "corporate venture capital" (CVC) arms—such as Shell Technology Ventures, BP Ventures, and Chevron Technology Ventures—that invest heavily in low-carbon startups.

The Data: In 2022, over 20% of all VC climate tech deals had participation from major oil and gas players.

The Motive: These companies are diversifying away from pure fossil fuels and buying into technologies that may replace their core business (e.g., geothermal, hydrogen, advanced batteries). 

2. The Shift to "Transition Tech" (Not Just Renewables)

The definition of "climate tech" has expanded beyond just wind and solar. Many investors are focusing on technologies that help traditional energy industries reduce emissions—a space known as "transition technology" or "hard-to-abate" sector solutions.

Carbon Capture & Storage (CCS): Oil and gas companies are investing in startups that trap CO₂ before it enters the atmosphere.

Operational Efficiency: Technologies aimed at reducing flaring (burning waste gas) or reducing emissions during extraction.

3. The Need for "Heavy-Asset" Funding 

Climate technology often requires high capital expenditure and long development timelines (the "valley of death"). Oil and gas companies have the massive cash flow and industry infrastructure to scale these technologies, making them "ideal" partners in the eyes of many VC firms.

4. Continued Fossil Fuel Investment

While climate tech is growing, it is important to note that the oil and gas sector still invests in its own, traditional infrastructure. As demand for energy grows, some firms are boosting capital expenditure in natural gas and liquefied natural gas (LNG).

Summary of the Landscape

Overall Trend: Global investment in clean energy (renewable power, storage, EVs) is growing and is expected to outpace upstream oil and gas spending.

The Conflict: Much of the capital powering this "green" pivot comes from "brown" companies (fossil fuel producers), making the data appear as a mix of both worlds.

The Result: Investors are betting that oil giants will either use their capital to pivot entirely or that the technology to make fossil fuels cleaner will dominate in the short term. 

After Goya

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