Good old days: is venture capital investment in climate tech past its peak?

2021 was a momentous year for venture capital investment in climate technology. 2836 deals were announced that year, collectively valued at over $60bn. Up from 1827 deals valued at $27.8bn the year prior. Exits were at a peak too - 123 exits worth over $100bn in total. Since then, however, VC deals in this space have slowed.

Data from PitchBook, a Morningstar company, suggests 2024 was the third consecutive year when both deal value and deal count for climate tech venture capital investments fell. Deal value is down 21% and deal count is lower by 11%.

Despite this, institutional investor interest in the VC climate tech opportunity is staying the course. A closer look at the latest figures shows institutional investors are still participating in high value VC climate tech deals.

The slowdown

The decline in VC climate tech deal activity is in its third year, but the 2024 slowdown is the largest by comparison. “At least some of this trend is related to wider VC trends, rather than just the climate tech space, though some climate tech-specific headwinds are certainly present”, says John MacDonagh, PitchBook's senior analyst for emerging technology.

The decline is evident even in the two largest market segments – mobility and grids. At its peak, in 2021, nearly half of VC climate tech investment was attributable to these two segments says MacDonagh.

Partly, this has to do with these technologies maturing and companies moving along the financing ladder as a consequence. “These two segments declined in deal value strongly from 2021 to 2024, partly due to the development of core EV and lithium-ion battery technologies shifting further out of the VC ecosystem”, MacDonagh told Net Zero Investor.

However, regulatory uncertainty from the US has played a role too. “More recently, the threat of changes to supportive policy and regulation in the US, plus the uncertainty caused by potential tariffs, has made investors more wary, though Q1 data is actually quite positive regarding US deal value for climate tech”, MacDonagh notes.

Low carbon, big deal

Low-carbon mobility in particular has attracted a bulk of high value deals – those that raise over $100m. In 2024, 72 deals crossed the $100m mark – 21 were in the mobility segment. MacDonagh says this has to do with technologies maturing, a widening awareness of EV applications and strong exit values that draw investor attention. 

Companies working on low carbon mobility raised $8bn across 225 deals in 2024. Breaking it down by individual category shows VC investor confidence is flowing towards terrestrial and marine BEVs (battery electric vehicles) in particular. 

“Infrastructure to support EVs is also growing, as are home energy technologies that can integrate with EVs, either to charge EVs via local solar panels, or to make use of lower-cost electricity via coupled energy storage”, commented MacDonagh.

Asset owner interest

Interestingly, the list of investors in big ticket deals includes institutional investors and asset owners in particular. The largest deal in Q1 2025 was a $682m raise by X-energy, a US-based manufacturer of small modular reactions used in nuclear power applications. The Ontario Teachers’ Pension Plan, a Canadian asset owner with $266bn in net assets was one of the lead investors. 

In 2024, Qatar Investment Authority and Singapore’s Temasek were lead investors in a $621m deal for Ascend Elements, a company specialising in lithium-ion battery materials. It was one of the largest deals of the year.

“I certainly expect continued climate investment from institutional investors like SWFs and pension plans, many of which have additional remits around positive impacts and ESG factors”, says MacDonagh. Some segments of the market are likely to remain attractive to institutional capital. “Certain areas of climate tech have shown themselves to be very commercially viable, such as energy storage, EVs, renewable energy, and alternative fuels”, he adds.

Compared to their peak in 2021, deal count and deal value in VC climate tech are lower today. Tariffs and the ensuing supply chain uncertainty has affected momentum. However, it is too soon to deduce from these trends that asset owner confidence in climate tech has taken a hit.

The data offers evidence to the contrary: as climate technologies mature and their commercial viability sharpens - tickets get larger, and institutional capital seeks a seat at the table. For these companies – the ones who raise big ticket deals each year – institutional investors are becoming a familiar audience.