India’s climate-tech sector faces challenges with funding, policies, and consumer preferences. Explore solutions to empower sustainable innovation.

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The Climate-Tech Landscape in India: Opportunities and Challenges

In a landmark statement made during the Middle East Green Initiative Summit in 2021, Larry Fink, CEO of BlackRock, emphasized the emerging class of unicorns driven by sustainable technologies. “The next 1,000 unicorns…won’t be a search engine, won’t be a media company; they’ll be businesses developing green hydrogen, green agriculture, green steel, and green cement,” he stated. This statement reflects a growing recognition among financial institutions that climate risk is not just an environmental concern, but a critical financial one.

However, despite global enthusiasm for climate-tech innovations, India’s potential in this sector remains unrealized. Let’s explore the state of climate-tech startups in India, identifying the key obstacles they face and potential pathways for growth.

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The Current Climate-Tech Startup Scenario

Since 2022, there has been some encouraging progress in the Indian climate-tech sector, with 486 startups receiving funding across multiple rounds. While this reflects the growing interest in the field, much of this funding has concentrated in the early stages. As reported by data platform Tracxn, in 2022, approximately 287 startups received seed and Series A funding, but these numbers declined noticeably in subsequent years.

Growth Capital: An Elusive Resource

The troubling trend indicates that while early-stage investments are readily available, the same cannot be said for growth capital. Only 26 startups received growth-stage funding in 2022, with those numbers dipping further in 2023 and 2024. According to Sandiip Bhammer, co-managing partner at Green Frontier Capital, “There’s a lot of early-stage capital available to back innovation, but unfortunately, as the innovation scales, there’s not enough growth capital.”

The Role of Electric Vehicles in Funding Dynamics

Interestingly, sectors like electric vehicles (EVs) have attracted a significant influx of worldwide funding, leading to the emergence of unicorns such as Ola Electric and Ather Energy. The focus on the mobility segment is motivated by rapid return on investment, which contrasts sharply with the broader climate-tech sector where growth is hampered by several factors.

Beyond Funding: The Policy Barrier

India’s slow pace in implementing robust climate policies stands as another barrier for climate-tech startups. Currently, the Securities and Exchange Board of India mandates only the top 1,000 companies to draft ESG (environmental, social, and governance) reports, and non-compliance does not incur any monetary penalties.

“Compared to Europe, where companies face significant penalties for failing to meet ESG standards, India’s approach remains relatively lenient,” observes industry insider Sapna Nijhawan, CEO of Sustainiam. This lack of stringent regulation dampens the urgency for businesses to adopt sustainable practices.

The Consumer Perspective: Cost vs. Sustainability

Moreover, the price-sensitive nature of Indian consumers complicates the sustainability landscape. According to observations by Arpit Dhupar, CEO at Dharaksha Ecosolutions, “Indian consumers are very price-conscious, so if there are, let’s say, five products on the shelf, the cheapest product gets sold.” This consumer behavior leads companies to prioritize lower costs over adopting sustainably sourced supplies.

The Free-Rider Problem: A Shared Dilemma

The “free-rider problem” applies not just to consumers but also among nations. There continues to be an expectation that wealthier nations in the Global North would assist other countries in the Global South in their climate technology initiatives, a support system that has yet to materialize, according to Mohapatra of PwC.

Looking Ahead: A Path to Transforming India’s Climate-Tech Landscape

Despite the hurdles, a new trajectory is emerging for climate-tech companies in India. The country’s green technology and sustainability market is anticipated to reach $8.6 billion by 2033, growing at a robust CAGR of 27.36% from 2025 to 2033. This potential indicates that there is a window of opportunity for innovative ideas coupled with strong business models.

As India looks to modernize its climate-tech landscape, the government needs to expedite the creation of an infrastructure that encourages sustainability. A more firm regulatory framework might compel companies to adapt their core practices toward more environmentally friendly standards.

Conclusion: Towards a Sustainable Future

India’s climate-tech startups find themselves at a crossroads. The combination of market uncertainty, regulatory challenges, and consumer behavior necessitates a fresh approach to harnessing their potential fully. With concerted efforts from all stakeholders, including government support and passionate investment in sustainable alternatives, there’s hope for elevating India’s climate-tech startups to the unicorn status that many aspire to achieve.

Innovative solutions must be prioritized, not only to create wealth but to build a sustainable future for upcoming generations. The time to act is now, as the climate crisis continues to demand attention and action.

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