Startups, pivotal in the shift to a net-zero future, can revitalise economies and communities while providing innovative solutions

Deux ex machina is a technique often deployed by writers to solve a seemingly hopeless situation by external, magical and often unimaginable intervention. It is debatable if Deux ex machina exists in real life, nonetheless, Startups being creatures with innovation, disruption and problem-solving in their DNA can offer faster, creative and localised solutions, for the increasingly hopeless real-world crisis of Climate Change.

Be it a startup supplying an animal feed supplement that can cut down bovine emissions significantly, another one using Biotech and robotics technologies for developing GMO seeds and seaweeds that act as powerful carbon sinks, a climate tech company developing agroforestry at a global scale or simpler everyday solutions that aim to greenify consumer finance or track individual efforts to reduce emissions, they can consolidate as a powerful force against climate change. World Economic Forum estimates that startups create value, nearly on par with the GDP of a G7 economy and the OECD suggests that young firms create almost half of the new jobs, suggesting their burgeoning economic power and potential to create impact at scale.

The race to net zero is propelled by energy and technology transition which on one hand is an opportunity for startups and a threat to local economies and livelihoods on the other. Take the case of coal being phased out; this might result in the currently bustling mining centres turning into silent junkyards. The modern world’s triumphs in Silicon Valley or a Shanghai SEZ may guide the establishment of new climate innovation hubs. Brain port Eindhoven in the Netherlands is one such example showcasing the transition from conventional industries to futuristic setups. The questions on the proliferation of such a model ‘Can’ be addressed by a few suggestions of ‘How’:

Blended Finance for Climate Innovation Hubs Practical experience suggests that ‘Impact Capital’ often expects social impact plus commercial returns. For startups social impact then becomes an additional responsibility and not an opportunity to improve margins or a business avenue to seriously pursue climate-positive opportunities over the long term. Blended finance can incentivise climate startups to agglomerate within the Climate Innovation Hubs.

Monetising Sustainability — Startups should have opportunities to monetise their efforts on reducing emissions, either in the form of reduced taxes and lower cost of capital or claim premiums for climate-positive brand value.

Reputation Capital — Unless climate-positive efforts are rewarded by markets in the form of valuations or additional capital or brand value, climate-positive behaviour will continue to be talk and no walk. Research & Development (R&D) Support — While large corporations have reserves that can be deployed for R & D, startups have only access to highly demanding capital that usually funds sales for growth and rarely for investments for innovations (unless the startup is incubated in a technical university).

While the existing carbon economy still grapples with the issues of just transition, the political economy of climate change signals shifts in geo-political equilibrium and technological leapfrogging in climate solutions is yet to emerge, startups as business organisations are only going to achieve greater proportions of power, prosperity and influence in the world. With focused support from policymakers, development finance institutions and international researchers, the global startup ecosystem can be geared up to take on threats of climate change head-on. Who knows we may have a Deux ex machina in the real world of climate change.

The writer is a Chevening Scholar and an International Development expert; views are personal