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Global investment in climate tech was down in the first half of 2025, by 19% compared to the first half of 2024. That said, non-dilutive funding is projected to hit an all-time high in 2025, suggesting that the market is more stable than the drop in total funding might suggest.
That’s according to the latest report from Net Zero Insights, out today. “Debt has taken center stage as the most dominant form of non-dilutive capital, financing scalable, infrastructure-heavy solutions with clear revenue models,” the report found. “This trend signals a growing confidence in the commercial viability of climate tech and a maturing ecosystem that can sustain repayment-backed instruments.”
And while deal counts continue to drop since the high of 2023 — reaching a five-year low, in fact — there are fewer larger investments, and “a more selective investment environment.”
The U.S. market has remained surprisingly strong, despite policy uncertainty impacting the market. which found that U.S. investment has grown to make up 51% of global funding for climate tech. These deals amounted to $21.4 billion, and projections for the full year anticipate a 12% growth in the market compared to 2024.
The Trump administration has slashed key programs funding climate tech, including via the loan Programs Office. However, the report found that the market has so far been resilient: “Commercial partnerships between technology providers and buyers in the U.S. have continued to rise,” the report found, though it questioned whether that momentum will continue as legacy programs are phased out.
Meanwhile, Europe’s funding — specifically equity funding — is on the downswing, despite the region’s robust policy support. That said, funding is expected to resurge in the second half of the year.
There are also shifts happening in the types of technologies that appeal to investors. Energy dominates the funding landscape, with $11.1 billion in the first quarter of 2025, followed by transport ($5.3 billion), circular economy ($4.5 billion), and industry ($3.4 billion).
More mature tech, like solar and battery storage, are seeing equity investment decline across the board, while emerging technologies are gaining some momentum. But strategic investors especially are increasingly focused on the latter category, including hydrogen and carbon capture, utilization, and storage; 23.4% of emerging tech deals now involve strategic investors, with especially dramatic increases in participation in data center and CCUS deals.
AI-enabled solutions are increasingly competitive in this landscape, pulling in one in five climate dollars, Net Zero Insights found. This funding is concentrated in the U.S.; North American startups have received more than half of all investment in AI-driven climate solutions. And a rising share of them are financed by debt — with a shrinking share financed by grants.
“Given the U.S.’s leading role in this space, the shutdown of many public funding programs supporting climate tech raises a critical question of how the lack of public support will ripple down to private capital,” the report noted.
The venture capital view
Last week, Sightline Climate released its own report on the first half of the year, focused more on the venture capital and growth equity markets. And its overall tone is more cautious about the climate tech market’s evolution.
Globally, the report highlights that the second quarter of 2025 saw the lowest quarterly investment since 2020, at just $5.9 billion globally. And while the market continues to grow, that growth has slowed down to 7% — which the report notes is normal, but could take some getting used to for the climate tech community.
“While steady absolute increases will naturally give smaller growth rates as totals rise, the climate community has become accustomed to exponential growth after the wind and solar booms of the past decade,” it noted. “There could be breakouts, but this new generation of climate tech will likely not have the same pace of growth.”
Ultimately, the market is maturing, with climate specialists continuing to dominate the investor list. VCs like Lowercarbon Capital (early-stage focus) and Breakthrough Energy (late-stage focus) “doubled down” on their picks, maintaining the deal counts they made in the market’s 2021 and 2022 heyday, and also making follow-on investments.
“The generalist investors have left, and the specialists remaining are being much more choosy, in the hopes of avoiding the high valuations and general frenzy of 2021-2022,” the report observed.
It was the Series B stage that saw the biggest decline, at 29% compared with the first half of 2024. Startups continue to struggle with the “Valley of Death” between getting technology from the lab to commercialization, and the market has a “missing middle” of needing money to build a first-of-a-kind project. The deal sizes also shrunk, by 28%.
As Sightline CEO Kim Zou said on a recent episode of Open Circuit, “there was a lot of early-stage venture capital flowing in between 2019 to 2023, [and] a lot of companies that were buoyed by zero interest rates…are now getting to that missing middle stage.”
Series C funding, meanwhile, dropped 6% compared with a year ago; the average deal size, however, increased by 8%. Growth-stage funding increased slightly.
