Insider Brief:
- Climate tech investment is shifting, with some sectors including energy receiving more funding, while necessary sectors like agriculture lose funding.
- Founders and startups have a range of options in raising funds, from family offices to CVCs to public funding bodies.
- Climate insider speaks to climate tech funding expert Oliver Yorke to decipher where funding is going in the next few years.
The climate tech ecosystem is shifting, with overall funding falling by 18% in Europe in Q1. Meanwhile in North America, the U.S. experienced a decrease of 7.7% in clean energy production technologies, while major climate tech funds collectively raised US$31.9 billion.
However, traditional VCs retreated from critical sectors just as deployment needs to accelerate. Industry expert Oliver Yorke, angel investor and recently Investor Community Lead at World Economic Forum, discusses how this funding evolution is reshaping the climate tech landscape and what stakeholders need to know to succeed in a complex but growing industry.
Venture Capital moves away from vital climate tech solutions
Traditional venture capital firms (VCs) are still a major focus of climate funders in hunting for financial support for their ventures, Yorke said.
There has been a deviation in the types of climate tech ventures VC is willing to finance.
“We’re just not seeing the courage for VC capital anymore where it needs to be injected,” he said. For nature-based solutions and solutions protecting and advancing biodiversity saw an enormous momentum several years ago, but a lack of pricing on these values has led to a change in focus for VC funding.
“Most sectors across climate tech have suffered, but ones where we need to make enormous leaps have suffered more greatly,” he said, pointing to fermentation nitrogen for the food cycle as an example.
“We’re just not seeing the injection of capital where we need it in very early startups, while the AI market uptake has greatly inflicted damage on climate, with VC unfortunately swayed away from the industry.”
This mirrors what Climate Insider data has found. Despite strong policy pushes and visibility for carbon markets and accounting firms, for instance, VC capital deployment remains modest, generating only C$540M in Q1 2025.
Other promising and necessary sectors, including geothermal energy, methane technology, and agricultural technology (AgTech) have received only a handful of small deals.
For companies in sectors which are seeing investor pullback, small-scale enterprises should consolidate resources through strategic mergers or joint ventures. This would allow these companies to achieve the scale required to attract larger investors.
This may take the form of technology companies could combine with enterprises with implementation technologies; together, this entity might have an easier pathway towards achieving desirable levels of scale for equity investors.
Investment mix needed for FOAK solutions
First-of-a-kind climate tech solutions are critical in meeting new demands for sustainability and circularity – but these start-up enterprises face their own funding conundrums.
Investors on public markets are gradually becoming more knowledgeable about what these start-ups need for commercialization and business success, Yorke said, and this understanding has grown over the last several years.
According to Climate Insider data, investment for FOAK has focused on energy and electric-powered transportation, with small modular reactor company x-Energy, non-battery energy storage Hydrostor, and electric aircraft Archer attracting financing in Q1.
The appropriate funding models for these types of companies is still lacking, Yorke said.
“There is more of a conversation happening towards what is needed regarding different investment vehicles and different platforms,” Yorke said.
Private equity firms and grow-op investors have better experience with FOAK companies than do earlier-stage investors in climate, he said.
Financing FOAK companies is a great opportunity for blended finance, when larger agencies or vehicles can partner with public and private partnerships to bring these companies into commercialization.
“We’re not seeing [this type of partnership] at the scale we need to reach,” Yorke said. Many investment vehicles do not have the information or knowledge about alternative methods of financing, and about the economics of bringing FOAK companies to commercialization, that is required.
“We need potential an industrial family office which has the knowledge and the contacts to be investors in, say, a carbon capture company that needs to build 100 factories.”
For companies developing FOAK solutions now, they should be looking into blended finance agreements and working with development finance institutions, government agencies, and corporates to create custom financing structures. Funding which includes milestones based on revenues backed by government guarantees is a possibility, and also reduces risk for private investors.
Funding moving towards Middle East, Asia
Yorke, who is based in Europe, has noticed that there is more of an openness in Europe towards climate tech opportunities in the Middle East and Asia, with more investors taking trips and observing the landscape.
One of the challenges that investors will face in the Middle East particularly is the lack of usable climate data for many companies, Jessica Scopacasa, co-founder of Dubai-based climate tech startup Olive Gaea, told Climate Insider in 2023. Governments also play a driving role in the push towards decarbonization in the Middle East, Scopacasa added.
“While there has been a lot of mistrust in that region of the world there’s been an incredible turnaround,” he said. “VCs that wouldn’t set down in those countries before are finding ways to access their market points.”
Markets in the Middle East particularly have “matured very quickly,” with the region increasingly looking like an opportunity for foreign investors to co-invest alongside Middle Eastern funding organizations.
European funders are also looking to Singapore, Hong Kong, and Japan for climate tech investment opportunities.
“There are a lot more investors which co-invest with large industrialists and corporates,” Yorke noted.
He cautioned patience, however, noting that “it will take a lot of time to build relationships, especially if [investors] are doing business with China.”
Yorke’s observations are buttressed by Climate Insider data. The data finds that while European countries dominate the number of climate tech funding deals in Q1-2025, the Philippines is in the top 10 of dealmakers this quarter. India and Israel are in the top 20, while Singapore is in the top 25 countries for climate tech deals.
There is plenty of opportunity for climate tech firms based in Europe and in North America to benefit from this shift.
Companies should strategically prioritize expanding into the Middle East and into Asia, where capital availability and government support for climate tech remains strong. Launching market entry strategies that leverage local partnerships, rather than replicating Western business models, may be the key to success in these markets.
Fortune 500 funding needs to support ecosystem
Yorke noted that many Fortune 500 companies – including Amazon, Salesforce, and Microsoft – have been investing in the climate tech space.
The benefit of receiving funding from companies like these is their research and development arms, which are integrating more and more with the work of the climate tech companies these firms are funding.
“There’s more R&D funding coming from Fortune 500 companies that is directly focused on climate,” Yorke noted.
But Fortune 500 companies are in a unique position to do more to advance climate technology and ensure deserving companies receive the funding they need, he said.
“There are enormous bottlenecks for startups, R&D, scaling, and so on,” Yorke said. This is where Fortune 500 funding could really make a difference.
“There’s no structured approach” for Fortune 500 to target their funding and focus on specific climate tech startups that can really help invigorate innovation,” Yorke said. “There should be some stimulation for them to do more.”
For corporates, they should be forging new partnership agreements with climate tech startups and small enterprises. Instead of investor or customer relationships with these companies, corporates should be crafting strategic R&D partnerships to both accelerate technology development and market access.
Though the sector is working its way through a lull in funding, Yorke is confident that it will turn a corner and more investment money will be available before too long.
“Climate tech isn’t dead—it’s evolving. This isn’t just about funding startups. It’s about shifting the economic model for the planet.”
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