AI could unlock US$600 billion a year in climate and sustainability value by 2028

While climate technology has long been associated with venture capital, AI-driven opportunities are now extending to growth equity, buyouts and infrastructure capital.

Venture capital continues to fund companies built around AI and specific sustainability challenges, such as adaptive learning platforms for students with disabilities. Growth equity investors, meanwhile, are expected to focus on platforms with proven deployments and growing customer bases. The BCG-Temasek report cited operational forecasting platform Tomorrow.io, which is expanding its satellite sensing infrastructure into data-sparse regions.

Buyout and infrastructure investors may also find opportunities in established businesses and physical assets where AI improves efficiency, margins or long-term cash flows. Mr Berdichevskiy cited global investment firm KKR’s investment in Zenobe, a United Kingdom-based specialist in electric vehicle fleets and grid-scale battery storage, as an example of investor interest in physical assets that may benefit from AI-enabled optimisation.

Mr Oehling said the link between financial returns and sustainability outcomes is clearest where AI helps companies use resources more efficiently. For instance, when a motor system runs more efficiently, energy costs fall and emissions decline at the same time.

The most promising companies may not always be those with the best AI models. In climate risk modelling, for instance, the advantage may lie with enterprises that control proprietary data and have established links to insurers and financial institutions.

Mr Oehling said investors should look beyond the AI model and ask two questions: Who owns the data and who has the customer relationships?

As AI creates new revenue streams and asset classes in climate and sustainability, investors with an outdated view of climate investing may miss part of the opportunity, said Mr Berdichevskiy. Late movers may face higher valuations and fewer openings as incumbents lock in data and distribution advantages.

“A company that deployed AI in industrial process control two years ago has two years of high-resolution operational data that a new entrant cannot buy or replicate,” he said.

Explore Boston Consulting Group and Temasek’s report, The Private Capital Opportunity in AI-Enabled Climate and Sustainability Sectors, to find out how AI is expanding the climate investment landscape.