As steel giants face climate goals, investors focus on decarbonization and emissions

Steelmaking is thousands of years old, and essential to the global economy: The steelmaking process is incredibly energy intensive, and the industry has often been considered as one of the most challenging to decarbonize. Steel and iron production account for around 7%–9% of all global human CO2 emissions, emitting 2.6 Gt CO2e annually.

ArcelorMittal, the second-largest steel producer in the world, plans to reduce its overall CO2 emissions intensity by 25% by 2030 and reach net-zero emissions by 2050. To help it get there, the company is investing in related climate-tech startups through its XCarb Innovation Fund. The steel giant, which brought in nearly $80 billion in revenue last year, claims it plans to spend as much as $100 million a year on companies “developing technologies with the potential to support and accelerate the transition to net-zero carbon steelmaking.” Established in 2021, the fund has so far committed $158.5 million to six different startups in the space.

In January, the steel giant announced its latest big investment via the venture arm: It led a $120 million Series C for Boston Metal, a startup founded in 2012 and focused on decarbonizing steel production.

Irina Gorbounova, vice president of M&A and head of the XCarb Innovation Fund at ArcelorMittal, told Tech Brew the fund’s objective is to identify “the most prominent technologies that can be deployed and can help us get to net zero faster.” 

“We want to also be at the forefront of the industry’s transition. This is our responsibility, but I also frame it as our opportunity,” Gorbounova said. “Although the technology isn’t ready today, we believe, based on our technical assessment, that it has very exciting future potential. And we do want to be part of this journey to support the development.”

Boston Metal’s tech changes a key component of traditional steelmaking techniques, replacing non-renewable energy with renewable energy and using electrical currents to heat iron ore, a step that is the main contributor of emissions as it relates to the steel industry. Boston Metal aims for its “green steel” solution to be market ready by 2026.

“Because of the immense scale and the amount of CO2 produced when you make steel using carbon…The steelmakers—and really the whole supply chain—[are] now demanding that the age of carbon for steel, or at least the age of emissions, come to an end,” Adam Rauwerdink, SVP of business development at Boston Metal, told Tech Brew.

Boston Metal is the fund’s sixth investment since it began; ArcelorMittal invested $36 million into the company, and was joined by investors like Microsoft’s Climate Innovation Fund.

The steelmaker has also invested in other companies adjacent to or crucial to the steelmaking industry, including LanzaTech, which makes carbon-capture tech, and Form Energy, which specializes in long-duration energy storage.

So far, XCarb has only invested in early-stage companies, but Gourbounova said the fund is not limiting itself to early-stage companies in any future investments.

She added that ArcelorMittal’s position as a global steel player means that it can field test and eventually scale promising tech, but the company isn’t doing so at the moment.

“We have the industrial setting, we have the industrial platform to test these technologies to establish the technical viability and also the industrial scalability. Lots of funds can look at some of the promising technologies in isolation, whereas we have the platform that we can really see if those technologies can be deployed and can be scaled on the industrial scale,” Gorbounova said.