Climate Tech funding in 2025 is increasingly defined by a growing divide between two distinct types of investors: generalists and specialists. While generalist investors are pulling back and reallocating funds, specialist climate funds are stepping in to drive innovation of capital-intensive, deep-tech solutions.
Our latest State of Climate Tech Q1’25 report explores how this dynamic is reshaping investment flows across the sector –and what it could mean for the pace of climate innovation this year and beyond.
Generalists leave Climate Tech to follow the AI hype
As shown in our Q1’25 report, generalist investor activity peaked in 2021–2022 before falling sharply. Our review of 80 global VC and PE firms reveals that this retreat closely mirrors the broader decline in Climate Tech funding, highlighting the outsized influence generalists have on overall market trends.
In 2024, deal activity from generalist investors hit a low point, and early 2025 data shows little evidence of a strong rebound. Instead, generalists are increasingly redirecting capital toward AI, Big Data, and Blockchain technologies which are faster to scale and with the potential of quicker returns.
This isn’t surprising. Generalists, by nature, maintain a broad investment lens and quickly reallocate capital when sectors face headwinds. Following setbacks at companies like Northvolt and SunPower, many chose to pause new Climate Tech exposure, waiting instead for clearer commercial signals before re-entering the market.
Specialists are stepping up, betting bold on deep tech
While generalists pull back, specialist Climate Tech funds continue to invest, but not without challenges.
From 2020 to 2022, specialist funds saw steady growth in capital deployment and fund closures. However, momentum slowed in 2023 and declined further in 2024 as fundraising challenges mounted. Mid-sized funds ($100M–$500M) remained relatively active, but both smaller and mega-sized funds have lost ground.
In our State of Climate Tech 2024 survey, more than half of investors reported significant or moderate increases in fundraising challenges, citing a more selective LP base, tighter capital markets, and a heightened aversion to early-stage risk.
Infrastructure funds, critical for scaling mature technologies, are also facing difficulties. New $500M+ infrastructure fund closures fell sharply in 2024, and the early 2025 pipeline appears thin. Without sufficient infrastructure capital, the sector risks falling short on deployment goals for clean energy, sustainable transport, and more.
Generalist investors aren’t gone, they’re just more selective
Despite the overall pullback, generalists haven’t disappeared from Climate Tech altogether. In 2024, they still accounted for nearly half of total Climate Tech funding but their focus has shifted.
Today’s generalist investors are concentrating on high-value, later-stage rounds in proven sectors such as solar, wind, EVs, battery storage, and charging infrastructure. They favour opportunities where market readiness is strong and commercialization pathways are well-established.
Generalists with cross-sector experience continue to invest where market readiness is clear. Apart from energy and transport, our analysis shows they also remain active in promising verticals like next-generation nuclear and advanced agriculture solutions like precision farming and alternative proteins, solutions that benefit from mature deployment pathways and scalable models.
Generalists play a key role in scaling Climate Tech solutions that are built around software, data, and digital platforms.
Where specialists are betting big
Specialist investors, by contrast, are channeling capital into technologies with high technical risk, longer development timelines, and capital-intensive innovations.
They are more willing to finance early-stage solutions that still require proof of concept or large-scale demonstration. This includes areas like water systems, GHG capture, and climate resilience.
Our analysis shows that over 60% of funding in sectors like carbon capture, green hydrogen, sustainable aviation fuel, and climate monitoring platforms came from specialists. They also dominate investments in digitally enabled infrastructure such as electrolyzers, data centers, and carbon management systems.
Specialists take the lead
Specialist investors are now leading the charge in capital-intensive and hardware-heavy Climate Tech.
Long-duration energy storage, carbon capture, and electrolyzers are just a few examples. These technologies demand long R&D cycles, significant project financing, and strong policy alignment, areas where generalists have shown less comfort.
Specialists also play a key role in funding first-of-a-kind (FOAK) projects which are commercial-scale deployments that follow successful pilots. These large, capital-intensive initiatives often sit outside the risk tolerance of many generalist investors, making specialist participation essential for moving these innovations forward.
Looking ahead: rebalancing capital to drive climate solutions
Climate Tech in 2025 sits at a funding crossroads. Generalist investors have dialled back, but their influence is far from gone. They continue to support scalable, proven technologies particularly those that intersect with software, data, and platform-driven business models. Specialists, meanwhile, are keeping the innovation pipeline alive, placing bold bets on high-impact technologies still in development.
For Climate Tech to regain momentum, the sector must deliver returns that speak louder than risk. If success stories emerge in the next few quarters like blockbuster IPOs, major acquisitions, and steady policy environments, generalist capital may have returned in force. Until then, specialists will continue to do the heavy lifting on the path to deep decarbonization.
Want deeper insights into how generalists and specialists are shaping Climate Tech investment in 2025? Check out the full analysis in our State of Climate Tech Q1 2025 report.
