What’s behind this year’s boom in climate tech SPACs?

There's no denying that 2020 has been the year of the special purpose acquisition company.

Since the beginning of the year, 219 SPACs have raised $73 billion, according to widely reported market research from Goldman Sachs. That's a 462% jump from 2019 and more than traditional public offerings raised by about $6 billion. By some counts, roughly one quarter of the SPACs that have been announced will target climate-related businesses.

Since the beginning of the year, 219 SPACs have raised $73 billion.

Already, of the 78 deals that have either completed or announced a merger since 2018, just over one-third have been climate-related, as tallied by Climate Tech VC. And these SPACs have outperformed the broader technology market, with the 10 climate tech companies that have completed mergers averaging a 131% return on investment versus the 50% return of the total SPAC market (assuming average offering prices of $10 per share).

Clearly this has been a banner year for companies that are tackling the climate crisis across a number of verticals, but can it last?

There are a few reasons to think that it can - led chiefly by the demand for these kinds of public offerings from institutional investors, including the pension funds, mutual funds and asset managers handling trillions of investment dollars.

[The] current wave [of SPACs] is because over the past 24 months the institutional investor universe has come fully into believing that climate solutions are going to be a major growth area in the 2020s and beyond, but they weren't seeing options available to them for investing into," wrote longtime clean technology investor, Rob Day, in a DM.

The available publicly traded green' companies were already getting really bought up, and the private equity options were underwhelming as well (smallish in the case of VC, low returns in the case of large-format projects). Throw in a Robinhood market of retail investors with a lot of enthusiasm for EVs and such, and you have a nice recipe for this to happen."