VCs love to boast about their long-term vision — that mythical “10-year horizon” where today’s bets become tomorrow’s unicorns. But if that’s true, why aren’t more of them investing in the only thing that guarantees there will still be a market to sell to: a liveable planet?
Instead, many are piling into AI, SaaS and even defence, while climate tech, arguably the most pressing challenge and opportunity of the decade, is getting sidelined.
According to Sifted data, funding for European climate tech fell 71% in the first half of this year, compared to the same period in 2024, dropping from €21.7bn to €6.2bn. Meanwhile, investments in European AI companies grew by 61% and funding into European defence jumped by nearly 30% over the same time period.
But the reality, according to VCs, is more complex than a simple retreat. Climate investing, they argue, hasn’t vanished — it has fractured. Some sectors have overheated and crashed, others are being rebranded as “resilience” or “infrastructure”, and a new wave of startups is being forced to prove not just impact, but profitability.
Just another cycle?
For Hampus Jakobsson, general partner and cofounder of Swedish VC firm Pale Blue Dot, the climate hype of 2021 was always going to cool.
“There was a boom of tourist investors in 2021 where everybody invested in everything,” he says. “Because everybody gives climate such a Jesus complex — like all these people are going to save the planet — when they started shaking, everybody was like, okay, this is not going to work.”
This slowdown isn’t unique to climate, says Matthew Nordan, cofounder and general partner of US-based climate VC Azolla Ventures.
Everybody gives climate such a Jesus complex.
“This happens in nearly every category,” he says. “You enter a boom period where capital is cheap… a lot of stuff gets funded that are nearly identical. Most of them fail to raise downstream financing. People throw up their hands. All is lost. The category retrenches.”
Rokas Peciulaitis, managing partner at Lithuania-based Contrarian Ventures, agrees.
“VCs love cycles,” he says. “Some sectors were completely abandoned. For example, carbon markets. A lot of hype, there was a lot of money going in, and the market didn’t move, and technology, in some cases, didn’t follow through as well.”
The cycle played out in cleantech 1.0 in the early 2010s, and Nordan believes we’re seeing it again in 2025. But he insists that’s not necessarily a bad thing.
“It will clear the field of propositions that were relying on momentum or subsidies or price support,” he says. “It will create breathing room for earlier stage ventures that might have previously been neglected.”
Still, he points out that climate tech has faced some unique setbacks. The collapse of Northvolt has spooked sovereign wealth funds and other heavyweight investors, the EV boom didn’t quite make it to Europe and the hydrogen “frenzy” fizzled once the scale of infrastructure required became clear.
A rebrand?
Some investors argue climate hasn’t gone away so much as it has been reframed.
Seeing one GP after another Ctrl F in PowerPoints and replace climate with resilience or security, makes me a little sad.
“It really depends on how you define climate tech,” says Kim Dang, head of network at Germany-based VC Planet A Ventures. “You might see deals in, for example, battery or carbon capture going down, but at the same time you’re seeing a lot of money flowing into things like AI and energy. It’s actually booming.”
While climate tech is no longer trendy for tourist investors, resilience is — a new VC buzzword that can be used to describe climate tech, space tech, defence tech and everything in between.
“It is fueled by the European independence and resilience movement,” says Dang. She adds that Planet A has long looked at companies’ indirect and foundational impact, for example, a robotics company making manufacturing more efficient and therefore consuming less energy. “It is a part of the climate movement. I welcome it 100%.”
Nordan, however, is less keen on the term and thinks it’ll be counterproductive for the climate sector to lean into it.
“Seeing one GP after another Ctrl F in PowerPoints and replace climate with resilience or security, makes me a little sad,” he says. “Anyone who was pitching a climate tech thesis worth their salt has always communicated that multidimensionally.”
Safest IPO bet?
While US president Donald Trump is hurting some of climate tech’s branding, the changes are also pushing more climate tech companies into Europe, according to Nordan. His portfolio company Aikido Technologies, which develops platforms for floating offshore wind farms has moved into Norway.
We have never had many requests from US LPs.
“In Europe, we’re seeing doubling down on this sector,” says Peciulaitis. “We have never had many requests from US LPs.”
And despite the churn, Jakobsson insists that climate is the only rational long-term investment. Oxford Economics estimates the green economy, which includes climate tech, will contribute $10.3trn to global GDP by 2050.
“If you are doing something that is bad for the planet, I don’t think you can IPO that company in ten years,” he says. “For every year that passes, I think the stock exchange will be like: this could crash if there is a carbon tax.”
Read the orginal article: https://sifted.eu/articles/climate-tech-rebranding/
