African startups and venture capitalists (VCs) must prioritize climate-resilient business models to address the growing threat of climate change, according to Dotun Olowoporoku, Managing Partner at Ventures Platform. Olowoporoku stressed the importance of adopting climate-resilient business models during an interview at the Africa Prosperity Summit, highlighting the dual responsibility of startups and VCs in the space.

Climate change is having a devastating impact on Africa, with the continent contributing only 4% to global carbon emissions yet bearing the brunt of climate-related risks. Major cities like Lagos, Cairo, Nairobi, and Johannesburg are already feeling the heat, with sea-level rise threatening coastal areas, extreme heat disrupting daily life, and water scarcity depleting arable land. On average, African countries are losing 2-5% of their GDP, with some diverting as much as 9% of their budgets to address climate extremes.

A climate tech white paper from Ventures Platform revealed that by 2050, more than 90% of Africans could be exposed to climate-related hazards, potentially resulting in nearly $440 billion in annual damages. However, this adversity has also sparked a wave of African startups finding innovative ways to tackle these hurdles, while also creating new economic opportunities on the continent. From renewable energy to sustainable agriculture and eco-friendly transportation, these ventures are crafting creative solutions to both mitigate and adapt to climate change.

Olowoporoku emphasized that "Building climate-resilient business models isn’t just about addressing environmental challenges. It’s also about unlocking societal and economic sustainability." Companies like Thrive Agric, Remedial Health, Moove, and SunFi show how businesses can seamlessly blend sustainability with profitability across critical sectors including agriculture, healthcare, transportation, energy, and financial services.

Despite the potential of this ecosystem, funding remains a significant challenge for climate tech. In 2024, while fintech dominated startup funding, securing nearly half of all investments, climate tech captured 32%, making it the second most funded sector, according to Africa: The Big Deal. Yet, this figure is lower than 2023, reflecting challenges in the energy sub-sector, which saw a 42% year-on-year funding drop.

However, Olowoporoku remains optimistic, noting that funding is gradually improving, with more Limited Partners (LPs) showing interest in the space. He emphasizes the vital role of policies as catalysts and enablers for many climate tech solutions. "Unlike fintech, where you can simply build a business and expect the policy to follow, climate tech is a bit different. It’s a collective, wider ecosystem issue that impacts many people. We need to engage with governments and policymakers, presenting the innovative products we’re building. Engaging with them and helping shape policies is key," he stated.

Olowoporoku also noted a prevalent misconception among some African governments, who view climate change as a problem mainly for the West, arguing that "we don’t need to focus on reducing our impact." He stresses the importance of investing in enablers and mitigants, urging Africa to focus on understanding how climate change affects the continent and finding ways to minimize its impact.

Startups are finding innovative ways to make climate tech more accessible. Take solar energy, for instance. Just a few years ago, high costs and a lack of awareness posed significant barriers. Today, companies like SunFi are bridging the gap by providing financing options for solar panel adoption. "The challenge used to be educating the market," Olowoporoku recalls. "Now, with reduced costs and increased awareness, adoption is accelerating. What we need to do as Africans is invest in adaptation as quickly as possible."

This shift in market dynamics is encouraging. Shorter time-to-market cycles for products like solar panels make climate tech more attractive to investors who were previously deterred by the long wait for returns. "Startups that demonstrate both significant climate impact and venture-scale economics will attract the funding they need to thrive. Measuring performance against climate impact metrics and financial benchmarks is key to their long-term viability," Olowoporoku advises.

In conclusion, African startups and VCs must prioritize climate-resilient business models to mitigate the devastating impact of climate change and unlock economic sustainability. By adopting climate-resilient business models, startups can create innovative solutions to address climate-related challenges, while also generating profits. As Olowoporoku emphasized, "Building climate-resilient business models isn’t just about addressing environmental challenges. It’s also about unlocking societal and economic sustainability."