Launching and building green businesses will be an important activity in reaching net-zero targets. Companies that can innovate and scale during these fast-changing, uncertain times could set themselves up for exponential growth. McKinsey analysis shows that growing demand for net-zero offerings could generate $9 trillion to $12 trillion in annual sales by 2030 across 11 value pools, including transport, power, and consumer goods.
In several sessions at COP29, McKinsey experts and panelists discussed how organizations can accelerate the scale-up of green businesses and climate tech through finance, cross-sector collaboration, and more.
Insights from our events
On November 16, McKinsey brought together experts from across industries to explore how to scale climate technologies and accelerate their deployment while also addressing other priorities such as affordability and energy security. With a focus on the technical and commercial breakthroughs required, the discussions centered on how innovation, investment, and strategic partnerships can drive faster adoption of key climate solutions.
Cracking the hyperscaling formula will involve innovative financing and strategic partnerships.
- Scaling climate technologies requires innovative financial structures—specifically, models that can bridge from pilot through “first of a kind” (FOAK) operations. In the case of technologies such as hydrogen and long-duration energy storage, cost reductions can be driven by both technological advancements and innovative financing strategies.
- One panelist described their company’s efforts to develop modular direct-air-capture (DAC) systems with the aim of reducing the cost from $1,000 per ton of CO2 to $100 per ton by 2050, leveraging project financing and supply chain efficiencies to achieve scale.
- Offtake agreements are a crucial component of financing large-scale climate technologies. McKinsey research indicates that offtake agreements can play a pivotal role in financing decarbonization projects by providing cash flow certainty and a mechanism for risk sharing. One panelist noted that such agreements can cover 70 to 90 percent of their company’s financing needs for green infrastructure projects, particularly when paired with other innovative capital structures. This can not only help lower the cost of capital but also unlock access to green bond financing, providing early-stage projects with the necessary financial backing to scale.
Navigating market dynamics and support from incumbents will be key.
- Panelists agreed that new technologies sometimes face a “chicken and egg” problem, in which market hesitance to adopt unproven solutions can limit progress. To overcome this, panelists discussed the importance of creating new market mechanisms and financing models that can derisk investments and attract early adopters. Demand signals, such as purchasing carbon removal credits or committing to purchase from early-stage projects, are essential to building the business case and moving from pilot stages to widespread deployment.
- Significant funds are still available in the market, but investor expectations have changed, requiring a faster path to profitability and scale. Starting small, proving the technology in real-world applications, and building credibility are crucial steps in gaining traction. The success of early movers helps build confidence and encourages larger-scale adoption across industries. For example, a panelist shared that a large beverage company was one of the first to purchase CO2 captured through their company’s DAC facilities, using it for sparkling water. Later, this helped the company build the case for new investors.
- Incumbent companies in particular can play a critical role in scaling climate technologies. By integrating new climate technologies, incumbents help derisk investments, create markets, and accelerate deployment. Incumbents have accelerated investment over the past five years with a threefold increase in the share of global 2023 clean energy investments. Incumbents can help in other creative ways as well. One panelist described their company’s launch of a climate tech accelerator to support early-stage start-ups, providing mentorship, resources, and partnerships to fast-track innovation. These types of collaborations can play a role in unlocking investment, building trust, and creating opportunity for promising start-ups in the climate space.
Digital technologies such as AI can promote operational efficiency and help climate tech companies reduce costs and scale infrastructure more quickly.
- One speaker discussed how his company is digitizing energy grids using AI to manage the rapidly growing number of renewable-energy connections to the grid. With 500,000 new renewable installations connected to its grid this year, the company is preparing to handle eight million connections to the grid in 2030, and AI will play a key role in scaling up that process with speed.
- However, speakers also noted that it’s crucial to balance these innovations with the energy demands they create. While AI can optimize systems and improve operational efficiency, the energy it uses must be responsibly managed and aligned with sustainability goals.
Beyond why to how: Three questions for leaders
- How can incumbents, governments, and investors work together to create a supportive ecosystem for climate tech?
- How do you incorporate data-driven insights (such as AI and machine learning) into your climate tech solutions, and how do you ensure they are effective, scalable, and sustainable?
- How can we move beyond climate commitments to make tangible investments in scaling solutions, whether through direct procurement, funding, or partnerships?
McKinsey at COP29
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