9 Climate Market Predictions for 2023

Spoiler alert: focus on real applications & less hype

2022 has been a tumultuous year, marked with rising inflation, spiking rates and the war. Despite this, there is one industry that has shown significant and sustainable growth.

More than one quarter of all venture capital funding is going to climate technology, with increased focus on technologies that have the most potential to save our planet. Tokenized carbon credits became a hot topic, and standard bodies became acquainted with the possibilities of blockchain to scale and improve the integrity of the market:

The World Bank launched its Climate Action Data (CAD) Trust together with IETA & Government of Singapore along its Blockchain-based Climate Warehouse.
Leading Carbon registries Verra and Gold Standard recognize the opportunities of tokenized credits and both are exploring a tokenized state in their registries.
A lot of national & international bills and initiatives driving capital towards Climate Investments, like the Inflation Reduction Act in the US, which pledges US$369 billion in climate investments over the next decade.

This has accelerated the climate market — here’s what to look out for the months ahead:

1. Dry Capital

Climate VC’s are sitting on a huge amount of dry powder, an unallocated amount of USD 37.4B is waiting to be invested, but it will be deployed more cautiously than ever before.

Climate tech dry powder. Source Climate Tech VC

Looking at the Gartner Hype Cycle, We’re now past the Peak of Inflated Expectations and on our way to the Trough of Disillusionment, leading to a big shake out of failing projects. Focus on real problems will create a VC Golden Period, marked with a high return on investments comparable to the boomtimes of the dotcom era last decade (spearheaded by e.g. Obvious Ventures, Offline Ventures, PlanetA, Emergence Capital and many more).

Gartner Hype Cycle: towards the Trough of Disillusionment.

2. Maturation of Financial Carbon Markets

As climate finance matures, the carbon markets will mirror the traditional financial markets, with similar services like insurance, market makers, derivatives and more (e.g. Kita.earth, Renoster, Mangrove, Particula).

3. Fragmentation

As new carbon initiatives, integrity standards (like ICVCM), national carbon exchanges, and marketplaces continue springing up all over the place, liquidity in the carbon markets will become increasingly siloed and inaccessible. Permissionless liquidity aggregator, anyone?

At senken we are determined to make climate finance seamless, by aggregating carbon liquidity in an permissionless manner.

4. Trough of Disillusionment for Carbon Removal (CDR)

It will be a tough year for the relation of VCs and CDR companies with immense pressure living up to the promises like cost-efficiency. We hope the likes of NeoCarbon, Running Tide, Charm, and others prove us wrong by helping all carbon removal pathways come down their respective cost curves as quickly as possible.

5. Year for carbon x web3

Carbon Registries & standards like Gold Standard, EcoRegistry and Verra will get familiar with next-gen tech infrastructure and get acquainted with its benefits. Fellow players in the ecosystem are Toucan, Flow Carbon, Thallo, C3).

6. Pre-Funding of carbon

Pre-funding of carbon credits will be higher than actual carbon sales. Lack of supply and high competition amongst new startups will drive the shift. (e.g. Ivy, Salt, Solid Word, Goodcarbon, Vlinder).

7. Digital MRV Breakthrough

Category leaders for digital Monitoring, Reporting and Verification tooling (d-MRV) will finally have their breakthrough by being directly connected to the registries and the underlying infrastructure. Companies that are pioneering with end-to-end tracking are Pachama, GainForest, Open Forest Protocol, Regen Network, Chainlink.

8. ClimateTech is the new Silicon Valley

The best minds in world are gravitating towards climate tech. Fuelled by further tech layoffs, the search for purpose, and the desire to keep working in high-growth environments, the ClimateTech industry will become the new Silicon Valley.

9. Institutional investors

Driven by trend #2 — maturation of climate finance, more and more institutional investors getting comfortable with exploring carbon credits as an asset class, which will also fuel trend #6 — pre-funding. This will also lead to innovation along regulated lines (e.g. JP Morgan, Goldman Sachs, senken).

If you see what we see (or think we’re not seeing it correctly), please let us know at adrian@senken.io or josep@senken.io.

About senken

senken is the world’s largest climate finance platform that enables transparent investments in on-chain carbon credits from verified climate projects.

The corresponding project credits can be bought, traded, and used to offset carbon emissions. By using blockchain technology, senken provides additional security and transparency at the data level to ensure the quality and integrity of the projects.