Climate tech is booming – so why does it feel like a slowdown?

Climate tech investors are asking harder questions today. They’re more focused on timelines and capital intensity, and they’re looking for the technologies that can actually scale. 

Rewind just a few years, and capital was pouring in. The assumption was that if the problem was large enough, the market would eventually reward credible attempts to solve it. 

According to a recent report from BloombergNEF, global energy transition investment reached a record USD $2.3 trillion in 2025. That shows there’s still momentum, but it’s slower than before: growth has eased from 27% in 2021 to 8.1% in 2025.

And the capital isn’t spreading evenly. The biggest pools are flowing into the parts of the transition that already look buildable at scale: electrified transport ($893 billion), renewable energy ($690 billion) and power grids ($483 billion).

The real economy is moving – but not fast enough

The International Energy Agency’s latest review gives us the other half of the picture. Global energy demand grew 2.2% in 2024, while electricity demand rose 4.3% – driven by heat, electrification, and digitalisation.

Clean energy is responding. In 2024, 80% of the increase in global electricity generation came from renewables and nuclear. Together they supplied 40% of total generation for the first time, with renewables alone at 32%.

But energy-related CO2 emissions still rose 0.8% in 2024. Clean technologies are avoiding 2.6 Gt CO2 annually, which is substantial – but the gap between progress and pace is still significant. 

Venture has become more selective 

That tension shows up in startup funding too. 

BloombergNEF reports that climate-tech equity finance rose to $77.3 billion in 2025, up 53% year on year. But venture funding for startups still fell for the third consecutive year.

Data from Dealroom adds some useful context here:

• Climate tech’s combined enterprise value reached $3.4 trillion in 2024, up from $2.0 trillion in 2022
• The ecosystem has grown 33x in a decade
• But VC funding fell from $76 billion in 2021 to $38 billion in 2024

That’s a steep reset, even if 2024 still sits above pre-2021 levels. It’s clear evidence that this isn’t a broad ‘fund the category’ moment anymore – climate tech today has to move through a much more disciplined filtering process. 

Where the conviction still lives  

Dealroom’s sector split is revealing. Climate tech remains one of the world’s most-funded startup categories, but funding is concentrated around energy and transport, with transportation at $19 billion in 2024 and energy close behind. Together they still account for more than half of climate-tech VC funding.

There are also more specific pockets of conviction. Dealroom notes strong recent growth in hydrogen, methane, and nuclear fusion, while mobility funding overall has fallen dramatically from its 2021 peak. This suggests refinement – investors haven’t backed away from climate tech, but they’re honing in on more specific niches. 

A new question for investors

A key concern for climate tech investors in 2026 is whether a company can survive the conditions of the market it’s entering. 

Can it integrate into real systems? Can it handle long capital cycles? Can it unlock larger pools of follow-on financing, including debt, project finance or government support?

The market isn’t rewarding climate ambition on its own. It’s rewarding climate ambition that proves it can carry weight. 

Join us at LEAP from 31 August – 3 September 2026 to hear directly from the people building the future of climate tech.