Investor Tom Steyer extols ‘great opportunity’ in climate tech amid market upheaval

The secret to Warren Buffett’s success, the legendary investor told his shareholders in 1986, was “to be fearful when others are greedy and to be greedy only when others are fearful”.

Could this be a good moment to apply Buffett’s maxim to the climate tech market, as it goes through a crisis of confidence? Venture capitalist Tom Steyer makes the case below.

Also today, we explain why an arcane change in accounting practices at the Asian Development Bank is good news for green finance.

Have a great weekend.

Green investment

Tom Steyer: ‘This is a great opportunity’

Billionaire fund manager Tom Steyer’s entry into climate tech investing occurred at the height of the financial sector’s interest in the topic.

Galvanize Climate Solutions, which he co-founded with fellow investment veteran Katie Hall, launched in September 2021 — a few weeks before the COP26 climate summit in Glasgow, where finance bosses jostled for platforms to declare their commitment to the net zero agenda.

To many eyes, the picture looks far gloomier today, as Donald Trump’s return as US president weighs on sentiment in a climate tech venture market that had already been sputtering. But Steyer insists that the upheaval has left this market looking more attractive.

“People were very excited at Glasgow,” Steyer told me this week. “So . . . which is the better time to invest? If you look at the pricing in the markets in 2021, versus the pricing today . . . this is a great opportunity.”

Climate venture investment declined for a third successive year in 2024 to $30bn, according to market intelligence firm Sightline Climate, down from a peak of $48bn in 2021. Last year’s number would likely have been even lower without support for green investment from Joe Biden’s Inflation Reduction Act, which is now being scaled back by the Trump administration.

Steyer made his own shortlived but expensive tilt at the presidency in 2019, ploughing $341mn of his personal funds into a campaign that he dropped after failing to pick up a single delegate on the Democratic primary trail. Last October, Galvanize — which runs a $1bn climate venture and growth fund and smaller ones focused on global equities and real estate — hired former US secretary of state and climate envoy John Kerry as co-chair. “John opens up relationships with people all over the world,” Steyer said — albeit perhaps less so in Washington these days.

But Steyer maintained that Trump’s return had not forced any fundamental change in Galvanize’s investment strategy, which he said had always been focused on businesses that were not reliant on policy support.

Several of the firm’s investments have been in software companies — including Watershed, which makes software to track corporate carbon emissions, and Alcemy, which develops analytics to reduce emissions from cement and concrete production. Galvanize has also taken a stake in the UK’s fast-growing green electricity provider Octopus Energy. Another bet has been on next-generation geothermal company Fervo Energy which, as we wrote last month, now looks set to benefit from the support of Trump’s new energy secretary.

“We’ve basically invested into growing trends that have continued to grow,” Steyer said. “That’s what we were trying to do in the last administration, and that’s what we’re trying to do in this administration. We’re not counting on the government to save us.”

climate finance

How the ADB found an extra $6bn a year for climate finance

Compared with the Glasgow COP, last November’s COP29 in Baku had a much less upbeat mood. A UN-backed expert group made the case for a huge expansion in international climate finance for developing nations, only for wealthy nations to stop far short of the recommended commitments.

But news from Manila suggests an improving picture at least for one part of the climate finance puzzle.

The Asian Development Bank this week announced a new 10-year plan, under which it plans to increase its annual financing from $24bn last year to $36bn in 2034. The share of climate finance within this will rise to 50 per cent by 2030.

The details of how the ADB will do this are very geeky, but they matter.

Multilateral development banks such as the ADB and World Bank have long taken a fairly conservative approach to managing their balance sheets, limiting their lending in order to preserve hefty capital buffers.

In recent years, they’ve been under growing pressure to take a more aggressive approach. The likes of Barbados Prime Minister Mia Mottley argue that they can stretch their balance sheets further without losing the triple A credit ratings that underpin their low borrowing costs.

In that UN-backed report last November, the experts wrote that this less cautious approach — together with new capital contributions from governments — would be crucial for the MDBs to triple their annual climate finance provision to at least $240bn, as the report deemed necessary.

The ADB’s increased financing will come through precisely the more aggressive balance sheet approach that the multilateral banks’ critics have been calling for. (This follows a similar move in December at the World Bank’s International Development Association.)

A long-standing ADB rule requires that no more than 90 per cent of its capital can be used for loans or other operational purposes. The bank has not dropped this rule. But it has changed how it does its capital adequacy calculations — for example, by assigning lower risk weightings to sovereign loans to countries with better credit ratings.

Under the new accounting system, its “capital utilisation ratio” is only 71 per cent, down from 85 per cent under the old one. That’s what will give it the additional headroom to deploy the extra $6bn a year in climate finance.

It may only be a small fraction of the additional sum the November report said the MDBs needed to stump up for climate finance — let alone the wider $1.3tn a year required by developing nations. But every little helps.

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