Israeli climate-tech is a world leader in clean energy

The “Mile Advisory Report” recently published in CTech paints a seemingly disappointing picture of the state of Israeli climate-tech companies focused on the development of decarbonization technologies. According to the report, only 152 of the startups in the industry are directly engaged in decarbonization efforts, with an additional 268 making only an indirect contribution. The report also claims that these startups provide merely 15% of the clean energy technologies that the International Energy Agency (IEA) has defined as essential for emission reduction. It also notes tepid interest from international investors towards Israeli companies operating in the industry. Additionally, the report points out that Israel’s level of government investment in research and development in the energy sector is five times lower than the OECD average.

Jonathan Benartzi.

Indeed, the relatively low investment in R&D in the energy sector reflects ongoing failure on the part of Israeli governments. Just this past December, a government budget allocation of NIS 200 million earmarked for environmental and climate-tech projects was withdrawn. It is incumbent on the government to recognize the importance of bolstering investments in an industry that is not only a source of national pride, but also enables Israel to compete on the global innovation stage, especially during these challenging times for the Israeli high-tech sector. As for the rest of the report's findings, the picture that emerges is much bleaker than in reality. In fact, the Israeli climate-tech sector is far more robust and established than the report suggests.

First and foremost, the report itself acknowledges that no less than 420 of the 700 Israeli startups examined are offering advanced decarbonization technologies. Whether their contribution to achieving this critical objective is direct or indirect, this accounts for a significant majority - 60% - of the decarbonizationist companies. This figure is particularly impressive considering that some of the startups in the reviewed group operate in sectors not directly linked to energy, such as transportation, water and agriculture.

In fact, the actual number of Israeli decarbonization companies is even greater. Data from PLANETech, a joint initiative of the Israel Institute for Innovation and the British investment group Consensus Business Group, reveals an additional 360 Israeli startups dedicated to making a positive impact in the climate arena. These startups develop innovative products across such sectors as green agriculture, meat substitutes, water infrastructure, recycling, innovative materials, waste and food waste.

And that’s not all. According to data from PLANETech and the Innovation Authority, the number of Israeli climate-tech startups surged by 13% in 2022, on the eve of the high-tech crisis. The data also indicates that climate-tech companies accounted for 17% of all technological startups in Israel, successfully managing to raise an impressive $2.3 billion in 2022 alone. While climate-tech investments dropped dramatically in 2023 by 60%, this must be contextualized as part of the sharp 40% major decline experienced by the climate-tech sector worldwide. This decrease in the scope of investments intensified here in Israel due to the crisis faced by the local high-tech sector owing to the judicial overhaul saga and subsequently the war.

Despite all these challenges, the outlook for the Israeli climate-tech sector remains optimistic. According to data from PLANETech and the Innovation Authority, 14 cents of every dollar invested in Israeli high-tech goes to the climate sector, compared to only 10 cents worldwide, according to PwC data. In other words, our local climate-tech sector has outperformed by far the rest of the world in the weight attributed to it by high-tech investors. The profile of investors is also encouraging. According to the same data, nearly half of the investors are international investors, demonstrating the appeal of the Israeli climate-tech to venture capital funds and overseas investors.

These figures are not surprising to those living and breathing climate-tech in Israel. International investors are deeply involved in what is happening in the Israeli industry, and they are largely responsible for the year-over-year growth in the number of startups in this field. Over the past five years, Israeli climate-tech companies have received investments totaling no less than $8.5 billion.

Much like the rest of the high-tech industry, the climate-tech sector is currently contending with the challenges of the crisis, further exacerbated by the ongoing war in Gaza. However, the crisis also presents an opportunity to leverage climate technologies for producing more affordable energy for an economy yearning to save costs and to again set in motion the wheels of the Israeli high-tech sector and the Israeli economy. The foundation of Israeli climate-tech is robust and growing, even now, and it is up to us to seize the opportunity to advance the sector.

The writer is a Co-founder and managing partner of Firstime.