In 2022, $800M (and counting) in ESG investment went to DC-area companies

While 2022 is shaping up to come in a little lower than 2021’s $5 billion year, DC-area investment is actually on the rise, according to new data.

Financial consulting giant Deloitte, in collaboration with PitchBook, released a new study on ESG investments in 2022. And as it turns out, ESG — short for “environment, social and governance” — was strong throughout the year in the greater DC area (in which Deloitte included Richmond, Virginia and Baltimore, Maryland). In the first three quarters of the year, ESG investment increased to $800 million across 17 deals in the DC region. That’s up from $500 million spread across 12 deals in all of 2021.

The study took a look at regional investments of venture capital, private equity and private corporations. Deloitte’s definition of ESG loosely included companies focused on cleantech (i.e. technologies that will reduce the environmental impact of human activities, as well as help or adapt to the effects of climate change), climate tech and impact investment, which included anything from software and hardware to tools and services. Nationally, the report ranked the DC area fifth overall in deal counts and value.

Krista Smith, Deloitte’s emerging growth company practice leader for the greater DC area, said that cleantech and climate tech companies have been on an upswing over the past few years.

“Certainly now with the ESG push, [cleantech] is now coming into its own here in DC,” Smith told Technical.ly. “It gets me excited to see the marriage between early-stage companies and clean tech.”

DC was not alone in its ESG success, with investments and deals holding strong elsewhere. Although there were fewer new climate-related unicorns in 2021, the active and existing unicorn companies stayed strong. In addition, more unicorns were created in 2022 than in any other year except 2021.

For 2023, Smith is unsure of exactly what founders and investors should expect, as she anticipates an upcoming U.S. Securities and Exchange Commission ruling will have a large impact on funding. The Enhancement and Standardization of Climate-Related Disclosures for Investors decision would make providing climate-related information on registration statements and annual reports a requirement. As the ruling hasn’t come yet, she isn’t sure what it will mean for investors and climate tech companies; Still, she recommends starting to prepare now, as well as getting a sense of what disclosures could come and what both company leaders and funders have in place to measure.

With that in mind, she said a combination of technology, data, resources and the right tools to support reporting and accountability will be crucial. And should that go well, she sees no reason why investment growth isn’t likely to follow.

“More investment is likely to follow,” Smith said. “We’ve seen the dollars flowing in and I think we’re just going to continue to see that.”