14. Decarbonizing the Global Economy: The Valuation of Climate-Tech Firms

Cleantech and climate-tech describe the green and clean technologies that venture capital investors were turning to in increasing numbers as the next big thing in technology investing after the collapse of the tech boom in 2000. Billions are pouring into the business of decarbonization, betting on climate innovation. Cleantech is any new business model or technology that increases the performance, productivity, and/or efficiency of production while minimizing negative impacts on the environment. This includes clean energy, clean air, water treatment, transportation, recycling, and waste reduction, supply chain improvement, the built environment, manufacturing, and more. Climate-tech deals specifically with addressing climate change and thus is defined as any new business model and technology that mitigates the impacts and drivers of global greenhouse gas emissions (i.e., climate change). Business models impact valuation, increasingly consistent with ESG benchmarks. The analysis of the innovative business model of climate-tech firms is a prerequisite for its appraisal and embeds scalability options. The evaluation depends on the prioritizing identification of the crucial value drivers. The evaluation metrics are mainly based on expected cash flow and market comparisons.