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1、November 2024Insights and Outlook on Chinas Climate Technology Investment and Financing Marketrmi.org/2Insights and Outlook on Chinas Climate Technology Investment and Financing MarketAbout RMIRMI is an independent nonprofit,founded in 1982 as Rocky Mountain Institute,that transforms global energy s

2、ystems through market-driven solutions to align with a 1.5C future and secure a clean,prosperous,zero-carbon future for all.We work in the worlds most critical geographies and engage businesses,policymakers,communities,and NGOs to identify and scale energy system interventions that will cut climate

3、pollution at least 50 percent by 2030.RMI has offices in Basalt and Boulder,Colorado;New York City;Oakland,California;Washington,D.C.;Abuja,Nigeria;and Beijing,Peoples Republic of China.rmi.org/3Insights and Outlook on Chinas Climate Technology Investment and Financing MarketAuthors and Acknowledgme

4、ntsAuthorsTing Li,Shutong Lu,Guangyu Tan,Zhe Wang,Boya Zhang,Chi ZhangAuthors listed alphabetically.All authors from RMI unless otherwise noted.ContactsShutong Lu,llurmi.orgCopyrights and Citation Ting Li,Shutong Lu,Guangyu Tan,Zhe Wang,Boya Zhang,and Chi Zhang,Insights and Outlook on Chinas Climate

5、 Technology Investment and Financing Market,RMI,2024,https:/rmi.org/insight/insights-and-outlook-on-chinas-climate-technology-investment-and-financing-market/.RMI values collaboration and aims to accelerate the energy transition through sharing knowledge and insights.We therefore allow interested pa

6、rties to reference,share,and cite our work through the Creative Commons CC BY-SA 4.0 license.https:/creativecommons.org/licenses/by-sa/4.0/.All images used are from iS unless otherwise noted.rmi.org/4Insights and Outlook on Chinas Climate Technology Investment and Financing MarketContentsExecutive S

7、ummary.51.Analysis of Chinas Climate Technology Investment and Financing Market.7 1.1 High Demand and Rapid Growth in Climate Technology Investment,but with High Concentration.7 1.2 Rapid Growth of Climate Technology Startups:Key Drivers of Technological Breakthroughs.13 1.3 The Climate Financing Ma

8、rket Mechanism is Largely Established,but Funding Sources for Startups Remain Limited.162.Causes of Financing Challenges for Climate Technology Startups.21 2.1 Increased Uncertainty in the Macroeconomic Environment Limits Startup Financing.22 2.2 Technical and Policy Barriers in Climate Technology I

9、nvestment Deter Investors.24 2.3 Climate Technology Startups:Long Development Cycles,High Risks,and Continuous Capital Needs.273.Multidimensional Empowerment of the Climate Technology Investment and Financing Ecosystem.30 3.1 Scientific Models to Aid Investment Decisions.32 3.2 Platform Construction

10、 to Integrate Information Resources.35 3.3 Financial Product Innovation to Broaden Financing Channels.38Endnotes.43rmi.org/5Insights and Outlook on Chinas Climate Technology Investment and Financing MarketExecutive SummaryClimate technology,as a key driver for achieving carbon neutrality,has garnere

11、d widespread attention.China,fueled by policy incentives and a surge in startup innovations,has led the world in investments in various climate technologies.However,due to the impacts of international geopolitical situations,energy crises,and the COVID-19 pandemic,global investment market activity h

12、as seen varying degrees of decline.Under these circumstances,early-stage climate technology startups face particularly challenging development due to long investment return cycles,uncertainties in risk,and technical barriers.To overcome the financing difficulties in the early stages of climate techn

13、ology development and to promote efficient capital flow and allocation,this report,based on the status of Chinas climate technology development and investment market,focuses on the specific challenges faced by startups in climate technology investment and financing.It systematically analyzes the cor

14、e influencing factors and proposes strategies from three dimensions scientific modeling,platform development,and financial product innovation to support the construction of a sustainable investment and financing ecosystem.The key market trends in climate technology investment and financing summarize

15、d in this report include:Strong demand and rapid growth in climate technology investment:Despite rapid growth,investment remains heavily concentrated and urgently requires diversification.Rapid growth of climate technology startups:These emerging companies are set to drive future technological innov

16、ations.Largely established climate financing market:However,there is still room to expand funding sources for startups.When assessing the financing challenges faced by climate technology startups,three main factors emerge:Heightened macroeconomic uncertainty:This restricts available financing option

17、s for startups.Technical and policy barriers:These complexities can deter potential investors from investing in climate technology.Long development cycles and high risks:Startups in this sector often require continuous capital,further complicating funding efforts.rmi.org/6Insights and Outlook on Chi

18、nas Climate Technology Investment and Financing MarketIn response to these challenges,this report proposes three key recommendations to accelerate climate technology investment:1 2 Develop scientific evaluation modelsAccurately measure carbon reduction potential and investment returns and anticipate

19、 macroeconomic risks,helping startups and investors optimize their portfolios.Facilitate platform development Build communication networks to break down information barriers,streamline resource allocation,reduce innovation and implementation costs,and expedite R&D and commercialization efforts.Innov

20、ate financial productsMitigate investment risks,secure stable returns,overcome financing challenges,and expand financing options for climate technology startups.3rmi.org/7Insights and Outlook on Chinas Climate Technology Investment and Financing Market1.1 High Demand and Rapid Growth in Climate Tech

21、nology Investment,but with High ConcentrationChinas climate technology industry began in the early 21st century and has developed over two decades.As the importance of combating climate change has grown,the government has continuously introduced policies and regulations that emphasize low-carbon and

22、 green development.Since the introduction of the dual carbon goals in 2020,China has clarified its strategic direction of driving high-quality economic development through green development and reached a broad consensus on the need for a complete green transition in socioeconomic development.In 2021

23、,the dual carbon goals were officially established as national strategic objectives when they were incorporated into The Outline of the 14th Five-Year Plan for Economic and Social Development(20212025)and Long-Range Objectives through the Year 2035 of the Peoples Republic of China.1 Subsequently,to

24、implement these goals,China established the 1+N policy framework for carbon peaking and carbon neutrality,where 1 refers to the core policies of this framework Completely,Accurately,and Comprehensively Implementing the New Development Concept and Ensuring Peak Carbon Dioxide Emissions and Carbon Neu

25、trality and The Action Plan for Carbon Dioxide Peaking Before 2030 while N refers to relevant policy documents across various In recent years,with the increasing emphasis on sustainable development and the establishment of carbon neutrality goals,China has made rapid technological advancements in ta

26、ckling climate change.These technologies include not only mature low-carbon solutions such as renewable energy,energy efficiency improvements,and electric vehicles(EVs),which directly reduce greenhouse gas emissions,but also a broader range of new climate technologies,including adaptation technologi

27、es,carbon removal technologies,and climate fintech.Although the categorization of these technologies may vary in different contexts,their breakthroughs,development,and application are crucial for Chinas green economy transition and the achievement of climate goals.Technological development is insepa

28、rable from financial support.In China,the climate technology investment and financing market has made considerable progress,particularly in the fields of renewable energy and EVs,where significant capital inflows have positioned these sectors as global leaders.However,some early-stage technologies h

29、ave yet to attract sufficient investment,slowing the pace of innovation and increasing the difficulty of achieving the dual carbon goals.1.Analysis of Chinas Climate Technology Investment and Financing Market1.1High Demand and Rapid Growth in Climate Technology Investment,but with High Concentration

30、Rapid Growth of Climate Technology Startups:Key Drivers of Technological BreakthroughsThe Climate Financing Market Mechanism is Largely Established,but Funding Sources for Startups Remain Limited1.21.3rmi.org/8Insights and Outlook on Chinas Climate Technology Investment and Financing Marketindustrie

31、s and sectors.The 1+N policy framework covers multiple dimensions,including strategic planning,industrial development,and supporting services.Over half of these policies involve the promotion of low-carbon technology and climate technology innovation,underscoring the importance of developing climate

32、 technologies to achieve the dual carbon goals.Further unleashing the potential of climate technology development requires policy guidance and support.Building on the top-level policy documents related to the dual carbon goals,China has established a comprehensive policy system that integrates top-l

33、evel design with practical implementation,focusing on driving technological innovation and scaling up.Exhibit 1 highlights some key policies.To ensure the achievement of the dual carbon goals,key emissions-intensive sectors such as energy,industry,transportation,and construction have each developed

34、strategic plans and implementation schemes for different stages,including short-term plans(to 2025),medium-term carbon peaking implementation plans(to 2030),and long-term development plans(to 2035).Across all industries and timelines,tasks related to technology,such as enhancing innovation capacity,

35、accelerating key technological breakthroughs,and strengthening technology dissemination,are highlighted as key priorities or crucial safeguards.Beyond industry-specific plans,the 1+N framework also includes a series of policies specifically focused on technological innovation,outlining development g

36、oals in various industries and identifying key technologies for research and promotion.The policies also propose action plans to achieve these innovation goals.At the implementation level,the policies emphasize the importance of organizing key technological breakthroughs,nurturing green innovation e

37、ntities,improving technology transfer and promotion mechanisms,and enhancing the technology evaluation system.To further support technology commercialization,the government has issued a series of industry guidance catalogs and pilot demonstration directories,detailing the scope,content,and key techn

38、ological priorities of the green industry.rmi.org/9Insights and Outlook on Chinas Climate Technology Investment and Financing MarketExhibit 1:Key Policies in the 1+N Policy FrameworkRMI Graphic.Source:RMICategorizationPublishing departmentublicationsTop-level designCentral Committee of the Communist

39、 Party of Chinaa nd the State CouncilWorking Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development PhilosophyState Council Action Plan for Carbon Dioxide Peaking before 2030Industry planningNational Development and Reform Commission,Nati

40、onal Energy Administration14th Five-Year Plan for a Modern Energy SystemNational Development and Reform Commission,National Energy Administration,and nine other ministries14th Five-year Plan for Renewable Energy DevelopmentMinistry of Industry and Information Technology14th Five-Year Plan for Indust

41、rial Green DevelopmentMinistry of TransportGreen Transportation 14th Five-Year Development PlanMinistry of Housing and Urban-Rural Development14th Five-Year Plan for Building Energy Efficiency and Green Building Development Ministry of Industry and Information Technology,National Development and Ref

42、orm Commission,and Ministry of Ecology and EnvironmentAction Plan for Industrial Carbon Peaking by 2030National Development and Reform Commission and National Energy AdministrationMedium-and Long-Term Plan for the Development of the Hydrogen Energy Industry(20212035)Industry planning and technologic

43、al innovationNational Energy Administration and Ministry of Science and Technology14th Five-Year Plan for Scientific and Technological Innovation in the Energy SectorMinistry of Transport and Ministry of Science and TechnologyOutline of the Medium-to Long-Term Development Plan for Scientific and Tec

44、hnological Innovation in the Transportation Field(2021-2035)Technological innovationMinistry of Science and Technology,National Development and Reform Commission,and nine other ministriesScience and Technology Support Carbon Peaking and Carbon Neutrality Implementation Plan(2022-2030)National Develo

45、pment and Reform Commission and Ministry of Science and TechnologyGuiding Opinions on Building a Market-Oriented Green Technology Innovation SystemNational Development and Reform Commission and Ministry of Science and TechnologyImplementation PlanforFurther Improving the Market-Oriented Green Techno

46、logy Innovation System(2023-2025)Demonstration applicationsNational Development and Reform Commission,Ministry of Science and Technology,and 10 other ministriesImplementation Plan for Demonstration Projects of Green and Low-Carbon Advanced TechnologiesNational Energy AdministrationNotice of the Nati

47、onal Energy Administration on Organizing Pilot Demonstration of Renewable Energy DevelopmentNational Development and Reform Commission,Ministry of Housing and Urban-Rural Development,and 10 other ministriesGuidance Catalog for Green and Low-Carbon Transition Industries(2024 Edition)rmi.org/10Insight

48、s and Outlook on Chinas Climate Technology Investment and Financing MarketStimulated by clear emissions reduction targets,Chinas climate technology has experienced rapid development over the past two decades,particularly in the fields of clean energy and electrified transportation.Leveraging its adv

49、antages in technological maturity and well-established supply chains,China has attracted the majority of global market investment in these sectors,maintaining a leading position with significant investment growth.These sectors have become the core drivers of achieving Chinas climate goals.Renewable

50、Energy Sector1Globally,China leads in the installed capacity of hydropower,wind power,solar power,and nuclear power under construction,maintaining a high growth rate.By 2023,Chinas total installed capacity of renewable energy reached 1.45 billion kilowatts,surpassing the total installed capacity of

51、thermal power,and accounting for over 50%of the nations total installed power capacity.In 2023 alone,Chinas combined new installations of wind and solar power reached 290 million kilowatts,nearly 60%of the global total.Moreover,China is a major exporter of renewable energy products,supplying 50%of t

52、he worlds wind power equipment and 80%of photovoltaic components,2 leading the world in production capacity(see Exhibit 2).In technology development,Chinas photovoltaic power generation technology has rapidly iterated,continuously setting new world records.For example,in 2023,the mass production eff

53、iciency of advanced solar cells reached 25.5%,nearly a 1%improvement from the previous year.3 Regarding costs,between 2010 and 2020,the global cost of solar power generation decreased by 85%,while the costs of onshore and offshore wind energy fell by 56%and 48%,respectively.4 Chinas ongoing technolo

54、gical innovation has been a key driver of the global cost reduction in renewable energy.5 Exhibit 2:Chinas Share of Global Photovoltaic Production CapacityRMI Graphic.Source:International Energy Agency,https:/www.iea.org/reports/solar-pv-global-supply-chainsNew Energy Vehicles,Energy Storage,Electri

55、c Vehicle Batteries,and ElectrolyzersChina also holds a globally leading competitive advantage in industries such as new energy vehicles(NEVs)i,energy storage,electric vehicle batteries,and electrolyzers.In 2023,Chinas production and sales of NEVs reached 9.6 million and 9.5 million i In China,the t

56、erm new energy vehicle(NEV)refers to automobiles that are fully or primarily powered by electric energy,including battery electric vehicles(BEVs),plug-in hybrid electric vehicles(PHEVs),and fuel cell electric vehicles(FCEV).202136%75%86%98%80%0%10%20%30%40%50%60%70%80%90%100%201531%65%68%83%49%0%10%

57、20%30%40%50%60%70%80%90%100%56%58%78%29%0%10%20%30%40%50%60%70%80%90%100%Polysilicon20104%ChinaOther.countriesPolysiliconPolysiliconrmi.org/11Insights and Outlook on Chinas Climate Technology Investment and Financing Marketunits,respectively,ranking first globally for the ninth consecutive year,6 wi

58、th cumulative sales accounting for about 60%of the global total.In 2023,Chinas NEV penetration rate exceeded 31%,up from 5%in 2019,far exceeding the global penetration rate of less than 15%.China also holds over 70%of the worlds electric vehicle battery production capacity.From 2012 to 2022,the incr

59、ease in the energy density of electric vehicle batteries has led to a six to seven times improvement in range,with an 80%cost reduction.By the end of 2023,Chinas electrolyzer production capacity accounted for half of the global total,7 with costs only 25%of those in Europe and the United States.8The

60、 development momentum of these two industries is driven not only by green low-carbon industry development policies,such as fiscal subsidies,tax reductions,and restrictions on fossil fuel use,but also by the rapid technological advancements in these fields.These advancements have significantly reduce

61、d equipment costs,generating scalable carbon reduction potential and substantial investment returns,continuously attracting investment.In 2023,Chinas climate technology investment in renewable energy,power grids,energy storage,and EVs reached 6.3 trillion RMB,contributing to 40%of Chinas gross domes

62、tic product(GDP)growth,with all the years investment growth stemming from climate technology.9 This marks climate technology as the primary driver of Chinas economic growth.However,the heavy focus on investment in the energy and transportation sectors has diverted attention and resources away from o

63、ther industries,leaving significant emissions reduction potential untapped.As depicted in Exhibit 3,while the transportation sector accounts for only 8.3%of the nations total emissions,it receives 46.5%of total clean energy investments.Conversely,the industrial sector,responsible for 25.5%of emissio

64、ns and stands as the second highest emitter,receives only 5.2%of clean energy investments.Estimated funding needs for the industrial sectors low-carbon transition exceed 20 trillion RMB,yet only around 400 billion RMB has been invested so far.10 Low-carbon investment in the industrial sector is insu

65、fficient and unevenly distributed.In heavy industries,which are central to industrial emissions reduction,over 90%of low-carbon investments are concentrated in highly mature technologies,while early-stage innovative technologies,which hold 60%of the emissions reduction potential,have received only a

66、bout 6%of the investment,11 leaving a large portion of emissions reduction potential inactivated.rmi.org/12Insights and Outlook on Chinas Climate Technology Investment and Financing MarketExhibit 3:Comparison of Key Emissions Sectors and Financing Distribution SectorsGiven the current landscape of i

67、nvestment in key climate technology sectors,an effective approach to broaden the scope of climate technology investment is to appropriately extend and expand along the industry value chain.On the one hand,industries such as energy and transportation,which are current hot spots for climate technology

68、 investment,possess mature technologies and well-established supply chains.These sectors have entered a stage of high-quality development.Although they will continue to attract significant capital flows in the future,their potential for further investment growth is somewhat limited.Therefore,these i

69、ndustries should focus on emerging technological demands that stem from existing technologies,thereby avoiding the intensification of competition due to concentrated investments and excessive homogeneity.For instance,the fluctuating nature of wind and solar resources,coupled with the substantial inc

70、rease in renewable energy installations,has triggered a rapid growth in the demand for energy storage facilities.This has created a market demand for more efficient and flexible distribution and storage infrastructure,thereby attracting new large-scale investments.On the other hand,sectors with subs

71、tantial emissions reduction potential but lacking market attention,such as the industry sector,will be key areas for future investment growth.As policy support for reducing industrial emissions increases and the construction of low-cost renewable energy and electrification infrastructure accelerates

72、,the industrial sector will have more favorable conditions for the low-carbon transition.The upgrading and expansion of capital-intensive factories will also provide critical opportunities for the clean and low-carbon transition of the industrial sector.Under these combined factors,the industrial se

73、ctor is expected to attract significant capital investment,supporting financing and deployment of key technologies such as hydrogen energy and CCUS.RMI Graphic.Source:IEA,https:/www.iea.org/countries/china/emissions;Carbon Brief,https:/www.carbonbrief.org/analysis-clean-energy-was-top-driver-of-chin

74、as-economic-growth-in-2023/9.0%25.5%5.2%57.2%48.3%8.3%46.5%Share of green house gas emissionsTransportationEnergyOtherIndustrialrmi.org/13Insights and Outlook on Chinas Climate Technology Investment and Financing Market1.1High Demand and Rapid Growth in Climate Technology Investment,but with High Co

75、ncentrationRapid Growth of Climate Technology Startups:Key Drivers of Technological BreakthroughsThe Climate Financing Market Mechanism is Largely Established,but Funding Sources for Startups Remain Limited1.21.3Finally,the convergence of climate technologies and digital technologies is emerging as

76、a new trend.As the investment and financing environment gradually improves,with supporting tools and management systems becoming more robust,investment tools are expanding from traditional hardware investments to include software and services.This trend is accelerating the integration of climate tec

77、hnology with digital technology.12 Investors interests have also broadened from a singular focus on the energy sector to include areas such as data analysis and intelligent applications,fully demonstrating the diversified and specialized development direction of future climate technology investments

78、.1.2 Rapid Growth of Climate Technology Startups:Key Drivers of Technological BreakthroughsAs China enters the post-pandemic recovery phase,it faces the dual challenges of the need to foster economic growth and the need to conserve energy and reduce emissions.Climate technology development is expect

79、ed to become a critical pathway in achieving synergies between economic,energy,and environmental goals.According to the International Energy Agency(IEA),over 90%of the cumulative carbon dioxide reduction potential by 2050 under a net-zero scenario will be driven by climate technologies and their app

80、lications.13 Notably,about half of all climate technologies that need to be deployed and applied by 2050 are still in the R&D stage.These include technologies for heavy industries such as steel,cement,and chemicals,as well as for transportation sectors like road freight,shipping,and aviation.Many of

81、 these technologies are still in the early stages of commercialization,and there remains significant uncertainty regarding their future research and market applications.These technological gaps in emissions reduction will inevitably spur significant technological innovation and market demand,injecti

82、ng new vitality into Chinas sustainable economic development.Startups,as the most dynamic and creative new forces in the innovation ecosystem,play a significant role in the technological transition within their industries,with far-reaching impacts on other sectors and the broader economy.In the cont

83、ext of climate change,the necessity and urgency of technological innovation are even more pronounced.As countries worldwide respond to climate challenges and make carbon reduction commitments,the development and application of clean and low-carbon technologies are seen as crucial to the success of a

84、chieving net-zero goals.It is widely recognized that decarbonization across industries will rely on the research and application of various clean climate technologies.Consequently,climate technology startups have emerged as pioneers and trailblazers in providing clean and low-carbon solutions across

85、 different sectors.rmi.org/14Insights and Outlook on Chinas Climate Technology Investment and Financing MarketCase Study of the BYD CompanyBYD Company,a global giant in the electric vehicle batteries industry,started as a small startup in the 1990s,focusing on developing and producing consumer elect

86、ronic batteries.Over the course of its expansion and eventual public listing,BYD continuously broke through core battery technologies and boldly ventured into new business sectors.Today,BYD is a significant driving force in the EV industry in China and worldwide,accounting for approximately 16%of th

87、e global electric vehicle batteries installed capacity in 2023,ranking second globally.14Wang Chuanfu,the founder of BYD,graduated from the Beijing General Research Institute for Nonferrous Metals,where he remained as a senior engineer,associate professor,and general manager of a state-owned enterpr

88、ise affiliated with the institute.In 1995,he left the institute to establish BYD.Initially,BYD primarily produced nickel-metal hydride,nickel-cadmium,and lithium-ion batteries,achieving cost reductions through process improvements in battery production lines.This success allowed BYD to become a batt

89、ery supplier to major companies such as Motorola and Sony.As the consumer electronic battery market reached saturation,BYD entered the automotive industry in 2003,shifting its long-term strategy toward NEVs.Guided by the principle“technology is king,innovation is the foundation,”15 BYD leveraged its

90、 accumulated expertise in the battery industry and its ongoing innovations to evolve from lithium iron phosphate to ternary lithium battery technologies.This evolution positioned BYD as a leading global manufacturer of electric vehicle batteries,and the company also ventured into the battery EV manu

91、facturing industry.In 2023,BYDs battery EV shipments reached nearly 1.6 million units,ranking second globally,just behind Tesla.16 BYDs electric vehicle batteries are widely used in electric passenger cars,commercial vehicles,and rail systems.As the country with the worlds largest vehicle fleet,Chin

92、a views transportation electrification as vital to achieving its carbon neutrality goals.The rapidly growing BYD will undoubtedly be a key force in helping the countrys transportation sector reduce carbon emissions.China has long prioritized green climate technology innovation in the energy sector a

93、nd the development of innovative small and medium-sized enterprises(SMEs).Since 2014,the National Development and Reform Commission(NDRC),the Ministry of Science and Technology(MOST),the Ministry of Industry and Information Technology(MIIT),and the Ministry of Ecology and Environment(MEE)have jointl

94、y issued four batches of nationally promoted low-carbon technology catalogs,providing important guidance on technological innovation directions.In 2023,to support the continued development of clean climate technologies and stimulate market innovation,NDRC and MOST jointly issued the Implementation P

95、lanforFurther Improving the Market-Oriented Green Technology Innovation System(2023-2025),17 which emphasizes clarifying directions,setting priorities,strengthening measures,and assigning responsibilities,with the aim of accelerating R&D and the promotion of advanced energy-saving and carbon reducti

96、on technologies.From the perspective of supporting the development of innovative SMEs,the revised Law of the Peoples Republic of China on the Promotion of Small and Medium-Sized Enterprises,implemented in 2018,focuses on improving the business environment for early-stage SMEs and encourages governme

97、nts at all levels to provide support in areas such as taxation,financing,markets,and regulation.Additionally,for technology-based startups,MOST issued a notice in early 2022 on Creating a Better Environment to Support the R&D of Technology-Based SMEs,18 aimed at supporting companies in tackling key

98、core technologies and enhancing R&D capabilities.In the same year,the Ministry of Finance and the State Taxation Administration issued a notice on Further Improving the Policies Regarding Weighted Pre-Tax Deduction of Research and Development Expenses,19 which rmi.org/15Insights and Outlook on China

99、s Climate Technology Investment and Financing Marketincreased the pretax deduction ratio of R&D expenses for enterprises from 75%to 100%,providing tangible incentives for technology-based enterprises to invest in R&D through tax reductions.The rapid growth of climate technology startups in China ref

100、lects the countrys progress in clean climate technology and serves as a vital force driving technological advancements.As shown in Exhibit 4,the number of unicorn companies in Chinas climate technology sector grew from 5 in 2016,accounting for only 4%of all unicorns in China that year,to 41 in 2022,

101、accounting for 11%.The rise of unicorns in clean energy,NEVs,and new materials has become one of the most prominent trends in the development of Chinas startup ecosystem.Exhibit 4:Number of Unicorn Companies in China(201622)RMI Graphic.Source:Great Wall Strategy Consulting,RMIAt the same time,China

102、has consistently maintained steady growth in innovation and R&D investments,guided by the strategic principle that“science and technology are the primary productive forces.”20 The sustained prosperity of green technology innovation has also played a significant role in fostering related entrepreneur

103、ship and investment.According to data released by the National Bureau of Statistics,Chinas total R&D expenditure exceeded 3.3 trillion RMB in 2023,with the R&D intensity(ratio of R&D expenditure to GDP)reaching 2.64%,surpassing the 2.5%baseline for innovative countries.21 The Global Innovation Index

104、 2023,published by the World Intellectual Property Organization,ranked mainland China 12th globally,making it the only middle-income economy in the top 30.22 Green and low-carbon sectors,as emerging strategic industries,are among the key areas for R&D investment.Driven by strong national policies,co

105、upled with significant R&D investments and the precise targeting of talent development,Chinas climate technologies have 5915142317411261591872042282993160501001502002503003504002016201720182019202020212022Climate technologyOther industriesrmi.org/16Insights and Outlook on Chinas Climate Technology I

106、nvestment and Financing Marketachieved remarkable and rapid development over the past decade.As shown in Exhibit 5,the number of green technology patents increased more than fourfold from 2012 to 2021,and the green technology innovation index more than doubled.This upward trend lays a solid technolo

107、gical foundation for China to achieve its carbon neutrality goals.1.3 The Climate Financing Market Mechanism is Largely Established,but Funding Sources for Startups Remain LimitedSince the 2016 issuance of the Guidelines for Establishing a Green Financial System by the Peoples Bank of China and six

108、other ministries,23 China has focused on promoting green finance,providing effective support for the low-carbon economic transition and high-quality development.Over the past decade,this has resulted in a comprehensive green finance system,which includes policies related to green credit,green bonds,

109、environmental information disclosure,green investment,green insurance,and environmental rights trading markets.This green finance framework has been further enhanced with the development of additional categories such as transition finance and climate investment,contributing to a more diversified and

110、 comprehensive investment ecosystem.These systems are designed to channel funds into key areas critical for the low-carbon transition.Although these financing concepts sometimes overlap,they each emphasize different priorities(as illustrated in Exhibit 6).Promoting effective coordination among these

111、 systems will provide strong momentum for clean and low-carbon development.Exhibit 5:Annual Index of National Green Technology Innovation and Number of Green Patents Granted(201221)RMI Graphic.Source:Zero-one Caijing,RMI0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 02468101214161820201

112、2201320142015201620172018201920202021Technology innovation indexNumber of patentsNumber of green patents granted(10,000)Green technology innovation index(1,000 in 2008)1.1High Demand and Rapid Growth in Climate Technology Investment,but with High ConcentrationRapid Growth of Climate Technology Start

113、ups:Key Drivers of Technological BreakthroughsThe Climate Financing Market Mechanism is Largely Established,but Funding Sources for Startups Remain Limited1.21.3rmi.org/17Insights and Outlook on Chinas Climate Technology Investment and Financing MarketExhibit 6:Support Priorities of Different Financ

114、ing Labeling SystemsRMI Graphic.Source:RMI Analysis.Driven by policy guidance,local governments have actively conducted related pilot practices.Twelve provincial-level administrative regions have included“developing green finance”as a key work direction in their 14th Five-Year Plans and have establi

115、shed regional green finance pilots,such as the Belt and Road Initiative and the GuangdongHong KongMacao Greater Bay Area.24 In August 2022,MEE announced the first batch of 23 climate investment and financing pilot areas,including twelve cities,four districts,and seven national-level new areas.By the

116、 end of 2022,these 23 pilot areas had collected over 1,500 projects,involving approximately 2 trillion RMB in funds.Thanks to policy guidance and practical implementation,the climate financing market mechanism,primarily driven by green credit and green bonds,has become increasingly mature.Although c

117、omplete market-scale data is lacking,representative investment areas and financial products demonstrate that the climate investment and financing market is experiencing sustained high growth.For example,in the clean energy sector,the national investment scale increased from$287 billion in 2015 to$51

118、2 billion in 2022,an increase of 78.4%.25 Green loans and green bonds are currently the most mature green financial products.Since 2018,green loans has maintained an annual growth rate of nearly 30%.As shown in Exhibit 7,by the end of 2023,the balance of green loans in domestic and foreign currencie

119、s in China reached 30.08 trillion RMB,a year-on-year increase of 36.5%,ranking first globally.26 The annual issuance scale of green bonds also increased from 220 billion RMB in 2018 to 11,180.5 trillion RMB in 2023.27 By the end of 2023,the balance of the domestic green bond market reached 1.98 tril

120、lion RMB,ranking among the top globally.28 Green financeThe integration of the concepts of environmental friendliness and sustainable development into the use and investment of funds in financial activities.The main objective is to support and promote environmental protection and sustainable develop

121、ment.Climate financeInvestment and financing activities used to address climate change and reduce greenhouse gas emissions.Climate investment and financing includes a variety of projects and measures,such as renewable energy development,energy conservation and emissions reduction,and climate adaptat

122、ion,aimed at addressing the challenges posed by climate change.In 2020,five ministries and commissions,including the Ministry of Ecology and Environment,jointly issued the Guidance on Promoting Investment and Financing to Address Climate Change,which makes it clear that climate finance is an importa

123、nt part of green finance.Transition financeFinancial activities that promote the transition and upgrading of economic structure.Transition finance focuses on serving industries and projects with significant carbon emissions reduction benefits,providing reasonable and necessary financial support for

124、the low-carbon transformation in high-emissions or difficult-to-reduce areas,and promoting the increasing proportion of green industries and projects in economic activities on the premise of ensuring safe carbon reduction.rmi.org/18Insights and Outlook on Chinas Climate Technology Investment and Fin

125、ancing MarketExhibit 7:Size of Chinas Climate Financing MarketDespite the progress made in establishing more flexible climate investment and financing mechanisms,these mechanisms are still in their early stages,and the availability of financing channels needs further expansion.Benefited from the rap

126、id development of Chinas green finance system,financing channels for climate technology have steadily expanded.A basic structure of primarily indirect financing supplemented by direct financing has gradually taken shape,encompassing various types of financing,such as policy-based grants or subsidies

127、,funding from policy banks/multilateral banks/support funds,and equity offerings,as illustrated in Exhibits 8 and 9.Indirect financing typically involves financial institutions,such as banks,collecting deposits from savers and then lending these funds to individuals or companies in need of capital.T

128、hese types of credit assets account for more than 70%of Chinas overall financial assets.29 In the low-carbon sector,green loans alone constitute about 90%of the overall green finance market.30 Although these financing methods are relatively standardized,most products still rely on traditional fixed-

129、asset collateral models,which have high requirements for the size and financial status of companies.As a result,credit assets often fail to meet the diverse financing needs of different industries,company sizes,and project types,particularly for climate technology startups.On the other hand,direct f

130、inancing involves companies raising funds directly from investors by issuing debt or equity securities.This approach generally allows companies to communicate specific transition plans to investors,who may then take a greater interest in the companys transition potential.However,this form of financi

131、ng is relatively complex,often requiring companies to have strong internal financing capabilities and the ability to effectively communicate and coordinate with investors and other stakeholders.Moreover,other forms of direct financing,such as green equity financing and green funds,are still in their

132、 infancy and have not yet developed into mature investment models.Consequently,their ability to provide the necessary capital for clean climate technology or companies remains limited.For example,according to Global Sustainable Investment Alliance data,the total amount of sustainable investment in m

133、arket-based funds in China is only about 500 billion RMB,31 accounting for just 1.6%of the countrys sustainable finance market.RMI Graphic.Source:Peoples Bank of China,Joint Credit Information System,RMI8.2310.2211.9515.9022.0330.0820186.67%20196.92%20206.04%202110.05%202212.66%20238.25%Green bond m

134、arket balance1.98Trillion RMBTransition bond balance146Billion RMBScale of local and foreign currency green loans in ChinaAs of end 2023:占貸款總額比例（%）Percentage of total loansBalance of local and foreign currency green loans(RMB,trillion)rmi.org/19Insights and Outlook on Chinas Climate Technology Inves

135、tment and Financing MarketExhibit 8:Channels for Financing Climate Science and TechnologyRMI Graphic.Source:RMI Analysis.Exhibit 9:Annual Financing Scale of Climate Technology by ChannelRMI Graphic.Source:BloombergNEF,Joint MDB Climate Finance Report,FTSE Russell,Renmin University of China Chongyang

136、 Institute for Financial Studies,Hainan Green Finance Research Institute,KPMG,RMICommercial bank loans 8 trillion RMBBond issuance 800 billion RMBMarket-based fund investment 150200 billion RMBEquity issuance 80 billion RMBPolicy banks/multilateral banks/enabling funds grants and investments 20 bill

137、ion RMBPolicy funding or subsidies 2030 billion RMBFinancial leasing 40 billion RMBFinancing channelsSpecificitiesImplementation modalitiesPolicy funding or subsidiesLow demand for profitability,led by the direction of the countrys strategic developmentIncludes both policy funding for R&D and piloti

138、ng of new technologies and subsidies to promote the large-scale application of new technologies to reduce costsPolicy banks/multilateral banks/enabling funds,grants,and investmentsModerately low demand for profitability,led by the strategic direction of the organizationInstitutions can target fundin

139、g in the form of grants,concessional loans,equity financing,and so on,to key enterprises or projects that can achieve specific environmental objectives while guaranteeing basic returnsFollow-on public offerProfitability demands are moderately high,with some risk-sharing ability,but with high require

140、ments for corporate credit levelsListed companies raising funds by additional issuance of sharesMarket-based fund investmentsModerately high profitability demands,high risk-sharing ability,and moderate requirements for corporate creditworthiness;the investment period is relatively long and focuses o

141、n the growth of the enterpriseDirect investment in enterprises by market-based funds such as venture capital and private equity funds,usually in the form of equity investmentCommercial bank loansProfitability demands are high and financing terms are usually short with high corporate credit level req

142、uirementsLoans are granted by commercial banks to enterprises for a fixed period and at a fixed interest rate,taking into account environmental objectives through,for example,interest rate concessionsBond issuanceProfitability demands are high and financing terms are usually short with high corporat

143、e credit level requirementsIssued by enterprises to social investors,with fixed maturities and fixed interest rates,and taking into account environmental objectives through,for example,interest rate concessionsFinancial leaseThe profitability demands are stable and controllable,which can effectively

144、 reduce the risk of excessive fixed cost investment in the early stage of startupsFor asset-heavy,high up-front investment projects,the enterprise may not purchase the assets directly,but the financial leasing company may purchase the assets and lease them to the enterprise and collect rent,thus ena

145、bling the enterprise to spread the capital investment over the project period and reduce the up-front costsrmi.org/20Insights and Outlook on Chinas Climate Technology Investment and Financing MarketFor early-stage startups whose business models are not yet mature,securing funding through traditional

146、 financing tools is particularly challenging.Chinas existing sustainable financing system is primarily dominated by loans and bonds,both of which are fixed-income products with stringent repayment requirements.As such,they are difficult to adjust flexibly based on project circumstances,making them s

147、uitable only for projects with high creditworthiness and strong growth prospects.Many key climate technologies are still in the early to mid-stages of maturity,with companies that are relatively small and projects with uncertain profitability expectations.These types of projects are more suited to m

148、arket-based fund equity investments,which offer greater flexibility and risk tolerance.However,market-based funds have not yet shown sufficient interest in clean,low-carbon projects,and the scale of green equity investment remains small,playing a limited role in the gradual maturation of climate tec

149、hnology.This issue is particularly acute for startups.Exhibit 10 summarizes the tendencies of common investment and financing channels for different types of climate technology projects.The exhibit illustrates that due to startups lack of established credit in their early stages and unclear future d

150、evelopment paths,they struggle to meet the financing standards of traditional financial tools,leading to significant financing difficulties.Exhibit 10:Common Financing Forms for Climate Technology Project DevelopmentRMI Graphic.Source:RMI Analysis.Subjects with poor creditworthi-ness can improve the

151、ir financing conditions through credit enhancement instruments and measuresProject Profit ExpectationRobustWeakPolicy grants or subsidiesDevelopment Entity Credit LevelExcellentPoorPolicy Banks/multilateral Banks/enabling funds grants and investmentsMarket-based fund investment Financial leasingStoc

152、k issuanceBond issuanceCommercial bank loansrmi.org/21Insights and Outlook on Chinas Climate Technology Investment and Financing MarketFor startups,equity financing such as private equity and venture capital serves as a primary funding option and plays a pivotal role in facilitating growth.From a fi

153、nancial perspective,especially for startups entering their growth phase,the higher the proportion of market-driven equity investment in their total financing,the more flexible the fund management and the stronger the risk tolerance.This is especially crucial for climate technology startups as they s

154、cale from laboratory innovations to commercial production and market adoption.Additionally,market-driven equity investors,including angel investors,venture capitalists,and private equity firms,tend to be highly attuned to policy shifts and closely monitor industry practices.For startups,the commerci

155、al resources of these investment institutions and their portfolio companies can complement the companys resources,providing significant support for development.Furthermore,investment teams with technical or management experience can empower startups through active participation,offering additional a

156、ssistance in their growth.Market-driven investment funds also have a strong incubation function within the industry.For example,their strategic focus on key industries and sectors signals the importance and growth potential of specific target areas.As a result,terms like photovoltaics,electric vehic

157、le batteries,hydrogen energy,and energy storage have become buzzwords in the investment market.Consequently,clean climate technology investment,once considered a niche focus,is rapidly becoming a mainstream and widely recognized sector.However,since 2022,despite climate technology remaining a hot to

158、pic for global investors,the challenging global macroeconomic environment has increasingly affected the direct investment market.Investors have become more cautious when facing early-stage startups characterized by high technical barriers and the coexistence of high risks and high returns.2.Causes o

159、f Financing Challenges for Climate Technology Startupsrmi.org/22Insights and Outlook on Chinas Climate Technology Investment and Financing Market2.1 Increased Uncertainty in the Macroeconomic Environment Limits Startup FinancingEntering the 2020s,the global economy has faced multiple challenges,rang

160、ing from the aftermath of the COVID-19 pandemic to geopolitical tensions,supply chain disruptions,and inflationary pressures,all of which have compounded to impact economic trajectories.Although the pandemic is nearing its end,the economic disruptions it caused in many countries will take a long tim

161、e to recover.Meanwhile,geopolitical conflicts,such as the USChina trade war and the RussiaUkraine conflict,have exacerbated global uncertainty,particularly in energy supply,leading to higher energy prices and greater volatility or disruption in global supply chains.These disruptions have caused prod

162、uction delays and increased costs,affecting global manufacturing and trade and directly contributing to rising inflation in multiple countries.To combat persistent inflation,many central banks,such as the Federal Reserve and the European Central Bank,have implemented interest rate hikes,attempting t

163、o curb price increases.Although these policy adjustments have helped control inflation to some extent,they have also increased volatility in capital markets,especially affecting bond markets and the stability of emerging market currencies,putting further pressure on economic growth(see Exhibit 11).E

164、xhibit 11:Global Monthly Economic Policy Uncertainty IndexRMI Graphic.Source:Economic Policy Uncertainty Index,RMIUnlike other major global economies,China is currently facing the dual pressures of economic slowdown and deflation.To further stimulate the economy,it is anticipated that more accommoda

165、tive monetary policies,such as interest rate cuts,will be implemented to support economic stability and growth.At the same time,to ensure the stability of financial markets and reduce systemic risks,the Chinese government has been continuously strengthening market regulation,issuing laws such as the

166、 Personal Information Protection Law and the Data Security Law,and establishing more comprehensive security review mechanisms.1502002503003504004502019.122020.022020.042020.062020.082020.12020.122021.022021.042021.062021.082021.12021.122022.022022.042022.062022.082022.12022.122023.022023.042023.0620

167、23.082023.12023.12Global monthly economic policy uncertainty index100=mean from 1985 to 20092.12.22.3Increased Uncertainty in the Macroeconomic Environment Limits Startup FinancingTechnical and Policy Barriers in Climate Technology Investment Deter InvestorsClimate Technology Startups:Long Developme

168、nt Cycles,High Risks,and Continuous Capital Needsrmi.org/23Insights and Outlook on Chinas Climate Technology Investment and Financing MarketAlthough these measures protect national interests,they also present challenges for foreign investment,affecting foreign investors decision-making processes and

169、 reducing the overall attractiveness of Chinas investment environment.The ongoing turmoil in international markets has directly dampened investor sentiment.Coupled with a lack of confidence in the long-term market outlook,investors risk preferences have undergone a noticeable shift.In addition,China

170、s increasingly restrictive investment environment has resulted in a significant decline in foreign direct investment(FDI).The data released by Chinas Ministry of Commerce in April 2024 shows that the FDI in the first quarter of this year fell by 26.1%year-on-year,reaching the lowest level in 30 year

171、s.32 In 2022,US private equity and venture capital investments in China dropped by approximately 76%compared with the previous year,US$29 billion to US$7 billion.The withdrawal of foreign equity funds has had a direct impact on the financing of Chinese startups.First,foreign funds typically bring no

172、t only capital but also international management experience and global resource networks,which are crucial for startups,especially those in the expansion phase.The withdrawal of foreign investment may lead to the loss of these resources,affecting the internationalization process and business expansi

173、on of companies.Second,the exit of foreign investors may prompt a reassessment of Chinas startup investment environment by the capital markets.The withdrawal of foreign funds could cause some investment projects to stall,leading to potential disruptions in capital flows and increasing the difficulty

174、 of financing for startups.As foreign capital retreats,more domestic investors and equity funds are emerging to fill the market gap.Although the partial withdrawal of foreign equity funds poses challenges for financing Chinese startups,it also provides opportunities for the growth of domestic capita

175、l markets and policy support,promoting the diversification of capital markets and the enhancement of domestic innovation capabilities.In 2023,state-owned and-controlled limited partners accounted for 77.8%of the total disclosed investment,with government guide funds becoming the mainstay of the vent

176、ure capital market.As the market structure shifts,the main challenges it faces have also changed.Compared with market-driven capital,state-owned capital has a lower tolerance for risk and imposes strict limitations on financial risks in projects,making it less compatible for high-risk venture capita

177、l projects.Moreover,the period from 2015 to 2017 saw a concentrated development of government guide funds,and with the expiration of the seven-year term,these funds are approaching a phase of exits simultaneously,which could shake up the market.To address the issues currently emerging in the venture

178、 capital sector,the General Office of the State Council issued the Several Policy Measures to Promote High-Quality Development of Venture Capital on June 15,2024.33 As the latest guiding policy in the venture capital field,it specifically mentions“optimizing the management of government-funded ventu

179、re capital funds,reforming and improving fund assessment and fault-tolerance mechanisms,and improving the performance evaluation system”as well as“systematically addressing the issue of simultaneous exits of government-rmi.org/24Insights and Outlook on Chinas Climate Technology Investment and Financ

180、ing Market2.12.22.3Increased Uncertainty in the Macroeconomic Environment Limits Startup FinancingTechnical and Policy Barriers in Climate Technology Investment Deter InvestorsClimate Technology Startups:Long Development Cycles,High Risks,and Continuous Capital Needsfunded venture capital funds”to b

181、etter leverage the guiding role of state-owned capital in the venture capital sector.2.2 Technical and Policy Barriers in Climate Technology Investment Deter InvestorsThe current global landscape of rapid changes in science,technology,and industry necessitates a faster extension of financial supply

182、toward the front end of the innovation chain.34 In the 2010s,traditional equity investment funds in China have generally favored companies in their growth stages due to shorter capital return cycles and limited risk tolerance.Compared with earlier-stage companies,growth-stage companies typically hav

183、e more mature and validated technological outcomes,with preinvestment due diligence primarily focused on commercial,legal,and operational risks.Generally,the earlier a company is in its life cycle,the more its strategic and management focus shifts toward the technical domain(as shown in Exhibit 12).

184、As equity investment increasingly extends to earlier stages,the requirements for technical due diligence on the part of investors also become more stringent.Exhibit 12:Innovation Focus at Different Stages of StartupsRMI Graphic.Source:RMI Analysis.Moreover,technological convergence is becoming incre

185、asingly apparent,with interdisciplinary integration emerging as an important trend.Different academic disciplines are contributing diverse perspectives and methodologies to solve new challenges,particularly in the research and innovation of frontier sciences.Interdisciplinary technological innovatio

186、n has also become a defining characteristic of technology startups.For climate technology startups,facing the unprecedented challenge of climate change,interdisciplinary integration is undoubtedly a common phenomenon across various subtechnological fields.For example,photovoltaic cell technology,as

187、an interdisciplinary field,involves knowledge from physics,electronics,chemistry,materials science,engineering,and energy sciences.Similarly,energy storage technology combines fundamental knowledge from energy science,materials science,and chemical engineering.In reality,as investors face increasing

188、ly early-stage investments and more cross-disciplinary technologies,there is a growing demand for a deeper understanding of these technologies.This is crucial because a companys technological level will directly influence its ability to commercialize and generate returns.Understanding the technical

189、core competitiveness is vital during the technology assessment process because it determines the companys technological barriers and its potential to stay ahead of competitors or be surpassed.Additionally,Life cycleStartup periodGrowth periodDevelopment periodInnovation pointKey technologiesOrganiza

190、tionmanagementrmi.org/25Insights and Outlook on Chinas Climate Technology Investment and Financing Markettechnology investments require investors to think more broadly about the technology development cycle and the speed of technological evolution because these factors will shape the companys future

191、 growth potential and trajectory.However,many investment institutions report a lack of professionals who are knowledgeable in both investment and technology.This challenge is especially pronounced in the climate technology sector,which has a relatively short development history,resulting in an even

192、greater shortage of specialized technical talent.As a result,conducting sector scanning and due diligence in this field becomes a significant challenge,particularly because of the high technical barriers.The climate technology industry,being relatively new,has several segments that are just beginnin

193、g to be commercialized and have not yet established tightly knit supply chain networks or complete industrial support systems.Even if a technology is relatively mature,it may still face challenges due to underdeveloped supporting industries and sales channels,further increasing the difficulty of ach

194、ieving profitability in the climate technology sector.Therefore,a deep understanding of both the technology and the entire industry chain is necessary to accurately assess the future potential of various technologies.The value of climate technology heavily depends on the recognition of its environme

195、ntal benefits,including the monetization of environmental value through mechanisms such as carbon pricing and green electricity markets.This means that investors need to accurately assess the environmental value of climate technologies.However,in practice,the economic value generated by environmenta

196、l benefits is often difficult to measure accurately.First,Chinas carbon market is still in the pilot phase,and the timeline for its future development remains uncertain.When valuing certain clean climate technology companies,if the goal is to monetize their carbon reduction potential,the assumptions

197、 regarding the scope of the carbon market are often weak.Second,given that the development of environmental performance and value assessment capabilities among enterprises is still in its early stages,and is facing specific challenges such as underdeveloped market mechanisms and inconsistent mechani

198、sms across regions,various environmental performancerelated assessment tools,services,and platforms are still in a rapid development phase.For most operators and investors in Chinas climate technology,there remains significant room for improvement in their ability to assess environmental performance

199、 and value.Climate technology investment also places high demands on policy research capabilities.Policy changes not only directly affect the assessment of a companys environmental value but also have profound effects on the overall development of the industry.Compared with other industries,technolo

200、gical innovation in the climate sector has a clear positive impact on the environment,making it a typical example of high-quality economic development and new productive forces.As a result,at the policy level,climate technology often receives preferential treatment and support during its early devel

201、opment stages.Climate technologies,such as photovoltaics,wind power,and EVs,have greatly benefited from government rmi.org/26Insights and Outlook on Chinas Climate Technology Investment and Financing Marketsubsidy policies over the commercialization and rapid expansion period.These policies have not

202、 only addressed the economic challenges of early-stage technology development and continuously drove cost reductions on a large scale,but also attracted ample financial resources to the industry and enabled leading companies within the sector to maintain long-term high growth rates.By closely follow

203、ing policy directions,numerous fast-rising funds and unicorn companies have emerged in the climate technology investment fields of renewables and EVs.Therefore,for current investors and entrepreneurs,identifying the next rapidly growing sector has become one of the most critical questions.Official p

204、olicy documents provide guidance on the direction of industry development,and those related to subsidies or carbon markets directly influence a companys potential future revenue.As such,tracking and analyzing key information in these policies is an essential part of investment research.In reality,th

205、e rapid pace,large volume,and varied forms of policy releases by various levels of regulatory authorities concerning the popular technologies add complexity to systematic research and trend forecasting for industry practitioners.As illustrated in Exhibit 13,CCUS technology is a typical example of an

206、 emerging climate technology in China.Since 2021,there has been an explosive increase in the number of policies related to CCUS,covering financing channels,deployment planning,technology development,standards and technology positioning,etc.Exhibit 13:Number of Policies Released Related to CCUS Techn

207、ology in ChinaRMI Graphic.Source:21st Century Agenda Management Center,RMI1020304050607020072008200920102011201220132014200620162017201820192020202120222015Technology developmentStandardsDeployment planningTechnology positioningFinancing channels#of policies issuedrmi.org/27Insights and Outlook on C

208、hinas Climate Technology Investment and Financing Market2.3 Climate Technology Startups:Long Development Cycles,High Risks,and Continuous Capital NeedsResearch has shown that startups generally follow a specific development pattern,as illustrated in Exhibit 14.Before achieving profitability,startups

209、 must go through several stages that require substantial up-front investment,and securing sufficient capital is one of the key challenges they face.Initially,startups need to develop a product prototype through technological R&D and conversion.During this phase,they incur various costs,including lab

210、or,materials,fuel,and trial-and-error expenses.Once the feasibility of the prototype is validated,startups must scale up production,which leads to rapidly increasing costs.Typically,the cost of launching a scaled-up product can be 100 to 1,000 times higher than the initial applied research costs.35

211、After developing a scaled product,startups must explore their business model,strengthen collaboration with stakeholders,and establish a robust supply chain until the product reaches stable profitability and enters the maturity stage.During the early commercialization phase,startups may need to furth

212、er expand production to increase market share,which requires additional investments.Exhibit 14:Development Patterns of StartupsRMI Graphic.Source:Marc Dreyer et al.,http:/doi.org/10.20900/jsr20200033.2.12.22.3Increased Uncertainty in the Macroeconomic Environment Limits Startup FinancingTechnical an

213、d Policy Barriers in Climate Technology Investment Deter InvestorsClimate Technology Startups:Long Development Cycles,High Risks,and Continuous Capital NeedsR&D and Technology TransformationScale-upEarly CommercializationLate CommercializationMatureAccumulated profits/lossesEarlier studiesDeveloped

214、productsResearch ResultsTechnology TransformationIterate and scale productionBusiness model exploration and validationScale DemonstrationProfitabilityPrototypingValley of Deathrmi.org/28Insights and Outlook on Chinas Climate Technology Investment and Financing MarketAs startups grow,the amount of ca

215、pital required often exceeds what can be generated internally.However,the high-risk nature of startups makes it difficult for them to secure external financing.During the early stages of product R&D and scaling,startups face a high risk of technical failure.Even if the product is successfully develo

216、ped,entering the market introduces additional risks,including changes in user demand,macroeconomy environment fluctuations,relevant laws and policies evolutions,and competition from alternative technologies and other companies.These uncertainties make it challenging to estimate profitability expecta

217、tions during the early stages of a startups development.Moreover,even for climate technology startups that have reached this stage,their strategic focus is often still on R&D,and they typically lack professional financial management personnel who are capable of systematically managing financial stat

218、ements,deeply understanding environmental valuations,and working closely with investment institutions.Climate technology startups generally have long development cycles,and as a result they require continuous financing.According to statistics from the IEA,historically,new energy technologies have ta

219、ken 20 to 70 years to develop from the initial prototype stage to maturity.36 For example,it took nearly 30 years for solar photovoltaics to move from the prototype stage to market entry,followed by an additional 25 years to reach a 1%share of the national power supply market of China.37 For individ

220、ual companies,statistics show that the average time from initial venture financing to initial public offering(IPO)exit for US startups is 4 to 8 years.38 In the climate technology sector,the average IPO time is even longer,reaching up to 12 years.39In the early stages of R&D and technology conversio

221、n,the required amount of capital is relatively small and typically provided by government grants,which have a high risk tolerance.In the later stages of commercialization,when the technology is mature and the business model is largely established,the company is in a stable growth phase with relative

222、ly lower risk and can seek financing through secondary markets such as the STAR Market or the ChiNext Market.Overall,the challenges faced by climate technology startups are most acute during the scaling and early commercialization phases,a period often referred to as the valley of death.During this

223、phase,startups primarily rely on private equity and venture capital for funding.However,venture capitalists in China tend to have a relatively low risk tolerance and short investment recovery cycles,making it difficult for them to support climate technology startups through the valley of death.In te

224、rms of stages,private equity and venture capital typically focus on achieving returns on investment for their limited partners and prefer to invest in stable,later-stage,and quickly exitable mature technologies.In 2022,seed-stage investments accounted for only 9.3%of the total,while early-stage inve

225、stments accounted for only 14.4%.In contrast,expansion-stage and mature-stage investments,which are mid-to-late-stage investments,accounted for 34.4%and 41.9%,respectively.40 In terms of investment cycles,Chinese venture capitalists generally prefer to recoup their investments within three to five y

226、ears.The inability to exit on time rmi.org/29Insights and Outlook on Chinas Climate Technology Investment and Financing Marketis one of their most significant concerns.Since 2006,the main exit channels for private equity and venture capital,such as IPOs,the National Equities Exchange and Quotations,

227、equity transfers,and mergers and acquisitions,have been continuously expanded,promoting the capital provided for local startups.However,in August 2023,the China Securities Regulatory Commission proposed a phased tightening of the IPO process,leading to a slowdown in both the number and scale of IPOs

228、.In the short term,as the IPO process tightens and exit mechanisms narrow,private equity and venture capital have become more cautious about investing in climate technology startups,further exacerbating the financing challenges these startups face.To address this issue,the Several Policy Measures to

229、 Promote High-Quality Development of Venture Capital,issued in June 2024,explicitly emphasized the need to improve the venture capital exit mechanism,including expanding exit channels and optimizing exit policies for venture capital funds.These measures aim to better leverage the guiding role of sta

230、te-owned capital in the venture capital sector and support climate technology startups in overcoming the valley of death.Excerpt from the Notice by the General Office of the State Council of Issuing the“Several Policy Measures to Promote High-Quality Development of Venture Capital”V.Improving the ve

231、nture capital exit mechanism14.Expanding exit channels for venture capital.The functions of the main boards of the Shanghai Stock Exchange and the Shenzhen Stock Exchange,the STAR Market,the ChiNext,the National Equities Exchange and Quotations(Beijing Stock Exchange),the regional equity markets and

232、 their specialized manufacturers applying special,sophisticated techniques to produce unique and novel products shall be fully maximized,and the exit channels for mergers and acquisitions and reorganization shall be expanded.For scientific and technological enterprises that break through key core te

233、chnologies,green channels for listing for financing,bond issuance,mergers and acquisitions and reorganization shall be established,and the quality and efficiency of the issuance review on the National Equities Exchange and Quotations(Beijing Stock Exchange)shall be improved.The recordation managemen

234、t system for overseas listing shall be effectively implemented,and the exit channels for venture capital funds in foreign currency shall be smoothed.15.Optimizing the policy for exit of venture capital funds.The settlement of the issue of equity exit of investment enterprises from bank insurance ass

235、et management products shall be accelerated.The development of merger and acquisition funds and venture capital funds on the secondary market shall be supported,the business process and pricing mechanism for the transfer of shares of privately offered funds shall be optimized,and the coordinated dev

236、elopment of regional equity markets and venture capital funds shall be promoted.The pilot program of distributing stocks in kind shall be promoted.rmi.org/30Insights and Outlook on Chinas Climate Technology Investment and Financing MarketClimate technology startups play a critical role in driving gr

237、een innovation and achieving a low-carbon future.However,beyond the inherent challenges posed by the high costs of R&D,complex risk management factors,and technical barriers faced by these startups,the complexities of the external investment and financing ecosystem also significantly influence their

238、 development prospects.Therefore,overcoming these challenges requires a deep dive into the multi-faceted investment and financing ecosystem,involving key stakeholders and a thorough understanding of their core demands and difficulties in the climate technology investment process.This understanding i

239、s essential for identifying opportunities to systematically optimize the investment ecosystem and improve outcomes for all parties involved.Based on the market analysis,we have identified that the current sustainable investment and financing ecosystem in China is constructed by four main stakeholder

240、s:government and public sectors,startups,investors,and support and service institutions(as illustrated in Exhibit 15).Among them,startups innovate to address environmental and social challenges through technological solutions,while investors provide the necessary financial support to these startups,

241、aiming to achieve both investment returns and social responsibility goals.Government and public sectors play a critical role in shaping the regulatory framework,offering subsidies,and developing policies that promote sustainable investments.Additionally,third-party support and service institutions s

242、uch as academic research organizations,consulting firms,and data providers monitor both micro and macro market signals,providing strategic insights and industry intelligence.These contributions aid investors decisions,startups technological innovations,and governments policymaking,ultimately ensurin

243、g effective capital flow and resource allocation.3.Multidimensional Empowerment of the Climate Technology Investment and Financing Ecosystemrmi.org/31Insights and Outlook on Chinas Climate Technology Investment and Financing MarketIn fact,information asymmetry between investors and startups often le

244、ads to inefficient capital flows and resource wastage during the investment and financing process.Startups,due to their small scale and low visibility,often struggle to effectively communicate their technological innovations and market potential,making it difficult for investors to fully understand

245、the true value and potential risks of these projects.This information asymmetry not only hinders the efficient allocation of capital but also increases the complexity and uncertainty of investment decision-making.The complexity of risk quantification is another significant factor limiting the financ

246、ing capacity of climate technology startups.Projects in the climate technology sector are often characterized by high technical complexity,rapid market changes,and strong policy dependencies,making traditional risk assessment methods insufficient for accurately evaluating the risks and returns of th

247、ese projects.Faced with such a highly uncertain investment environment,investors tend to be more cautious,leading to insufficient capital investment,which further constrains the development of climate technology startups.Therefore,as a foundation for ensuring the smooth progress of these activities,

248、it is essential to streamline the interaction between capital flows and information flows and to optimize the investment and financing ecosystem for climate technology startups.Based on this,the study proposes optimization suggestions from the following two dimensions:Capital flowsInformation flowsD

249、evelop scientific quantification tools to measure carbon reduction potential and investment returns,and predict potential risks brought by macroeconomic changes,helping startups and investors better manage their investment portfolios.Establish communication and collaboration networks to eliminate in

250、formation barriers,promote the efficient circulation of resources,reduce the costs of innovation and project implementation,and accelerate the R&D and commercialization of climate technologies.Exhibit 15:Diagram of Chinas Sustainable Investment and Financing EcosystemRMI Graphic.Source:RMI analysisG

251、overnment and public sectorsStartupsSupport and service institutionsImpactGrantsInvestRevenueImpactRegulatory GuidanceInvestorsFinancial&Investment AdvisoryCorporate Strategy ConsultancyIntegrated Marketing CommunicationResearch Think Tankrmi.org/32Insights and Outlook on Chinas Climate Technology I

252、nvestment and Financing Market3.1 Scientific Models to Aid Investment DecisionsThe use of scientific tools to quantify returns and risks is crucial for conducting climate technology investment and financing activities.In todays investment practice,accurately assessing potential returns and associate

253、d risks is key to maximizing investment benefits,whether for traditional industries or emerging technologies.In the case of climate technology investments,in addition to traditional financial valuation models,it is also essential to consider the environmental benefits of these technologies,which may

254、 seem difficult to quantify.For investors,incorporating a relatively standardized scientific quantitative analysis model and framework can clarify the main dimensions for evaluating different climate technology companies and directly enhance the accuracy of investment valuations by systematically in

255、tegrating carbon reduction benefits into the valuation model.Before discussing how to quantify the carbon reduction value generated by climate technology startups,it is crucial to assess their carbon reduction potential.This assessment serves as the foundation for predicting the monetization of futu

256、re carbon reduction benefits and can also help investors compare the future development potential of different types of startups and forecast their growth trajectories and upper limits.Investment institutions in the market are currently exploring a more universally applicable and scalable framework

257、for evaluating and comparing startups across different technological fields,business models,and geographic regions.In 2022,the climate tech accelerator Third Derivative(D3)proposed a framework for assessing the climate impact potential of startups that provides investors with a reference for early-s

258、tage screening and evaluation.41 As shown in Exhibit 16,climate technology startups can be broadly classified into five different types,each with its own emissions reduction model that determines how its carbon reduction potential should be measured.Based on the industries and regions in which these

259、 companies operate,their carbon reduction potential can be estimated,and their total addressable market size can be calculated using specific formulas.rmi.org/33Insights and Outlook on Chinas Climate Technology Investment and Financing MarketExhibit 16:Measurement of Emissions Reduction Potential of

260、 Different Categories of Climate Technology StartupsRMI Graphic.Source:Third Derivative,https:/www.third-derivative.org/blog/why-and-how-we-measure-climate-impactAfter determining the foreseeable carbon reduction potential(mainly carbon dioxide emissions)of the target company,the next question is ho

261、w this carbon reduction value should be incorporated into the valuation model.For investors,startups,and policymakers,accurately measuring this benefit is crucial for guiding their next steps.When evaluating the economic value of carbon reduction potential,it is important to recognize that carbon va

262、lue can manifest in various forms of corporate operating profits.According to a framework proposed by the Boston Consulting Group,42 these forms and their impact mechanisms include four main categories:the regulated carbon costs specific to certain industries determined by the local market,internal

263、carbon costs imposed by the company based on its strategy and expectations,additional costs or benefits arising from changes in the carbon reduction preferences of other market participants(such as consumers or lenders),and the additional DefinitionExampleThreshold Carbon reduction potentialDirect M

264、itigation Measure 1Net-zero/low-greenhouse gas product/service:Product/service that reduces current or existing greenhouse gas emissions,or has a direct drawdown effectEV,direct air capture technology Global solutions for 0.25 gigatons CO2e/year 1%of annual regional emissions for regional solutionsa

265、nnual unit emissions of legacy technology annual unit emissions of new technology penetration rate of new technologyDirect Mitigation Measure 2Energy efficiency improvement solutions:Reduce emissions by reducing the level of energy consumption of existing products or servicesEffective building insul

266、ation technologySame formula as above or if more predictable:%reduction in energy consumption energy consumption per unit of legacy technology carbon intensity of current resources penetration rate of new technologyDirect Mitigation Measure 3Enhanced product or service:Technology that enhances anoth

267、er low-/zero-emissions solution Tandem perovskites that enable more productive solar panelspercentage reduction in energy consumption with the enhanced technology annual unit emissions of legacy technology annual unit emissions of new technology penetration rate of new technologyEnabler 1Critical sy

268、stems enablement:Products or services necessary to complement some of the mitigation solutionsCharging infrastructure for EVs,long-duration energy storage to enable a fully decarbonized grid Global solutions for 0.5 gigatons CO2e/year 2%of annual regional emissions for regional solutionsCarbon reduc

269、tion potential is closely related to mitigation technologies,and consideration needs to be given to whether enablers apply for a certain subsegment or level of adoption Enabler 2Promotion for empowerment:Products or services that reduce the diffusion of mitigation solutions and increase their market

270、 penetrationProject financing platforms dedicated to renewable energy assets Global solutions for 1 gigaton CO2e/year 5%of annual regional emissions for regional solutionsrmi.org/34Insights and Outlook on Chinas Climate Technology Investment and Financing Marketeconomic value created by the companys

271、 emissions reduction technologies.Therefore,even the same carbon reduction potential can generate completely different economic values for different companies,depending not only on the carbon regulations and incentive policies in their industry and region but also on less predictable factors such as

272、 the preferences of other stakeholders in the market.In climate technology investments,the economic value derived from the full carbon reduction potential can be determined and adjusted based on the target companys potential application scenarios and customer distribution.As illustrated in Exhibit 1

273、7,after understanding how the carbon reduction potential of startups can be converted into actual revenue or cost savings,these critical assumptions need to be incorporated into the final valuation model.These assumptions typically influence future income and cost projections through changes in grow

274、th rates or nonrecurring gains or losses.From a methodological perspective,given the uncertainties in future global greenhouse gas reduction outcomes,policy changes,and industry development trends,making different assumptions for various future scenarios allows for a more comprehensive consideration

275、 of potential future developments,providing valuable insights.Within the same scenario,it is essential to ensure the internal consistency and logical coherence of the key assumptions for different indicators.However,due to significant differences in the industry and market environments faced by spec

276、ific companies,there are no universal rules for adjusting model assumptions in practice.This step also reflects the investors subjective judgment about the target companys future development.Exhibit 17:Diagram of the Carbon Reduction Potential Value Transformation Process for Climate Technology Star

277、tupsClimate TechStartupsCarbon Reduction PotentialClimate TechStartupsValue of Carbon ReductionScenario 1/Client 1Scenario 2/Client 2Scenario 3/Client 3SectorsRegionConsumersInvestorsValue of Carbon Reduction 1CO2Construct multiple scenarios based on future global greenhouse gas emissions reduction

278、e ects,policy changes,industry trends,etc.Value of Carbon Reduction 2Value of Carbon Reduction 3RMI Graphic.Source:RMI Analysis.rmi.org/35Insights and Outlook on Chinas Climate Technology Investment and Financing Market3.2 Platform Construction to Integrate Information ResourcesIn the climate techno

279、logy investment and financing ecosystem,startups,investors,policymakers,and third-party support institutions each possess unique information resources.However,the limited and costly communication channels among these stakeholders often lead to information asymmetry,hindering the free flow of informa

280、tion and the efficient sharing of resources,ultimately reducing market efficiency.Therefore,building a collaborative platform involving all stakeholders in the ecosystem is of great importance.Such a platform would enable full information and resource sharing,allowing projects and innovations to be

281、executed with lower costs and risks,thus accelerating the R&D and commercialization of climate technologies.Moreover,the aggregation of collective intelligence and resources on the platform would significantly enhance innovation capacity,driving technological progress and industrial upgrading.Specif

282、ically,the platform could serve the following functions:Facilitate the information flow and resource matching needed for climate technology developmentProvide capacity building for investors and startups The establishment of a communication and collaboration network between investors and startups wi

283、ll serve as a key connector for resources.Both investors and climate technology startups are currently facing widespread challenges in finding mature,timely,and efficient channels to connect with each other.Therefore,building a collaborative platform that regularly facilitates communication between

284、high-quality investors and climate technology startups would allow for more frequent and deeper exchanges,leading to more efficient and comprehensive resources and deals matching.In terms of implementation,the initiators of such communication networks can be diverse,and the format of communication a

285、ctivities can be flexible.Generally,influential resource integrators within the field are ideal initiators,such as investment incubation institutions with access to startup resources,investor associations and alliances that connect various investors,and third-party institutions focusing on climate t

286、echnology and investment research.In terms of communication activities or format,traditional formats such as forums,seminars,and exhibitions can be used,as well as more dynamic forms like on-site technical demonstrations and investment road shows.The creation of a collaborative platform also serves

287、as a critical tool for providing technical support to both investors and startups.As mentioned in chapter 2,climate technology investments require higher thresholds,necessitating more professional perspectives on both technical details and policy trends for investors.For technology-based startups,a

288、lack of professional commercial risk and financial management capabilities during the early stages of financing often hinders engagement with investors.Therefore,establishing a cooperative mechanism can promote capacity building on both sides to some extent.The regular exchange within the collaborat

289、ion network can revolve around hot topics,policy trends,industry developments,and more,facilitating discussions and debates.Industry experts can also be invited to provide knowledge training sessions and share best practices.This approach not only helps participants stay closely updated on the lates

290、t technological advancements and market information,but also enables both parties to gradually address their weaknesses,thereby building more comprehensive capabilities.rmi.org/36Insights and Outlook on Chinas Climate Technology Investment and Financing MarketStartup accelerators are a primary form

291、of collaboration platforms,typically conducted through a bootcamp program lasting three to six months.Currently,Chinas climate technology accelerators cover various fields,including energy,transportation,construction,and agriculture.These accelerators often possess extensive networks within the star

292、tup ecosystem,connecting startups with potential investors,corporate partners,and industry experts.By offering guidance resources and funding,they help accelerate the growth of startups.Depending on the initiators and focus areas,accelerators can be classified into several types.Industry-driven acce

293、lerators are usually led by governments or industry associations,leveraging policy and industry resources to support startups in a specific sector.Training-oriented accelerators rely on networks of entrepreneurs,industry experts,and venture capitalists,focusing on practical experience sharing and ta

294、rgeted guidance for startups.Corporate ecosystem accelerators are typically led by large corporations,building startup ecosystems around their strategic development needs.Despite the growing scale of accelerators,there are still issues that need to be addressed.First,accelerators lack sufficient cus

295、tomization for climate technology startups.Compared with other types of technologies,climate technology has longer investment return cycles,and some of its value may not be directly reflected in short-term market returns.Additionally,climate technology startups cover a wide range of specialized fiel

296、ds,requiring comprehensive industry knowledge to accurately assess their value.Second,the diversity of participants within accelerators needs to be improved.Current accelerators primarily focus on bilateral relationships between startups and a single stakeholder(such as investors or government agenc

297、ies).The market still lacks a platform that brings together investors,governments,corporations,research institutions,and other entities for collective participation.Case Study of Third Derivative Third Derivative(D3)is an accelerator focused on climate technology startups,cofounded by RMI and New En

298、ergy Nexus in December 2020.D3 is committed to building an inclusive global ecosystem by fostering deep collaboration between startups,accelerators,venture capitalists,large corporations,and think tanks.Additionally,by leveraging complementary strengths among stakeholders within an ecosystem,D3 iden

299、tifies,funds,and scales climate technology startups,accelerating the global energy transition.Some climate technology startups hold significant potential for addressing global climate change but are often overlooked by the capital and venture markets.To address this gap,D3 conducts market and techno

300、logy analysis to identify market blind spots,and openly recruits climate technology startups for targeted technologies globally.D3 evaluates the climate impact and market potential of these startups,selecting the most promising companies to participate in a eighteen month accelerator program.During

301、the program,startups get access to D3&RMIs technical and business expertise,D3s 200 person external mentor network,opportunities to showcase their technologies and/or meet with potential corporate and investor partners both virtually and in-person and online resources.The program specifically connec

302、ts startups with key partners,such as venture capitalists and corporations.These partners serve as potential mentors,customers,investors,and acquirers,helping startups develop products,validate technologies,and refine business models,ultimately enabling long-term growth.Over nearly four years of dev

303、elopment,D3 has built a leading global community of climate technology startups.From over 3,000 applications,225 startups have been selected,with founders from more than 100 countries,raising over$2 billion in investments.D3s ecosystem also includes a mentor network of 200 scientists,industry expert

304、s,and policymakers;14 corporate partners;and investors managing over$12 billion in assets.rmi.org/37Insights and Outlook on Chinas Climate Technology Investment and Financing MarketCase Study of the TIM Climate Technology Portfolio Action Camp RMI designed the TIM Climate Technology Portfolio Action

305、 Camp with the aim of accelerating the development and application of climate technologies in China,promoting low-carbon and clean transitions across industries through collective action.The TIM Climate Technology Portfolio Action Camp focuses on identifying the development directions of climate tec

306、hnology in the zero-carbon energy transition,accelerating technological breakthroughs,and promoting commercial applications.By integrating stakeholder resources,it fosters industry communication and collaborative actions through high-quality research,efficient technology incubation,pilot implementat

307、ion,and the establishment of robust investment and financing mechanisms.The T-I-M forms the“golden triangle”of the action camp,which consists of:This component emphasizes conducting thorough research into the attributes,emissions reduction potential,practical applications,cost-benefit analyses,and d

308、evelopmental trajectories of clean climate technologies.It also involves evaluating the stages and priorities of technology development and predicting the future prospects of breakthrough innovations.Specific actions include regularly publishing a series of clean climate technology research reports,

309、forming a climate technology list and other policy recommendations,establishing a clean climate technology talent pool,and organizing expert seminars on popular technical topics.This involves establishing an integrated climate technology incubation mechanism oriented toward R&D,cultivation,investmen

310、t,and commercialization,and leveraging local policies,industries,and financial resources to carry out pilot and demonstration projects.Specific actions include creating a climate technology investment incubator,establishing a local clean climate technology project database,and promoting the implemen

311、tation and scaling of pilot demonstration projects.This includes building a platform for the collection and sharing of clean climate technology.Through report releases and case studies,the platform showcases the results of the TIM Climate Technology Portfolio Action Camp,facilitates exchanges on dom

312、estic and international climate technology developments and best practices.And organizing international climate technology annual conferences,technology exhibitions,and innovation competitions,strengthens the interaction between investors,technology providers,and businesses.TIMrmi.org/38Insights and

313、 Outlook on Chinas Climate Technology Investment and Financing Market3.3 Financial Product Innovation to Broaden Financing ChannelsAs analyzed earlier,climate technology startups are facing severe financing difficulties due to the high technical barriers,combined with the numerous uncertainties inhe

314、rent in the development process of startups.These startups require substantial capital investment during the early stages for R&D and market expansion.However,due to the uncertainties surrounding both the technologies and market prospects of startups,conventional financial institutions are often cau

315、tious about providing financing.To address this challenge,innovation in financial instruments has become an essential path,and its importance cannot be overstated.From a purely commercial perspective,the core logic for investors or capital providers when deciding to invest in a particular project or

316、 technology is how to maximize returns under controllable risks.Although current climate technology investments are primarily driven by environmental,social,and governance(ESG)themed funds,with investors that are somewhat motivated by social responsibility,sustainable capital inflow still requires i

317、mprovements in the structure of financing product,with innovation needed in both risk and return aspects.Climate technology startups face multiple risks,including technological,market,and policy risks.However,many investors lack the necessary risk management tools or experience,resulting in insuffic

318、ient confidence to navigate these risks and pursue further investments.In this context,innovation in financial products becomes key to helping investors reduce their investment risk exposure.Some potential innovation directions include:1Risk Management Insurance mechanism:Design insurance for specif

319、ic risks associated with climate technology projects,such as technology failure and construction.By purchasing these insurance products,investors can receive compensation in the event of project development failure or unexpected incidents during construction.Additionally,insurance can be offered to

320、secure a projects future revenues,such as insuring the expected revenue of solar or wind energy projects.If future market price fluctuations or policy changes lead to reduced income,the insurance company would compensate the investors,ensuring their expected returns.Public-sector incentive scheme:Go

321、vernments can reduce investors policy risks by offering risk guarantees,policy subsidies,and tax incentives,further incentivizing investment activities.For example,the European Green Deal includes extensive policy support and funding subsidies to encourage private capital investment in climate techn

322、ology.Blended financing models:By leveraging publicprivate partnerships and blended financing models,the strengths of both government and private capital can be combined to share project risks.For example,the UK Green Investment Bank successfully supported multiple renewable energy projects by colla

323、borating with private investors.rmi.org/39Insights and Outlook on Chinas Climate Technology Investment and Financing MarketIn addition to the innovation of mechanisms themselves,the market is actively integrating startup investment with climate fintech.By introducing advanced technologies such as bi

324、g data,artificial intelligence(AI),and blockchain,climate startups are provided with tools that can more accurately assess and manage risks,enhancing the transparency and efficiency of the investment and financing process.These technologies support the design and issuance of innovative financial pro

325、ducts,such as green bonds and carbon credits,broadening financing channels and attracting global investors.Specifically,big data and AI technologies can analyze and predict climate risks and market changes in real time,offering investors accurate decision-making support.Blockchain technology ensures

326、 the security and transparency of transactions,reducing risks associated with information asymmetry.These technological advancements not only effectively reduce investment risks but also optimize investment decisions,thereby channeling more capital toward climate technology startups to support their

327、 sustainable development and technological innovation.rmi.org/40Insights and Outlook on Chinas Climate Technology Investment and Financing MarketRisk-Sharing Financial Tools Blended Finance Blended finance is a financing approach that combines private capital with public or philanthropic funds to su

328、pport the achievement of the Sustainable Development Goals.The primary objective of this financial tool is to leverage the catalytic effect of public or philanthropic funds to de-risk projects and attract more private investment,especially in regions and industries where market mechanisms are insuff

329、icient or risks are higher(Exhibit 18).Blended finance,leveraging the dual advantages of risk mitigation and return assurance,serves as a vital source of funding for startups working in the ESG sectors.On one hand,blended finance structures project financing by using public funds for the initial con

330、struction,and once the projects returns become predictable,private capital is introduced.By synchronizing robust risk control mechanisms and government endorsements,the risks associated with private capital entry are reduced.For example,the Clean Energy Finance Corporation in Australia successfully

331、mobilized over$16 billion in clean energy project investments by December 31,2017,with an initial investment of$5.8 billion.On the other hand,blended finance,led by public funds with lower returns,offers concessions to private capital,thereby attracting private capital investment and expanding finan

332、cing channels for climate projects.For instance,the Green Climate Funds(GCFs)first climate project in Shandong,China,offered a loan of$180 million at an interest rate of just 0.75%,with a five-year grace period.With returns fixed,public funds low returns allow project returns to be transferred to pr

333、ivate capital,further incentivizing investment in climate projects.Moreover,blended finance further amplifies the guiding role of public funds.Using concessional public funds as seed capital,such as official development assistance,fosters a favorable climate investment ecosystem,thereby attracting additional public capital investment for climate change initiatives.For example,the GCF successfully