Nature tech takes center stage in new market report
The loss of biodiversity — driven by factors such as climate change, exploitation of wildlife, introduction of invasive species, pollution, and the absence of nature’s value in the current economic system — poses a critical threat to our planet.
A 2022 WWF assessment found that wildlife populations of mammals, birds, amphibians, reptiles and fish have declined an average of 69% over the last 50 years. At a broader level, the Kunming-Montreal Global Biodiversity Framework cites one million plant and animal species worldwide under threat of extinction, many within the coming decades, if action is not taken. In addition, the economic ramifications of this biodiversity decline are staggering. Over half of global GDP, roughly $58T, depends on the services and resources provided by nature, according to PwC analysis.
In line with our mission to harness digital technologies to scale climate action, Climate Collective is proud to announce a new Nature & Biodiversity vertical to bring entrepreneurs, investors, and scientists together to address these challenges head on. We have seen firsthand how digital technologies like AI, blockchain, satellite imagery, geospatial and connected sensors are helping the world better understand, manage, and restore biodiversity and critical ecosystems. Supporting nature tech entrepreneurs to grow and scale their solutions is central to making these innovations more affordable, fit for purpose, and ubiquitous — a process we’re seeking to accelerate.
As part of this scope expansion, our team has gone deep on the nature tech industry and mapped the landscape of early stage innovators. In the coming weeks, we will be publishing a mix of in-house research, joint op-eds, and collaborative write-ups reflecting what we are seeing across the market, what we think is needed to grow investments in Nature-based Solutions and nature positive solutions, and who the early movers are.
Today we are excited to share a report that Climate Collective and 50+ other organizations contributed to: The state of nature tech: Building confidence in a growing market, published by Nature4Climate, Serena, and MRV Collective.
Key insights from the report include:
Nature tech is emerging as a standalone investment category from climate tech, attracting $7.5B in venture capital over the last five years.
MRV & biodiversity credits is the fastest growing sub-category within nature tech.
To build a Nature Positive market that works for nature and people, accessibility and inclusion of Local Communities is critical, as is centering the knowledge of Indigenous Peoples in policies and practices.
We look forward to supporting more research, policy entrepreneurship, and pilot demonstrations that will build trust and momentum in the nature tech market. Read on for a brief summary of the report and reach out to our team if you are interested in joining the Climate Collective as a member or strategic partner in our Nature & Biodiversity community.
What are Nature-based Solutions (NbS) and how are they related to nature tech?
According to the International Union for Conservation of Nature (IUCN): Nature-based Solutions are actions to protect, sustainably manage, and restore natural and modified ecosystems that address societal challenges effectively and adaptively, simultaneously benefiting people and nature.
NbS play a critical role in protecting, restoring, and sustainably managing ecosystems, supporting climate resilience, food security, and the livelihoods of communities. Examples of this work include reforestation, peatland restoration, and coral reef protection. Beyond ecosystem services, NbS are estimated to deliver up to one-third of the emissions reductions required to reach global Net Zero targets by 2030.
Nature tech refers to the application of different technologies (i.e., geospatial technology, remote sensors, IoT devices, AI/ML, etc.) that accelerate and amplify the implementation of NbS through process automation and the provision of reliable data. Many nature tech applications are linked to Measurement, Reporting, and Verification (MRV) of NbS projects. For instance, Flying Forests International uses drones and AI algorithms to generate maps, develop ecosystem restoration plans, and remotely deploy seeds for reforestation.
Nature tech is attracting billions in venture capital
While nature tech has historically fallen under the $40B umbrella of climate tech investment, it is now emerging as its own investment category due to substantial growth in recent years.*
As a standalone space, the nature tech market has surpassed $1B in investment for each of the last five years, totaling $7.5B since 2018. Both the number of deals and the average size of deals have increased during this period. 2021 was a particularly strong year, showing a high of 171 deals totaling $2.39B.
Annual capital flow into nature tech reached a high of $2.39B in 2021. Sources: Crunchbase and Serena, via Nature4Climate.
Despite market turbulence and a decrease in overall VC investment throughout the last year, funding for early stage nature tech (seed, series A, and series B) grew 130% from 2020–2022. At the same time, the average size of early stage deals increased by:
70% (from $1.52M to $2.59M) for seed rounds;
63% (from $6.26M to $10.18M) for series A; and
71% (from $15.36M to $26.22M) for series B.
In the years to come, we can expect increased capital flow into the space driven by policy tailwinds from TNFD, SBTN, and the like.
Digital MRV & Biodiversity Credits demonstrate the fastest area of growth
Measurement, Reporting, and Verification (MRV) — an auditing process that ensures the climate or nature impact claimed by a specific project is indeed what occurred — has been the target of an overwhelming amount of digital innovation over the last decade. By enabling the collection of data more swiftly and consistently, digital MRV enhances data integrity, transparency, efficiency, and accountability. It also plays a pivotal role in modernizing current carbon markets, e.g. by transitioning from analog to digital measurements and calculations, reducing the potential for inconsistencies due to human error. For more details, see dClimate’s primer on digital MRV.
Innovation in digital MRV and biodiversity credits is the fastest area of growth within early stage nature tech. Source: MRV Collective via Nature4Climate.
The same benefits of digital MRV are applicable to biodiversity offset and credit markets. Biodiversity offsets are instruments that have been used across many jurisdictions for years, as a tool to compensate for biodiversity impacts associated with economic development. The efficiency and impact of these compliance instruments is often questioned.
Voluntary biodiversity credits are emerging as a new economic instrument to finance actions toward the protection, regeneration, and stewardship of the natural world. The expectation is that increasing transparency into NbS projects through verifiable and accessible biodiversity data helps buyers to gain trust in the market and channel more funds towards nature positive outcomes. Innovation in this space is being driven by teams such as:
SimplexDNA and NatureMetrics generating global databases for environmental DNA;
Terassos, Wilderlands and Savimbo developing biodiversity credits to fund conservation and restoration of land and nature;
Wilder Sensing harnessing bioacoustics and Machine Learning to track changes in biodiversity; and
Conservation X Labs designing and deploying novel hardware and AI tools to track wildlife.
While MRV and voluntary biodiversity credits have received only 16% ($1.23B) of nature tech funding since 2018, this category has demonstrated the fastest growth among early stage investments — it is the only area of nature tech that has consistently achieved year-on-year growth for the past five years. This progress notwithstanding, more capital is needed to develop this essential digital infrastructure to transparently channel the necessary $700B per year into biodiversity preservation by 2050.
Centering Indigenous Peoples and Local Communities in nature tech growth
As innovation continues to emerge within the nature tech market, the report calls on stakeholders to center the deep knowledge and experience of Indigenous Peoples and Local Communities (IPLCs) in the development of nature tech tools, biodiversity policies, and market discourse. Indigenous Peoples serve as custodians of roughly 50% of the earth’s terrestrial biodiversity. In the Amazon basin alone, Indigenous territories cover 28% of the region but account for only 2.6% of deforestation, highlighting their invaluable role and wisdom in the preservation of nature.
Involving IPLCs from design to deployment to use of nature tech tools is critical both to ensure the success of nature positive work and to mitigate any negative side effects of the market’s development. For example, the deployment of new remote sensors for data gathering may disrupt existing employment opportunities for IPLCs who have unique experience in tracking rare species. By co-creating community benefit agreements and upholding principles of Free, Prior, and Informed Consent (FPIC), among other risk management and safeguarding practices, nature tech innovators can ensure the meaningful participation of these communities and the equitable distribution of environmental and social benefits.
Get in touch with the Climate Collective team and stay tuned for more deep dives and market reviews as we continue to grow and support our Nature & Biodiversity community.
*Climate tech is dedicated to decarbonizing the economy by avoiding, reducing, and removing greenhouse gas emissions from the atmosphere to mitigate climate change. Nature tech addresses a wider variety of environmental challenges, including curbing biodiversity loss and restoring natural ecosystems to achieve nature positive outcomes. Despite their distinct objectives, climate change and nature loss are intrinsically intertwined. As such, innovations within the spheres of climate tech and nature tech will continue to interact and the markets will demonstrate some degree of overlap.
