Our ability to meet climate and development goals will depend in part on the performance and success of climate startups: the new ventures that bring low-carbon energy, transport, agriculture, water, resilience, and circular-economy solutions to market. In EMDEs, where a large and rising share of emissions and where the effects of a changing climate fall hardest, these new climate ventures matter for both climate and development outcomes. They also operate in demanding conditions. Their products are often capital intensive and infrastructure dependent, and their timelines are typically long and contingent on policy. Purchasing power is often low, and climate benefits are only partially priced.

The current frameworks used to assess venture ecosystems are designed mainly for advanced economies or conventional high-growth ventures. This paper presents a framework for assessing climate venture ecosystems in EMDEs. The paper’s findings can support the prioritization of efforts and resources to strengthen the conditions necessary to scale climate ventures. 

Key Findings

  • All ventures depend on the same six ecosystem conditions to scale regardless of geography, but climate ventures in emerging markets and developing economies (EMDEs) require different supports from each condition.
  • The six conditions are policies and regulations, finance, market access, entrepreneurial culture, talent and capabilities, and support services.
  • The six ecosystem conditions are interdependent. Effective interventions to strengthen the conditions can be sequenced or bundled across combinations, instead of trying to find a silver bullet or fixing one condition at a time.
  • Climate mechanisms like carbon pricing, sustainable finance taxonomies, international climate finance, and green industrial policy shape each condition differently, with green industrial policy being the only mechanism that directly affects all six conditions.
Climate entrepreneurial ecosystem in EMDEs figure.

Executive Summary

How new ventures form, survive, and scale depends on the surrounding entrepreneurial ecosystem. These six conditions serve as the basis for our framework for climate ventures in EMDEs.

  1. Policy and regulation
  2. Finance
  3. Market access
  4. Entrepreneurial culture
  5. Talent and capabilities
  6. Support services

The frameworks used to study and assess entrepreneurial ecosystems, however, are not built to see what makes climate startups different. Four gaps explain why:  

  1. Existing research and assessments concentrate on advanced economies
  2. They assume a high-growth, venture-backed archetype, modeled on software ventures that scale at low cost, which fits few climate ventures in EMDE settings.
  3. They assess conditions one at a time, although conditions interact and the same intervention can work differently across countries.
  4. A growing body of literature on sustainable entrepreneurial ecosystems now accounts for ventures with environmental and social returns, but it treats them as one broad category and does not distinguish climate ventures from other types. Social enterprises often serve markets that are underserved but new to the buyer. Most climate ventures sell energy, water, food, or materials into established markets as replacements for incumbent products; the climate benefit is usually a byproduct that markets do not fully pay for, so demand frequently depends on policy.

This framework can help identify where an ecosystem supports climate ventures and where it falls short. That, in turn, can help direct limited effort and capital toward the constraints holding ventures back, what to prioritize, and how to sequence them.