Halfway into 2025, let's look at climate tech trends...
Climate Tech Investment: AI is the 'new, new thing', sucking up about 50% of global VC money; government policy uncertainty is investors' number 1 concern for climate investing.
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In this Green Techpreneur edition, we explore the key trends shaping climate tech and investment in 2025 so far. From a sharp Q2 funding dip to the rise of AI-climate crossovers and regional divergence, the landscape is shifting fast. Whether you're a founder or investor, these insights can help you navigate what’s ahead.
At a glance, 2025 marks a rollercoaster year for climate tech investment. Q1 data reflects stark contrasts: $9 billion deployed in eco-focused startups — a steady figure — but global VC investment in climate then dipped by nearly 50% in Q2, hitting multi-year lows at $5.9 billion. Despite slowing deal velocity, the overall investment market remains active — mainstream VC surged to $91.5 billion in Q1, highlighting climate tech as a 10% slice of a booming investment pie.
This reflects a larger shift: AI-led sectors are absorbing growth capital — capturing 53% of VC dollars globally in the first half of 2025, according to data from Pitchbook. Climate-focused VCs remain selective, favouring later-stage, more proven companies.
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2025 Sector Breakdown & Standouts
Clean energy remains the backbone of climate tech funding. Despite a brief dip in Q1, PitchBook reports continued resilience driven by Inflation Reduction Act–backed renewables, storage, and electrification. Meanwhile, carbon and emissions tech is navigating uncertainty due to U.S. policy flux.
Climate-adjacent sectors are also emerging:
Data-center decarbonization is taking off. Startups are targeting AI and cloud infrastructure’s growing energy footprint—data centers now consume up to 4% of global electricity, leading to fresh investment in energy efficiency tech.
AgTech remains resilient in niches like dairy robotics and solar-powered infrastructure in the US, even as broader funding dips, reports Reuters.
African climate tech is tapping into new regional funds, such as a $55 million seed fund from Equator, to bolster energy and agriculture innovation, reports TechCrunch.
Funding Dynamics & Deal Flow
Trailing deal counts reflect tightened budgets — more capital chasing fewer opportunities. In 2024, climate tech VC totalled $37.8 billion across a shrinking number of deals. The Q1 2025 figure — a modest $9 billion — shows resilience, but Q2 raises concern after slumping to pre-2020 lows.
These patterns underscore a cautious investor playbook: larger ticket sizes, a focus on late-stage audiences, and explicit interest in proven climate technologies. A PitchBook and TechCrunch report confirms this later-stage momentum, showing a 7% drop to $12.9 billion in 2024 climate funding, with median deal sizes rising to $7 million and valuations to $44.5 million, according to TechCrunch.
Emerging Themes in Climate Tech
AI & Climate Tech Convergence
As AI devours global VC (53% share in early 2025), climate startups are partnering with or pivoting to data centers and computational retrofit, capturing crossover investment, reports Business Insider.
Policy-Induced Gatekeeping
For climate tech, policy whiplash is the central concern. According to CTVC, 50% of investors cite regulatory uncertainty as the top threat through 2026, surpassing macro and financial risk.
Early-Stage Resilience, Scale Challenges
Three in four deals in clean energy are Seed/A, but the “commercial-ready” gap remains hard to fund — particularly for $45–100 million–scale projects.
Regional Divergence
Europe remains policy-driven, with around 400 climate/cleantech funds. The U.S., meanwhile, contends with subsidy reversals under Trump 2.0.
Untapped Talent Pool — Women in Climate Tech
RMI surveys suggest boosting gender diversity could unlock an additional $12 billion in annual returns — yet gender parity remains distant.
Regional Investment Hotspots
United States: Clean energy and battery storage lead, propped by IRA incentives, but policy rollbacks have disrupted later-stage funding.
Europe: Fuelled by PPWR, Green Deal, and UK climate funds, investors like Elbow Beach and Pale Blue Dot are picking winners with commercial focus.
Africa: Equator’s $55 million fund underlines growing seed capital in regions traditionally funded via DFIs.
Asia Pacific: The fastest-growing market for sustainable packaging, renewables, and AgTech, though still fragmented by regional regulations.
Notable Rounds in 2025
Equator Fund closed $55 million to invest in African climate ventures.
Exowatt, a U.S. clean energy startup targeting AI-driven data centers, raised $90 million Series A in early 2025.
Elbow Beach Fund secured £63 million to back UK climate startups with customer-centric tech.
What Lies Ahead for 2025
More Scale & Growth, Less R&D
Expect continued pressure on startups to show commercial traction, especially in the $45–$100 million “first-of-a-kind” segment. Policy alignment will be split: U.S. clean energy will grow if IRA survives; Europe will push PPWR enforcement.
AI Infrastructure = Climate Opportunity
With data center demand up 18% in Q1, climate tech targeting energy, grid, and sustainable data solutions stand to grab crossover capital.Diversifying the Fund Pool
Funds focused on gender, regional inclusion, and diverse founders are likely to outperform — unlocking new returns and untapped markets.Government Policy Really Matters
The exodus is not absolute, but there is clear evidence of capital moving away from the U.S. into markets with stronger “climate proofing” policies and regulatory certainty.
Tips For Founders & Investors: Navigating the Current Climate Tech Landscape
Build with scale in mind. Early signals of commercial viability will be critical to standing out.
Stay policy agile. Expect future speed bumps; build buffers for sudden regulatory shifts.
Marry climate and AI. Infrastructure tech and green data supports are hot intersection points.
Champion inclusivity. Demonstrate diversity not just for gender, but for economic edge — sooner than later.
💥 Find out how you can stand out on our Climate Marketplace to attract investor enquiries…
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Further reading on the GT magazine:
How Homaio is Cracking Open Lucrative EU ETS Investing
Smokestack Industries: How GlassPoint is Disrupting the World’s Largest Market for Renewables
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