Climate Finance Is Heating Up
The Urgent Need for Early Investment in Climate Tech in Southern Europe and Latin America
Investing in climate technology, especially during its early growth stages and through venture capital, is crucial for addressing the climate finance gap and achieving net zero emissions by mid-century. This need is particularly pressing in regions like Southern Europe and Latin America, where the potential for significant environmental and economic benefits is substantial but undercapitalized.
According to the recent CREO report “Understanding the Climate Finance Gap”, global climate finance flows doubled between 2020 and 2022, reaching $1.4 trillion annually. However, to meet net zero goals, these flows need to increase sixfold by 2030 and tenfold by 2050, requiring an annual average of $8.6 trillion through 2030 and $10.7 trillion through 2050. The public sector alone cannot meet these demands, highlighting the critical role of private investment in scaling up climate technologies (CREO) (CPI).
Sixty percent of critical climate technologies are ready for commercial scaling, yet many remain at the tipping point where costs need to be further reduced to achieve widespread adoption. Large asset owners and institutional investors are increasingly committing substantial capital to climate funds. However, there is a pronounced skew towards mega funds exceeding $1 billion, which predominantly invest in growth equity, private equity (PE), infrastructure, and private debt asset classes. While these funds are crucial for scaling proven solutions, smaller funds in the range of $250 million to $500 million are better positioned to make growth-stage investments or focus on under-allocated sectors where median deal sizes are lower (CREO) (CPI).
The climate finance sector is witnessing a significant influx of capital, with climate funds raising $127 billion in 2023, a 41% increase from 2021. Venture capital (VC) funds are particularly noteworthy, attracting 47% of all capital raised by 2023 vintage climate funds, compared to 17% in the broader market. This trend is most prominent in Asia and North America, where the majority of capital flows into VC funds. In contrast, infrastructure climate funds are more prevalent in Europe, capturing 51% of capital raised (CREO) (CPI).
Despite this growth, there is a critical “missing middle” in climate finance. Growth equity and PE investors, who are essential for scaling emerging businesses, are under-represented in the climate sector. Only about 35% of the mitigation potential for 2030 comes from technologies already cost-competitive with existing solutions. The remaining 65% still require substantial investment to reduce costs and achieve commercial viability (CREO) (CPI) (REGlobal).
Southern Europe and Latin America are regions with high climate vulnerability and significant potential for climate tech innovation. However, they are currently undercapitalized in terms of climate finance. Redirecting capital to these regions can drive substantial environmental and economic benefits. For instance, agriculture, industry, and emerging technologies such as carbon capture and hydrogen have high mitigation potential but receive disproportionately low levels of investment.
Investing in climate technology in these regions not only addresses urgent environmental challenges but also fosters economic diversification and resilience. Public finance plays a crucial role in this process by de-risking investments and creating enabling environments for private sector participation (CPI) (REGlobal).
Introducing Rumbo Ventures
Rumbo Ventures, a Madrid-based climate tech venture capital fund, is dedicated to transforming the investment landscape in Southern Europe and Latin America. With a strategic focus on Spain, Portugal, Italy, and Latin America, Rumbo Ventures leverages over 25 years of experience in alternative assets and venture capital to drive impactful investments in climate technology. Our deep expertise and seniority in our target markets enable us to adopt a hands-on approach, ensuring that our investments are not only financially successful but also significantly contribute to environmental sustainability.
Rumbo Ventures is committed to bridging the climate finance gap in these regions by supporting innovative startups and growth-stage companies poised to lead the transition to a low-carbon economy. Our comprehensive understanding of local markets, combined with our robust network and strategic partnerships, positions us uniquely to identify and nurture high-potential ventures. By investing in emerging technologies and scalable solutions, Rumbo Ventures aims to accelerate the commercial viability of climate tech innovations, driving both environmental and economic benefits across Southern Europe and Latin America.
Our mission aligns with the urgent need for increased and strategic climate investments highlighted by the CREO report. By focusing on under-allocated sectors and mid-sized funds, Rumbo Ventures aims to address the critical “missing middle” in climate finance, providing the necessary capital to scale promising solutions. As we catalyze new capital flows and ensure investments are directed towards impactful climate technologies, Rumbo Ventures is dedicated to making a significant contribution to achieving global net zero targets while fostering sustainable economic growth in our target regions.
Join Us in Making a Difference
We are at a pivotal moment in the fight against climate change. The challenges are immense, but so are the opportunities. By investing in climate technology now, we can drive the innovations needed to secure a sustainable future. We invite you to join Rumbo Ventures in our mission to transform the climate tech landscape in Southern Europe and Latin America. Together, we can achieve these ambitious goals and create a prosperous, low-carbon future for all.
Let’s make a lasting impact. Join us on this exciting journey.
