Climate tech, profitability and digital intelligence: ETF Partners’ predictions for 2024
From the Partners at ETF Partners
As we enter a new year, at ETF Partners we continue to be committed to our mission of sustainability through innovation. The focus on ensuring a safe and environmentally sustainable future is more important than ever. We believe that by producing purpose driven investment we can ensure profitable decisions will also be the best ones for the planet in 2024. Below are the trends, topics, and market sectors that we see creating meaningful change over the next 12 months.
Climate tech continues to grow
In 2024 we are looking forward to seeing further growth in some of the most promising developments in climate tech. Renewable energy expansion of solar and wind technologies will drive unprecedented efficiency gains and cost reductions, making clean energy increasingly accessible on a global scale. As these technologies mature, the prospect of a cleaner, more sustainable energy landscape becomes not just a possibility, but a tangible reality. Our portfolio company Dexter Energy exemplifies this by enabling grid balancing and accelerating the energy transition.
The integration of AI and data analytics in climate tech will also open new frontiers for sustainable innovations. Smart grids, predictive modelling, supply chain planning, real-time monitoring systems and Earth Observation are all increasingly powered by AI. This contributes to a more intelligent and responsive approach to climate challenges that ultimately helps stakeholders better understand and manage their carbon footprint. Our portfolio company Open Cosmos perfectly demonstrates this integration of AI and data analytics, producing a global shared satellite infrastructure and cloud-based platform that can solve Earth’s problems based on satellite data.
Moreover, breakthroughs in the intersection between energy storage, battery technology and EVs will help us overcome the intermittent nature of renewable sources in 2024, ensuring a more reliable and consistent power supply.
The investment community has rallied around adopting sustainability in recent years and we only see the amount of beneficial and scalable propositions increasing. New investors are starting funds across Europe, and we expect more investment in 2024.
Digital intelligence takes centre stage
We have spent 18 years championing the power of startups to answer urgent needs with new solutions and in 2024, we only see this trend continuing. Startups will hone digital technologies that can be quickly and efficiently deployed to transform industries and accelerate climate-focused innovations that can be delivered at a relatively low capital cost. In our portfolio, carbon accounting company Normative combines cutting-edge data processing with a sustainable focus to provide companies with accurate reporting of their carbon emissions. Through identifying high carbon intensity sectors and suppliers, Normative reduces carbon footprint within the supply chain.
This year, the investment focus will be on the intersection of this digital infrastructure with hard to abate industries. Hard to abate sectors have long been a complex proposition when it comes to fighting climate change, yet in utilising the ever-growing power of AI technology, pioneering companies can create profitable methods of making hard to abate industries more efficient. One such company is DeepSea Technologies, which has already experienced great success in using AI and digital intelligence to understand large scale vessel logistics. They are helping to decarbonise an enormously fossil fuel-heavy industry that produces 4% of the world’s emissions.
While hardware and practical developments are critical to tackling the climate crisis, through adding a modern intelligence layer onto infrastructure digital tools can not only map carbon emissions but also improve the efficiency of operations. This will create companies that produce immediate results and the capacity to scale quickly. In 2022 alone, Normative processed 207 million tonnes of CO2 through their platform, while DeepSea were able to reduce the amount of fuel a ship consumed by as much as 12% per voyage.
Profitability is key
Heading into 2024 we are faced with a sluggish market that will present challenges as well as opportunities. Founders and VCs therefore need to understand that this economy is going to be the new normal and they should approach their portfolio and new investments with that reality in mind. It will be the organisations that can get to profitability quicker and manage their budgets effectively that will be the winners in the long term, rather than those investments with long term solutions and the need for short term losses.
The secret to remaining active in a downturn is being conscious and sometimes ignoring the herd rather than following it. Through remaining calm, we can still find great companies to invest in at sensible prices. The downtime is often a far better time to invest if you have the money.
In 2024, those who can spend wisely and create efficient, profitable solutions will see the greatest longevity.
Finding purpose in AI
In 2023, everyone was talking about AI and buzzword applications of the technology led to uses that added little to a company’s proposition. This year, it will be the organisations that can harness and understand their data with the help of AI that will find success in processing their information efficiently. We will continue to look for new and inventive ways that this machine learning-aided data processing can be implemented in successful investments. For instance, our portfolio company Net Purpose has used AI to create a platform that places sustainability and ESG achievements on a par with financial data. This helps potential investors gain both a fiscal and impact-focused view on organisations. Following the success of Net Purpose, we are looking for startups that can leverage AI creatively to produce scalable impact that can eventually change an industry.
An urgent focus on food and waste
Following COP28’s highlighting of food production as a key area for sustainable development, 2024 will see a continued emphasis on making the supply and production of what we eat greener. As much as a third of the world’s food production is wasted, leading to 17 million people living in food insecurity. Finding creative, digital-native solutions to food wastage and carbon reduction is therefore vital. Our portfolio company Phenix is already tackling this issue by providing a digital solution to connect retailers with consumers for food just before it goes off, thereby avoiding unnecessary wastage. Other ways that we can make food production and supply more sustainable will become an exciting sector to keep an eye on in 2024.
Ultimately, 2024 is a year of change and opportunity. Faced with the challenge of ensuring a sustainable future, technology continues to advance and provide solutions. Ultimately, there is massive potential in this environment to produce meaningful and profitable investments. The European founders we work with are at the forefront of building a greener, more sustainable world and we believe that 2024 will be an important year in achieving sustainability through innovation.