Cities are the driving force behind economic development. Today, they are home to 55% of the global population – a projected 68% by 2050. This rapid urbanization, coupled with overall population growth, places immense energy demand:from electricity to power buildings to the manufacturing of construction materials.
To align with the Paris Agreement’s goal to limit the temperature increase to 1.5°C, cities must significantly reduce their energy consumption. This can be done by scaling energy-efficient building technologies, adopting sustainable construction practices, and developing smart urban infrastructure. Luckily, the density, infrastructure, and economic influence of cities make them ideal for implementing climate technologies.
Despite this, the built environment has only attracted 7% of total Climate Tech funding since 2020, according to the State of Climate Report 2024. This highlights an urgent need to mobilize capital to accelerate innovation and bring scalable solutions to the market.
Solutions across Built Environment
Creating sustainable cities goes beyond planting more trees—it’s about transforming how we power, move, and build our communities. The Climate Tech Taxonomy serves as a strategic roadmap, identifying high-impact solutions in building efficiency, construction, smart cities, and water conservation—unlocking new investment opportunities in the built environment.
Building Energy Efficiency
Rapid urbanization, population growth, and rising incomes are driving an unprecedented increase in building construction. As cities expand, homes and businesses consume more energy for heating, cooling, lighting, and powering appliances. Buildings account for approximately 30% of global energy consumption and over half of the total electricity demand.
Energy efficiency plays a critical role in sustainability efforts since it reduces energy consumption and carbon footprint. Some of the key innovations in Building Energy Efficiency can be categorized into:Â
- Building Energy Management Systems (BEMS) – BEMS optimize energy consumption through a network of sensors, controls, and software that monitors and manages HVAC, lighting, and appliances. These systems analyze real-time data and make adjustments to improve efficiency, lower operational costs, and reduce carbon emissions.
- Insulation Technologies improve thermal performance by minimizing heat transfer and energy loss. Advanced building envelope materials, energy-efficient windows, and enhanced roof and floor insulation lower heating and cooling demands.
- Smart Appliances improve energy efficiency by optimizing energy use. Smart thermostats adjust heating and cooling based on user preferences, while home appliances operate during off-peak hours to lower electricity costs.
- Building Retrofits modernize existing structures to improve energy efficiency, ranging from minor upgrades to deep overhauls. By replacing outdated HVAC systems with LED lighting and upgrading building envelopes, retrofits reduces energy wastage and extend infrastructure lifespan.
Notable Startups to Watch in Building Energy Efficiency
Swedish company Aira makes homes energy-efficient by accelerating the electrification of residential heating with intelligent clean energy technology.Aira raised $68.7M in Series B funding in October 2024 from investors like Temasek, Statkraft Ventures, Altor Equity Partners, and Kinnevik.
California-based Mojave transforms air conditioning with its novel liquid desiccant system, which improves energy efficiency and reduces HVAC-related emissions. Mojave’s technology lowers energy consumption by 40-60% compared to traditional air conditioners. Mojave raised $9.5M in Series A funding in December 2024 from Alumni Ventures, Fifth Wall, Starshot Capital, At One Ventures, and others.
Canadian company Mysa develops smart thermostats for electric heating and cooling systems, reducing energy bills by up to 26% through remote control, scheduling, and geofencing. Mysa raised $8M in Series B funding in October 2024 from BDC Capital, Climate Innovation Capital, and others.
Construction
The construction sector depends on carbon-intensive materials such as steel and cement. As a result, the embodied carbon in construction remains high, with the sector accounting for 37% of global carbon emissions.
One of the most effective ways to cut emissions is retrofitting existing buildings. This reduces the carbon footprint of new construction while lowering economic costs. However, beyond retrofitting, innovations in material production and construction techniques are transforming the industry, improving energy efficiency, and reducing emissions.
Key innovations driving sustainable construction include:
- Alternative cement and concrete use low-emission clinker, alternative binders, and carbon capture technologies to reduce COâ‚‚ emissions in production.
- 3D printing in construction enables the rapid, precise fabrication of structures with minimal material waste, lowering emissions and construction costs.
- Modular and prefabricated construction assembles pre-made components off-site, reducing waste, improving efficiency, and accelerating project timelines.
- Advanced insulation materials improve energy efficiency by minimizing heat transfer, including high-performance windows, roofing, and wall systems.
- Engineered wood offers a sustainable alternative to traditional lumber, using composite wood materials to reduce deforestation.
- Recycled construction materials repurpose waste materials such as reclaimed wood, recycled concrete, and repurposed steel, lowering demand for virgin materials.
Notable Startups to Watch in Construction
US-based ICON transforms home construction with 3D printing robotics, advanced materials, and automation software. Its Vulcan robotic systems build high-quality, energy-efficient homes with extreme precision and minimal waste. The company raised $56M in Series C funding in February 2025 from Len X, Oakhouse Partners, Overmatch, Tiger Global Management, and others.
Finnish company Aisti develops innovative, natural, and recyclable bio-based acoustic tiles made from wood fiber, an eco-friendly alternative to traditional mineral wool acoustic panels. Aisti raised $8.9M in Series A funding in December 2024 from investors like Maki.VC, Valve Ventures, and Voima Ventures.
Belgium-based Bao Living focuses on modular construction solutions with its Smart Adaptive Module (SAM), a prefabricated system that integrates kitchens, bathrooms, HVAC, and storage into a single, sustainable unit. Bao Living raised $1.63M in Series A funding in October 2024 from investors like Entrevest and BESIX Group.
Smart City
Urban infrastructure is important for decarbonization as cities generate 70% of global greenhouse gas emissions. Climate technologies have made significant inroads to help reduce emissions while improving energy efficiency and transportation systems.
One such solution is smart cities. They harness data-driven solutions to optimize resource use, lower carbon footprints, and create more adaptive and efficient urban environments. By integrating IoT-driven energy management, AI-powered transportation systems, and renewable energy, smart cities create more efficient, sustainable, and inclusive environments.
Some of the important smart city solutions for achieving Net-Zero in the built environment include:
- Smart transportation systems use IoT sensors, AI, and data analytics to reduce congestion and improve public transit efficiency.
- Air quality monitoring deploys sensors and AI to track pollutants providing real-time data for targeted interventions.
- Smart street lighting adjusts brightness based on occupancy, time of day, and weather, cutting energy use while improving visibility and safety.
- Urban planning and design leverages GIS, data analytics, and simulation tools to optimize green infrastructure, reduce heat islands, and boost climate resilience.
Notable Startups Working Towards Smart City Solutions
California-based Hayden AI develops AI-powered smart city solutions to enhance safety, efficiency, and sustainability in urban transportation. Its mobile perception platform improves traffic enforcement, optimizes public transit, and enables digital twin modeling for smarter urban planning. Hayden AI secured $90M in Series C funding in July 2024 from TPG, Mitsubishi Electric, Drawdown Fund, and others.
Indian company WeVOIS Labs provides IoT-enabled waste management solutions, offering smart waste collection, fleet monitoring, route optimization, and recycling infrastructure. WeVOIS raised $4.18M in Series A funding in January 2025.
South Korea-based Bitsensing advances radar sensing technology for automotive safety, smart cities, and industrial automation. Its AI-driven sensor fusion solutions bring real-time intelligence to urban infrastructure, enhancing efficiency and connectivity. Bitsensing raised $25M in Series B funding in June 2024 from Industrial Bank of Korea, Korea Development Bank, Aju Capital, and others.
Innovation Helps Build Eco-Friendly Urban Centres
The built environment plays a crucial role in the transition to a low-carbon future, yet it remains an underfunded sector in Climate Tech. Solutions in energy efficiency, sustainable construction, and smart cities are steadily improving how we build and operate urban spaces, offering both environmental and economic benefits.
With cities driving both emissions and innovation, now is the time to support scalable solutions to make urban infrastructure more efficient and resilient. Increased investment in this space will be key to accelerating progress.
Want to explore emerging opportunities in the built environment? Book a demo with us today to discover the latest Climate Tech solutions shaping the future of cities.
