Arcadia is a climate tech startup that received $200 million in Series B funding led by Morgan Stanley’s new Climate Tech investment department in 2021. Morgan Stanley set up this department in 2020 to strengthen its business in addressing climate change. The bank is betting big on startups working on technologies like carbon removal and renewable energy. Arcadia develops direct air capture machines that can suck CO2 out of the atmosphere. Its technology has the potential to reduce emissions significantly and combat climate change.
Arcadia investments taps into growing ESG interest
The funding Arcadia received from Morgan Stanley’s Climate Tech department highlights the growing interest in ESG or environmental, social and governance focused investments. As sustainability becomes important for companies, investors are looking to put their money into startups providing solutions. According to McKinsey, global ESG assets are expected to reach $140.5 trillion by 2025, presenting a big opportunity.
Morgan Stanley expands climate investments
In September 2021, Morgan Stanley announced a new private equity team focused on sustainability, committing up to $150 million. It also acquired a majority stake in Eaton Vance, an investment firm focused on ESG investing. Earlier in 2021, it set up a dedicated climate solutions team within its municipal securities group. Clearly, climate change and ESG is a priority area for Morgan Stanley.
Climate tech sees more VC interest
Venture capital funding into climate tech startups has grown at a rapid pace over the last few years. According to Pitchbook data, VC investments in climate tech companies hit $32 billion globally in 2021, double that of 2020. Leading VCs like Sequoia Capital have also set up dedicated climate funds recently. Arcadia’s sizable Series B round led by Morgan Stanley signals continued momentum.
Morgan Stanley’s Climate Tech team leading a $200 million investment into carbon removal startup Arcadia shows the bank’s ambitious goals around sustainability. With climate change threats growing, investors and corporations are looking closely at startups providing solutions, leading to surging VC interest in climate tech.