Where the Smart Climate Tech Venture Money Is Going in 2025
Jan 02, 2025 - financialpost.com
In 2025, climate tech investors are navigating a shifting landscape with Donald Trump back in the White House, potentially rolling back key provisions of the Inflation Reduction Act and impacting energy regulations. Despite a significant drop in climate-tech equity raising from $127 billion in 2022 to an estimated $43 billion in 2024, investors still have $86 billion in unspent funds. AI and climate tech are emerging as key areas of interest, with AI being used to reduce carbon emissions and manage power grids. However, hydrogen's viability is in doubt due to high costs, and direct air capture faces economic challenges. Growth-stage companies are attracting venture capital interest, while sectors like decarbonizing buildings and sustainable agriculture remain promising but face market entry challenges.
Investors are also considering rebranding climate tech as defense tech to align with national security interests, particularly in critical minerals and semiconductors. The convergence of clean tech and national security priorities is seen as an opportunity to boost the American economy. Despite the challenges, there is optimism about the potential for climate tech to thrive, with a focus on AI solutions, growth-stage companies, and sustainable agriculture as areas to watch.
Key takeaways:
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Climate-tech equity raising has significantly decreased, but investors still have substantial unspent funds to invest in promising sectors.
AI is emerging as a key area for investment, both for reducing its own emissions and for its potential to optimize energy use and manage power grids.
There is a growing convergence between national security and clean tech, with opportunities in critical minerals, steel, and semiconductors.
Green hydrogen is facing challenges due to high costs and unmet demand, leading investors to pull back from the sector.
