Israel’s State of Climate Tech 2022 - Update

Executive Summary

Development and deployment of climate technologies are required to both mitigate and adapt to climate change, and solutions across a range of industries are growing rapidly. Israel has mirrored this global trend, with the number of Israeli climate tech startups continuing to grow, both in absolute numbers, reaching nearly 700 startups, and as a growing fraction of all new startups founded each year, 14% in 2021. The total amount invested in Israeli climate tech between 2018 – H1 2022 totaled $6.67 billion, growing in the three years between 2018-2021 by 340%, a rate 2.6 times faster than the global investment growth. Global drivers, together with an emerging and growing local ecosystem, are expected to continue to accelerate the growth of Israeli climate tech in the coming years. The effects of climate change are happening now, the impacts intensifying as warming grows, and the likelihood of inevitable and irreversible long-term impacts increasing. Despite global pledges to reduce GHG emissions, we are getting measurably closer to reaching the 1.5°C warming threshold of the Paris Agreement.

PLANETech is a nonprofit climate tech innovation community - a joint venture of the Israel Innovation Institute and Consensus Business Group. PLANETech aims to lead the Israeli and global climate tech ecosystem in tackling climate change via a combination of approaches. This is done by modifying business focus and technologies towards climate change challenges, supporting the deployment and implementation of innovative climate technologies, and by building a global network for climate tech innovators while promoting Israel as a world center for climate solutions.

Uriel Klar Director of PLANETech

Dr. TamarMoise Headof ClimateProgramsof PLANETech

Special thanks to thePLANETech team: AvivaPolisar, TamaraHoffman, DeborahKreis, Gal Sharon, and to the Israel InnovationAuthority.

Israel’s State of Climate Tech 2022 Update

Introduction Accelerated Growth of Climate Action 2021 - 2022 ‘Israel’s State of Climate Tech 2021’, a collaborative report written by the Israel Innovation Authority and PLANETech, and the first report to portray the climate tech ecosystem of any nation, was published a few weeks prior to COP26. The year since has been one of accelerated activity across the full array of stakeholders in positions to drive decarbonization and climate resilience, both globally and in Israel. The COP26 Glasgow Climate Pact commitments resonated with greater conviction to accelerate action on climate this decade. These included the demand that countries set targets to meet the 1.5°C goal, the pledge to reduce methane emissions and halt deforestation, re-commitments to increase financial support to low- and middle-income countries, as well as alignment with net zero goals from large financial institutions, members of the Glasgow Financial Alliance for Net-Zero. Israel, for the first time, declared its commitment at COP26 to net zero by 2050, and Prime Minister Bennet shared in his speech his vision of transforming Israel from ‘Startup Nation’ to ‘Climate Innovation Nation’.

The impact of this in accelerating the growth of climate technologies is striking. The number of new ventures and growth-stage climate tech investment funds established is proliferating, the funds raised by climate-focused funds are multiplying, and in parallel, dollar investments and the number of rounds in climate tech startups are climbing. In numbers; at the closing of 2021, annual VC climate-tech investments summed to over $40 billion over 600 deals, with funding rising ~20% sequentially for each quarter of 2021, and dollar investments in H1 2021 doubling compared to the equivalent period in 2020. 1,2 In H1 2022, climate tech startups raised around $19 billion across 500 venture deals, 3 despite a period of decline in overall venture market funding 4 . Approximately 70 new climate venture firms were announced during 2021. Climate tech investments are prominent in the overall VC market, accounting in 2021 for US$0.14 cents of every VC dollar, 5 and despite the downturn of the overall tech market in early 2022, deep investments in climate tech are expected to continue. 2 Israel’s government is also slowly stepping up its climate commitments, with a Climate Bill having passed its first reading. Furthermore, NIS 3 billion have been approved for the establishment of a climate tech program, which includes defined steps for promoting technological solutions dealing with climate change based upon findings from the 2021 report. In all respects, the Israeli climate tech ecosystem has experienced accelerated growth over the last 12 months. This is reflected in the activity of startups, incubators and accelerators, investors, as well as a growing number of founders, entrepreneurs and skilled professionals exploring and seeking new opportunities in the field. This 2022 report update analyzes the growth in ‘Israel’s State of Climate Tech’ over the past year, reflecting and comparing to the previous findings from 2021, and portraying an evolvement of the Israel ecosystem that parallels the global growth.

The 6 th IPCC reports were also published this last year, providing scientific evidence for climate change, the current and future impacts on ecosystems and society as well as developments in mitigation efforts towards attainment of long-term emissions goals. The deepened commitments and the sense of urgency following the Glasgow Climate Pact and the IPCC reports have sped up the pace of climate policy and action globally.

1 https :// www.ctvc.co / 40b-2021-climate-venture-recap /, 2 Pitchbook, Emerging Tech R esearch, Climate Tech R eport, VC Trends and Opportunities, Q 1 2022 . 3 https :// www.ctvc.co / 19b-2022-midyear-update / retrieved September 202 2 4 https :// www.emergingtechbrew.com / stories / 2022 / 07 / 25 / a-flight-to-quality-here-s-how-climate tech-vcs-are-shifting-focu s 5 Pwc, State of climate tech report, 2021, Scaling breakthroughs for net-zero

Israel’s State of Climate Tech 2022 Update

Climate Challenge Map

The PLANETech Climate Challenge Map presents the main challenges to successful climate change mitigation and adaptation, across all activities of our daily life and natural ecosystems (Figure 1). The ‘Israel’s State of Climate Tech 2021’ report classified startups and companies according to four climate challenges areas: The Built Environment, Materials & Manufacturing, Land Use, and Nature, each of which contain 5 explicit challenges – 20 challenges in total. 6 challenge area, Digital, that includes 2 new challenges. ‘Carbon Management, Risk & Finance’ - digital platforms that support climate actions by individuals, communities, organizations, and financial institutions, provide metrics for climate risk assessment, and offer digital financial instruments and mechanisms to advance climate action and enhance resilience. ‘Sustainable Digital Infrastructure’- software and hardware-based approaches and designs that reduce the resource consumption of the digital services and infrastructure, and lower the industry’s growing electricity demand and carbon footprint. The PLANETech Challenge Map provides a common platform for the Israeli climate tech ecosystem and has been adopted by the government in its newly announced climate tech program. It has also been adopted by the European Institute of Innovation and Technology (EIT) in their mapping of six European climate tech ecosystems. We have recently amended the challenge map and added a fifth

Figure 1 | ThePLANETechClimateChallengeMap

Built Environment

Clean Energy Systems

Sustaina b le Mob ilit y & T rans po rt

Low Car bo n B uil d ings

G reen C o nstructi o n

Ec o- E ffi cien t W ater I n f rastructure

Materials & Manufacturing

T rans p arent & Agile Su pp ly C h ains

Car bo n Ca p ture & U tili z ati o n

Nov el M aterials Clean M anu f acturing

Circularity

Land Use

Climate Smart Agriculture

S o il H ealt h

Alternati v e P r o teins

Food Lo ss & W aste

M etal & M ineral M ining

Nature

Fo rests & L an d Ec o systems

O ceans & W ater Ec o systems

E x treme W eat h er E v ents

B i od i v ersity

Eart h Ob ser v ati o ns

Digital

Sustaina b le D igital I n f rastructure

Car bo n M anagement , R is k & F inance

The PLANETech Startup Platform 7 presents Israeli climate tech startups and displays the relevant climate challenges each one addresses as well as their climate profile.

6 Details on each of the climate challenges can be found at https://www.planetech.org/challenge-areas 7 https://www.planetech.org/startups-platform

Israel’s State of Climate Tech 2022 Update

Overall investments in early and growth stage startups in Israel in 2021 were 25.8 billion USD, 9 meaning that for every dollar invested in Israeli high tech, 10 cents went towards climate tech. This is lower than the global and EU 2021 ratio of 14% 10 and 13% 11 respectively. This ratio, however, increases to 15% in H1 2022. Whilst total hi-tech investments in Israel saw a downturn in this half, 12 climate tech investments remained steadfast, such that their relative fraction of total capital raised grew by 50%. An analysis of the investments over the period between 2018 and H1 2022 reveals that9 After the initial increase between 2018-2020, annual investments in Clean Energy Systems decreased greatly in 2021, but seem to have recovered again in 2022 (when considering H1 2022 to be indicative of the full year to come)P After the initial increase between 2018-2020, annual investments in Sustainable Mobility & Transport have remained a significant fraction of the overall climate tech investments, though decreasing somewhat year by year6 Annual investments in Alternative Proteins have significantly increased year by year since 20186 Annual Investments in Climate Smart Agriculture have increased since 2018, and display a remarkably steady investment amount since 2020. We note that the four main challenges together raised similar amounts in 2020 and 2021 ($1.2 billion) and that the increased investments in 2021 came from additional challenge areas; Clean Manufacturing, Transparent & Agile Supply Chains and Green Construction.

Funding for Israeli climate tech in 2021 $2.5B

Funding growth between 2018-2021 340%

Faster growth vs. global investments x2.6

9 https://www.ivc-online.com/LinkClick.aspx?fileticket=zoiw9HbgiiI%3D&portalid=0×tamp=1657697282819 10 Pwc, State of climate tech report, 2021, Scaling breakthroughs for net-zero (ratio for 12 months of H2 2020 and H1 2021) 11 The rise of European climate tech, dealroom.co and Talis, April 2022 12 IVC and Leumi Tech, Israeli Tech Review, Q2 2022

Israel’s State of Climate Tech 2022 Update

Growth Map of Climate Tech Domains

An analysis of the growth rate of startup companies for any particular challenge is shown in Figure 5. The figure depicts the percentage increase in the number of startup companies over the last 3.5 years (2019-H1 2022), the size bracket of the total number of startups in the challenge and the total known investments per challenge.

Alternative Proteins, the third most funded challenge domain in 2021, is expected to continue to grow and may take top place in total investment in coming years. Cluster 3 – early emergence – includes a group of challenges, each with less than 50 startups and varied stages of matureness. Circularity and Novel Materials both show steady growth in number of startups, and Transparent & Agile Supply Chains displays a continued high growth in new companies. However, investment growth is still limited to date. Cluster 4 – new arrivals – includes Carbon Capture & Utilization and Carbon Management, Risk & Finance, two challenges that have attracted founders that have followed the global interest in these domains, and in which opportunities are expected only to grow. Both challenges, which are distinctly different in their tech drivers, include a very high percentage of young companies, but are still in early stage of investments. Significant growth in these two domains is likely, yet it will probably take a few years.

The challenges are grouped into a number of clusters with similar characteristics.

Cluster 1 – established fields – consists of Sustainable Mobility & Transport, Clean Energy Systems, and Climate Smart Agriculture, challenges with the greatest number of startups, the largest total funding sums over time, and steady investment growth. Cluster 2 – rapid growth – includes the Alternative Proteins and Green Construction challenges that have raised increased capital over the last year, validating our anticipation in our previous report that the quick rise in these new companies would lead to accelerated investments.

Figure5 | GrowthMapof ClimateTechDomains

N ew A rri v als

90%

Number of startups

Car b on Capture & U tili z ation

150

Car b on M anagement , R is k & F inan c e

100

80%

25 50

Built Environment Materials & Manufacturing

E arl y E mergence

70%

R apid Growth

Land Use Digital

60%

T ransparent & A gile Supply C h ains

A lternati v e P roteins

50%

G reen Constru c tion

Cir c ularity

40%

F oo d L oss & W aste

N o v el M aterials

E sta b lished Fields

30%

Sustaina b le M o b ility & T ransport

L o w Car b on B uil d ings

% of Young Companies (0-3.5 years)

Climate Smart A gri c ulture

Clean M anufa c turing

20%

Clean Energy Systems

E c o-Ef fic ient W ater I nfrastu c ture

10%

0

500

1000

1500

2000

2500

T otal I n v estment ( M U S D )

Israel’s State of Climate Tech 2022 Update

Israeli Climate Tech Unicorns

The strength, variety, and depth of the Israeli climate tech ecosystem is reflected in the list of Israeli climate tech startups that have reached unicorn status. This list includes companies that develop products and technologies that either directly reduce GHG emissions, or provide resilience to the impacts of the changing climate. It is worth noting that some of the startups were not established with a climate positive purpose, but evolved into a climate tech startup, developing a strong climate value proposition, as part of their venture and mission. The list includes 7 startups from different domains that have gained the title unicorn (evaluation higher than $1B) in their lifetime, as noted in different media channels and reports. Each climate tech unicorn shared with us a quote from their CEO, describing the startup’s climate impact. The following quotes and information were provided by the startups for this specific updated report. A notable company that is not listed is SolarEdge, an Israeli climate tech company with a market value of $17.5 billion as of today. It is the first Israeli company to join the S&P 500, and has over 2.6 million installations across 133 countries that are advancing solar energy.13

13 Yahoo Finance and SolarEdge

Israel’s State of Climate Tech 2022 Update

“Wiliot’s battery-free postage-stamp sized computers bring the power of the internet to every single thing. We can transition supply chains to demand chains that slash carbon and cost. Having businesses manage to a real-time view of their carbon footprint will allow us to move from promises of progress over decades, to a daily measurement that empowers the whole enterprise to optimize around carbon reduction.”

"For the majority of people, businesses and governments on Earth, the reality of climate change is rapidly expanding to focus on day to-day mitigation. Climate security has become the new cyber security, and innovative advancements to the world's existing forecasting technology is needed more than ever. Tomorrow.io’s mission is to equip humanity with the weather intelligence needed to adapt and thrive in an era of climate crisis."

Tal Tamir, Co-Founder and CEO, Wiliot

Shimon Elkabetz, Co-Founder and CEO, Tommorow.io

“StoreDot is addressing the number one barrier for the adoption of electric vehicles with the introduction of new materials in the battery. By eliminating Range and Charging Anxiety, the rate of EV adoption across the globe will dramatically increase and the transition to clean electric mobility will be accelerated.”

“Leading industrial manufacturers use Augury's advanced AI technology to improve energy efficiency, productivity and profits, while upskilling their workforce and reducing emissions. By improving Machine and Process Health across the industry, Augury is expected to reduce 3 million metric tons of carbon emissions annually.”

Doron Myersdorf, Co-Founder and CEO, StoreDot

Saar Yoskovitz, Co-Founder and CEO, Augury

"We need to radically reimagine our relationship with the private car if we are to avoid the worst effects of climate change and create more equitable communities. The good news is that the technology needed to make these changes is available today. U sing sophisticated algorithms, Via helps cities redesign and operate efficient public transport networks, providing viable alternatives to single-passenger car trips for millions of people all over the world."

“ O ptibus is helping 1 , 000 cities worldwide to reduce emissions and become more sustainable by making public transportation the mobility mode of choice for all. U sing AI and optimization algorithms, our software improves services and supports the roll-out of electric buses, which are more complex to manage but central to achieving carbon neutral cities.”

"The climate crisis requires everyone to be all in. At Veev we take our part seriously and are working continuously to lower our product's embodied carbon. Today, we are pleased that a Veev home is 40% lower on embodied carbon than a traditional home, but won't be satisfied until we are carbon positive."

Amit H aller, Co-Founder and CEO, V eev

Amos H aggiag, Co-Founder and CEO, O p tibus

Daniel R amot, Co-Founder and CEO, V i a

Israel’s State of Climate Tech 2022 Update

Thank You