New data: Climate VC held steady in 2025 – but made fewer bets

Venture capital funding into the climate sector came in at $42.2bn last year, almost identical to the $42.8bn invested in 2024, according to new data from PitchBook.

Dig a little deeper, though, and a different story emerges: investors made far fewer bets – and increasingly funnelled their money into AI-enabled climate startups.

Flat funding, thinner deal flow

Deal count dropped sharply to 2,130 transactions in 2025, down from 2,906 the year before and the lowest level in around five years. Rather than spreading capital across a broad mix of technologies, VCs concentrated it into a smaller group of companies – often writing bigger cheques for startups promising software-driven efficiency gains.

A big part of that shift is, of course, AI. Investors and analysts point to growing interest in software and AI tools designed to lower operating costs across energy infrastructure – from wind and solar to nuclear and thermal power plants. Startups pitching system-level optimisation, rather than new hardware alone, have captured a disproportionate share of funding activity.

AI to boost performance

That concentration is also visible in which technologies investors currently favour. John MacDonagh, a senior analyst at PitchBook covering emerging tech, says nuclear and geothermal (more on the topic in Impact Loop's investor deep-dive here) are viewed more positively than many other low-carbon options right now. Companies operating in those areas – particularly those using AI to boost performance or reduce costs – have benefited from that sentiment.

Broader market dynamics are reinforcing the trend. PitchBook highlights ongoing policy uncertainty in the US following the start of Donald Trump’s second president term, alongside rising electricity demand linked partly to the buildout of AI data centres. Together, those factors have pushed investors toward solutions that promise efficiency improvements across multiple asset types, rather than niche or capital-intensive technologies.