Climate change is no longer a distant threat; it is a present-day reality with far-reaching consequences. Rising temperatures, extreme weather events and disrupted ecosystems are clear indicators that the time to act is now. As global emissions continue to be driven by sectors like electricity and heat, transportation, manufacturing, construction, and agriculture, the need for innovative solutions has never been more urgent.

Nepal contributes just 0.027% of global greenhouse gas emissions but is highly vulnerable to the impacts of climate change, ranking as the fourth most affected country globally, with erratic weather patterns, intensifying climatic extremes and the rapid melting of glaciers. The nation's distinctive geography, delicate ecosystems and economic challenges further heighten its susceptibility to the effects of climate change. As global temperatures continue to rise, Nepal finds itself as a victim of the climate crisis.

To address these challenges, technological innovation, deployment and scaling must advance with urgency. Climate technologies play a critical role in this effort. According to the United Nations Framework Convention on Climate Change (UNFCCC), climate technologies refer to a broad range of tools, methods and innovations designed to mitigate or adapt to climate change. These include renewable energy sources like wind, solar and hydropower plants to reduce greenhouse gas emissions, as well as adaptive solutions such as drought-resistant crops, early warning systems and sea walls. Emerging advancements, such as AI and green hydrogen energy, are also being developed to reduce emissions, adapt to a rapidly changing climate and drive the transition to a low-carbon future.

However, to reach a low-carbon future, strategic investment and broad-based collaboration is required. This requires a concerted effort from all stakeholders, including policymakers, private sector leaders, financial institutions, non-governmental organizations, research institutions and local communities.

Private equity and venture capital (PEVC) firms have an unparalleled opportunity and responsibility to drive this transformation. While VC firms help transform ideas and provide capital to validate product market-fit, PE firms prove positive unit economics, prove technology at scale and meet large-scale market demand. According to PitchBook, there are now over 100 climate tech unicorns globally, with more than 200 exits recorded in the sector between 2023 and 2024. This underscores the significant potential for high-value exits in climate technology.

By channeling capital into climate technologies, PEVC firms can accelerate the development and adoption of solutions that decarbonize industries. These investments enable startups and scale-ups to overcome barriers, access new markets and drive meaningful progress in combating climate change, while generating strong and sustainable returns. Although energy and transport have been the primary focus of PEVC funding due to their critical role in decarbonization, sectors like industries and agriculture remain underfunded. This also underscores the pressing need for investment in areas with significant potential to achieve substantial CO2 emission reductions.

Global Climate Tech Trends

When examining global investments in climate technology, significant variations can be observed, shaped by each region’s stage of development and its unique needs. The overarching goal is to combat climate change with efforts focused on similar sectors such as energy, mobility, agriculture and other areas where climate technology can be applied. Significant differences exist in the technologies adopted, sources of funding, challenges encountered, opportunities and overall feasibility.

In developed economies, investments in climate technologies are primarily focused on innovations such as green hydrogen, artificial intelligence and other advanced solutions. For example, the Swedish start-up Stegra (formerly H2 Green Steel) has secured a total of €6.5 billion in equity and debt funding to date. The company's mission is to produce steel using hydrogen instead of traditional cooking coal. According to McKinsey, steel production powered by coal is responsible for approximately 8% of global greenhouse gas emissions.

In contrast, the landscape in developing and least developed countries (LDCs) presents a different narrative. Though it may only become fully apparent in retrospect, Africa has accounted for these factors and achieved significant progress in agriculture, water resource management, energy and other critical sectors. One notable example is SunCulture, a Kenya-based solar irrigation startup that has been transformative for smallholder farmers. In a country grappling with low and unpredictable rainfall, traditional methods such as flooding fields with water from nearby rivers or lakes often lead to soil erosion and nutrient depletion. Alternatively, using diesel-powered pumps for drip irrigation can be costly and environmentally taxing. SunCulture’s solar irrigation technology has revolutionized farming, offering a sustainable and efficient solution for farmers facing these challenges.

While advanced technologies often come to mind first when talking about climate tech, it is essential to adopt a thoughtful approach that accounts for the specific constraints and opportunities of the region to optimize strategies effectively. This is not to suggest that developing and LDCs are not exploring cutting-edge technologies to advance climate tech. However, it underscores the skepticism surrounding their readiness in terms of infrastructure, governance and regulatory frameworks. The Executive Secretary of UNDP’s timbuktoo Africa Innovation Foundation highlighted that while there is significant excitement about AI, the lack of reliable power infrastructure poses a major barrier to implementing advancements that could transform lives in Africa.

Like Africa, Nepal stands to benefit from a thoughtful evaluation of its unique challenges, opportunities and needs. While successful projects from other regions may not always align perfectly with Nepal’s context, a deeper understanding of its specific requirements, combined with lessons from global and regional successes can help Nepal identify and implement practical, impactful solutions.

Assessing Nepal’s Scope

Nepal has a significant opportunity in the energy sector, particularly in hydropower, which has attracted considerable interest from domestic and international investors. Countries with access to critical minerals, substantial financial resources and advanced technologies have made remarkable strides in developing and leveraging high-performance computing technologies. Similarly, the global demand for data centers is rising to meet the growing need for data storage. With its abundant hydropower resources, Nepal is well-positioned to play a pivotal role in powering these operations and hosting data centers, all while harnessing clean energy.

One notable development that has already taken place is the proposed establishment of Nepal’s first supercloud data center in Ramkot - a joint venture between Yotta Data Services and Nepal’s BLC Holding. The data center is expected to offer a comprehensive range of services, including cloud solutions, managed IT and cybersecurity, to store and process data and applications for various use cases, such as AI models and enterprise applications.

Nepal’s geographic location between India and China -- two of the world’s most populous economies -- places it in a unique position, as both countries are also among the biggest consumers of energy for computational purposes. India’s energy demand is expected to grow significantly due to its expanding IT sector and large-scale digital initiatives such as Digital India. In 2021, data centers in India consumed approximately 5.4 terawatt-hours (TWh) of electricity, a figure projected to triple by 2030. Likewise, China, which already houses some of the world’s largest data centers, consumed over 161 TWh of electricity for its data industry in 2021, accounting for nearly two percent of its total electricity demand. This presents a significant opportunity for Nepal in powering different regions of the world, provided there is collaboration from all stakeholders, including policymakers, private sector leaders, financial institutions, non-governmental organizations, research institutions and local communities.

Climate technology needs can be extracted from Technology Needs Assessments (TNAs). These processes under UNFCCC comprise a set of country-driven, participatory and action-oriented approaches to identify and prioritize the technologies needed for climate change mitigation and adaptation. In Nepal, the TNA process has emphasized energy innovations like Bus Rapid Transit (BRT) systems for fuel efficiency, electric cooking to reduce greenhouse gas emissions and biogas technologies leveraging local resources to cut CO2 emissions. In agriculture, technologies like Urea Molasses Multinutrient Blocks (UMMB) enhance livestock productivity and reduce methane emissions, while Alternate Wetting and Drying (AWD) technologies optimize irrigation and mitigate drought risks. Forestry innovations like Silviculture-based Forest management and Short Rotation Coppice (SRC) offer sustainable alternatives for wood harvesting, reducing deforestation and enhancing carbon stocks. These areas, identified through a multi-stakeholder process, hold substantial potential for delivering impactful, market-ready solutions.

While this highlights technologies that could significantly accelerate Nepal’s efforts to mitigate and adapt to climate change, it also reveals critical gaps. It overlooks certain areas of climate technology that Nepali investors are eager to advance and includes sectors that rarely gain public attention. This underscores an important challenge: bridging the gap between research-identified priority sectors and investor interests to ensure a balanced and aligned approach to advancing climate technologies.

Reducing emissions is a crucial step in addressing climate change. Nepal has committed to the Paris Agreement -- an international treaty in which participating countries pledge to reduce emissions, collaborate on adapting to the impacts of climate change, and limit global warming to 1.5oC. According to the International Finance Corporation (IFC), CO2 emissions in Nepal are primarily driven by agriculture, accounting for 54% of the total emissions. Farmers in Nepal face significant challenges due to changes in precipitation patterns and the diminishing snowpack in the mountains, leading to irregular and unpredictable water availability. These shifts severely impact crop production and food security. As a result, innovations such as Alternate Wetting and Drying (AWD), identified in the Technological Needs Assessments, should also be prioritized and implemented. By thoughtfully addressing Nepal’s unique challenges, opportunities and needs, the country can contribute to the global effort to meet the Paris Agreement's targets while also fostering economic prosperity.

Key Barriers to Climate Technology Adoption in Nepal

Financial constraints such as high upfront costs, extended payback periods and limited access to affordable financing are significant challenges for Nepal in adopting climate technologies. These financial obstacles are compounded by operational expenses, pricing uncertainties and insufficient investment in research and development which stifle innovation and scalability. Floods and landslides in Nepal induced by monsoon rain frequently result in damage to Nepal’s hydropower plants.

Weak and fragmented policies fail to create necessary incentives or address key issues like resource optimization and carbon conservation. Outdated regulatory frameworks, high import taxes and bureaucratic hurdles further hinder progress. The lack of mechanisms to scale successful initiatives limits their broader impact.For example, while there is recognition of the need to enhance and conserve forest carbon stocks, current policies and plans lack distinct strategies to achieve this goal.

Technical challenges are equally pressing. Inadequate infrastructure, such as the lack of fuels meeting Euro III or Euro IV standards, has hindered the implementation of systems like the Bus Rapid Transit (BRT). There is also a lack of expertise and insufficient extension services. Poor baseline data, limited access to raw materials and weak research systems exacerbate these issues. Inefficient market support systems and restrictive policies add costs and reduce accessibility.

Measures to Overcome Barriers

Addressing barriers to sustainability and innovation requires a multi-faceted approach that combines financial, policy, technical and market-driven solutions. Reducing financial obstacles such as high upfront costs through subsidies, soft loans, grants and dedicated credit lines will improve affordability and access to advancing climate technologies. Strategic investment in research and development, coupled with the promotion of cost-efficient and user-friendly solutions, can accelerate innovation and scalability.

Empowering local communities through targeted training, capacity building and active participation in resource management will foster long-term resilience. Streamlining infrastructure development and reinforcing governance frameworks are crucial for efficient implementation. Coordination among key stakeholders, such as farmers, research and development institutions, investors and partners, as well as concerned authorities like boards and ministries, is essential to enable faster decision-making and smoother execution of initiatives.

Incentives such as fair pricing, tax breaks and enhanced distribution networks will encourage wider adoption of sustainable technologies. Leveraging international financial mechanisms and fostering collaboration across sectors will attract investment and create financial incentives for businesses to adopt sustainable practices. These integrated measures will provide businesses with a clear pathway to overcoming barriers, enabling impactful, scalable solutions that drive both sustainability and growth.

Possible Collaboration and Partnerships

International development organizations, multilateral bodies, public-private partnerships (PPPs), and both onshore and offshore investments have been instrumental in advancing climate technologies. A notable example is the $30 million financing from Asian Development Bank (ADB) -- $20 million grant and $10 million in the form of concessional loan -- in 2024. This partnership aims to support communities in 24 municipalities by developing catchment management plans to ensure effective water resource management and enhance water security. The project will facilitate the construction of small-scale drinking water systems and gravity-fed irrigation facilities. Additionally, it will implement water and soil conservation measures to safeguard landscapes from the adverse effects of climate change. These measures include constructing structures to control soil erosion, manage surface runoff and promote water infiltration; stabilizing slopes and stream banks; and improving land cover through initiatives such as establishing nurseries, restoring barren lands and promoting agroforestry practices. Nepal's PEVC sector is actively investing in renewable energy projects, including hydropower and solar development. These investments contribute to Nepal's climate resilience goals while promoting sustainable economic growth.

Given Nepal’s geographical diversity and climate vulnerability, it is an ideal candidate for collaboration with international organizations, research institutions and private-sector stakeholders. PPPs are crucial in advancing Nepal’s climate tech sector by facilitating access to funding, technology transfers and capacity-building initiatives. Strategic partnerships with global organizations like the World Bank, climate tech startups and nations with advanced technologies can introduce cutting-edge solutions, such as carbon capture and AI-powered environmental monitoring.

Conclusion

The transition to a low-carbon future can be accelerated through the adoption of climate technologies. For Nepal, this journey presents an opportunity to align climate action with its economic, social and environmental priorities. By capitalizing on its abundant renewable energy potential and integrating advanced technologies across key sectors, Nepal can drive sustainable progress and strengthen its resilience to climate challenges. PEVC investments will be instrumental in this transformation, enabling the development and scaling of innovative solutions that address critical barriers and deliver tangible climate impact. Collaboration among stakeholders will further amplify these efforts, fostering shared expertise, resources and innovation. With strategic investments and a unified approach, Nepal can address its climate vulnerabilities while paving the way for sustainable development that benefits both its people and the planet.

(Team Ventures is an industry-agnostic alternative investment firm with a diverse portfolio spanning the energy, technology, real estate, manufacturing, financial institutions, agri-infrastructure, and electric vehicles segment.)

(This opinion article was originally published in February 2025 issue of New Business Age Magazine.)