Editing IPCC:AR6/WGIII/Chapter-16 (section)

==== 16.2.3.2 Determinants of Direction of Technological Change: Financial Markets ====

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The challenges of investing in innovation in energy when compared to other important areas, such as ICT and medicine are also reflected in the trends in venture capital funding. Research found that early-stage investments in cleantech companies were more likely to fail and returned less [https://www.sciencedirect.com/topics/social-sciences/capital capital] than comparable investments in software and medical technology ( [[#Gaddy--2017|Gaddy et al. 2017]] ). This led to investors retreating from hardware technologies required for renewable energy generation and storage, and moving to software-based technologies and demand-side solutions ( [[#Bumpus--2017|Bumpus and Comello 2017]] ).

The preference for particular types of investments in renewable energy technologies depends on investors attitude to risk ( [[#Mazzucato--2018|Mazzucato and Semieniuk 2018]] ). Some investors invest in only one technology, others may spread their investments, or invest predominantly in high-risk technologies. The distribution of different types of investors will affect whether finance goes to support deployment of new high-risk technologies, or diffusion of more mature, less-risky technologies characterised by incremental innovations. The role of finance in directing investment is further discussed in Chapter 15, [[IPCC:Wg3:Chapter:Chapter-15#15.6.2|Section 15.6.2]] .

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