As awareness – and concerns – rise in the climate crisis both globally and at home, a new report by the Israel Innovation Authority and the PLANETech organization set out to define, for the first time, the bounds of the country’s climate tech sector.
Rather than determining whether Israel has a separate climate tech sector, it examines which startups from various industries have innovative technologies relevant to this field, to show that companies in Israel’s ecosystem are working to tackle climate change. It also looks into Israel’s strengths, weaknesses and challenges are in the climate tech field.
“Over the course of several months, we examined some 2,000 companies in the relevant fields,” said Uriel Klar, director of PLANETech, a nonprofit set up to promote climate innovation in Israel. Of these companies, 1,200 were chosen, and in the end, 637 startups and growth companies that are developing climate tech made it onto the final list. At this point, the organizations involved decided, the full list will remain confidential.
Most of the companies on the list are young, meaning they were founded within the last seven years, and the majority are also small, with up to 10 employees. The most prominent fields are climate-smart agriculture, clean energy systems, sustainable transportation, efficient water infrastructure and alternative proteins – that is, animal product-free meat and dairy substitutes and cultured meat products.
“Not every company that meets the definition of ‘smart transportation’ made it onto the list,” Klar said. For instance, autonomous vehicle companies were left out despite claims that self-driving cars could reduce traffic jams, because they aren’t intended to reduce greenhouse gas emissions.
“When we started the job, it was convenient to say that smart transportation was climate-related,” Klar continued. “But that would be misleading the public. Our job was to break down each sector and field into companies that have a clearly positive impact on the climate and those that have no direct effect on the climate.”
However, companies involved in “new transportation” did make the list. This category includes ride-sharing companies like Via (which, among other things, is behind the Dan bus company’s Bubble service).
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In the energy field, the list includes companies involved in clean energy systems – energy storage, energy management and the production of green energy. Companies involved in oil or natural gas were excluded. The agricultural field includes companies that use technology to reduce the use of land or water.
Another prominent field is alternative proteins, in which Israel is a considered a world leader. “This is a field that’s exploding, and its climate impact is no less significant than that of any other energy technology,” Klar said. “Animal protein leaves an enormous carbon footprint, and replacing such proteins would help reduce the use of land, energy and water.”
Including alternative proteins in the climate category is unusual, but “it’s very important to get this into the conversation,” Klar added. “It will also help these companies grow. This is a specific technological field with a very important impact on climate.”
The biggest challenge? Funding.
The report found that Israel is one of the world leaders in cultured meat, irrigation systems, precision agriculture and desalination. But, it noted, developing climate technology is a complex process that generally takes many years. It is also expensive and high-risk, because “85 percent of the survey respondents have hardware at the heart of their innovations. Capital requirements for hardware are higher than those for software at all developmental stages,” the report said.
Israel has very few investment funds that specialize in climate tech, and despite the enormous amount of money flowing into Israel’s high-tech industry in general, a survey of some 200 Israeli climate companies commissioned for the report found that financing is the biggest challenge they face. Fully 72 percent of them listed access to capital as their chief obstacle to growth.
The report recommended several steps to promote climate technologies within the Israeli ecosystem, including creating a regulatory “sandbox.” This involves enabling the use of national infrastructure to test new technologies, improving access to international partners and funding programs, and enacting more lenient regulations to facilitate climate-tech companies’ entry into the market – alongside more stringent regulations for companies with negative climate practices.
Things are looking up, though. Between 2018 and 2020, $3 billion were invested in Israeli climate technologies. But the figure jumped to $1.2 billion for the first half of 2021 alone.
“That’s a positive sign,” Klar said. “But it’s still hard to get big, important, well-established climate funds to invest in Israeli startups. This report was created to show that there are companies and activity here.”