Climate Technology Finance

📣 Breaking Down Capital Structure in #ClimateTech Startups Understanding the capital structure in climate tech #startups, particularly those hardware-based, can differ greatly from digital startups. 👇 Hers’s an illustration of the evolution of capital types over time - equity, grants, and debt - with actual 💶 figures. Key takeaway: The name of the game is Non-Dilutive Capital ⭐ 1️⃣ Embrace Non-Dilutive Capital: Scaling with equity alone is a non-starter. There's insufficient climate-dedicated VC money out there and it's far from the most efficient way to finance CAPEX due to ownership dilution and the Cost of Equity. 2️⃣ Optimise Timing: With careful planning, each funding round can be delayed, allowing your company value to mature by achieving higher TRLs. Leverage grants wisely and delay equity funding rounds. 3️⃣ Strike a Balance with Grants: While grants are attractive, an overdose can divert you from your main focus of selling products and turn you into an R&D centre. Exercise caution! 4️⃣ Consider Debt Early: It's rocket fuel for growth. Proper measures can ensure you secure it even before hitting TRL9. 💡Tips for Raising Non-Dilutive Capital: General: - Begin early, it takes time - Build a solid funnel (4:1 ratio is a good rule) - Engage experts, it saves time and ups your chances Grants: - Be prepared to have some fresh equity to unlock certain grants - Participate in competitions - every sum counts and it's free exposure! Debt: - Sign off-takes to significantly boost your chances - Get in touch with your regional bank - they look at more than just ROI. It's time to rethink and redesign your capital strategy! #venturecapital #funding #innovation

🔎𝐄𝐬𝐬𝐞𝐧𝐭𝐢𝐚𝐥 𝐫𝐞𝐚𝐝𝐢𝐧𝐠 — especially for those in finance who think the energy transition is held back by a ‘finance gap’. There’s 𝐧𝐨 shortage of capital. And no, we’re not just one blended finance scheme away from solving the climate crisis. 💡 In this sharp piece on, Lara Merling exposes the real constraints behind the energy transition — and challenges the neoclassical fallacies that dominate economic thinking. 💸 Fallacy 1: That money is a scarce resource like labour or materials. 🧮 Fallacy 2: That market prices are accurate reflections of real-world scarcities. 📉 Fallacy 3: That central banks are neutral actors outside the real economy. 👉 The truth? The actual bottlenecks are material, technological, political and institutional: 🔺 Lack of skilled labour 🔺Inadequate supply chains 🔺Technological limits 🔺Political resistance 🔺Dysfunctional governance 💰 Finance can play a role — but it’s not the limiting factor. In fact, focusing on finance as the main barrier distracts from where the real work needs to happen. 📘 Merling’s piece is a must-read for anyone working at the intersection of macro, climate and public investment: 👉 https://lnkd.in/e6p-N2tw Let’s stop treating finance as the scapegoat — and start addressing the actual constraints. 🌍⚙️ #sustainablefinance #climate Adrienne Buller

Two of the largest capital reallocations in recent months have been driven by sustainability. In March, a major UK pension fund moved $35bn from State Street to Amundi and Invesco in search of closer ESG alignment. This week, a Dutch pension fund withdrew €14bn from BlackRock for the same reason. More money flows are happening behind the scenes without making it to the news. These are not isolated moves but part of a wider rebalancing: European and Asian LPs are reshaping their portfolios around sustainability, especially as US asset managers face pressure from Washington’s anti-ESG stance to halt their sustainability programs. The political backlash in the US was meant to end sustainable finance. Instead, it is accelerating a structural trend that started long before President Trump’s election. Large fiduciary institutions under public scrutiny (pension funds, insurers) cannot ignore environmental and social risks without compromising long-term value. That is why the integration of sustainability is not a passing fad but the new investment baseline. History shows that market forces tend to outlast governments and their political agendas. Ironically, the US crackdown against sustainability has had one positive effect in Europe. By casting ESG as overreach and boosting the global competitiveness of the American economy, it has made Europe look foolishly over regulated, especially on the sustainability front. A much needed wake up call as ESG practitioners were facing the risk of letting compliance become an end vs. a mean to an end. The conversation is shifting back to fundamentals: sustainability not as a reporting exercise, but as a tool to strengthen corporate resilience and long-term competitiveness. This new capital flow is the latest evidence that sustainability has been redefining what investors expect from their managers. Can’t wait to see more news like this one, and excited to see the sustainability space coming to its senses and refocusing on value creation.

Blackrock just took a big write-down on its Global Renewable Power Fund III. Because of two ill-fated investments in Northvolt and SolarZero. Surprisingly, a $4.8 billion fund saw its internal rate of return plummet due to just two portfolio companies faltering. This fund was BlackRock's third flagship GRP fund, part of its bet on the energy transition and a push towards renewable energy and infrastructure. Many of the funds’s assets are early-stage climate infrastructure investments in: EV charging, renewable generation, and power storage and transmission. Are they simply making bad investments or is this a prequel to what to expect? What this tells me about climate tech investing: 1. The significant impact of two companies on a $4.8 billion fund suggests that traditional risk models needs reevaluation. The conventional playbook for diversification doesn't quite work in climate tech. When companies in your portfolio are all betting on similar technological advances or regulatory shifts, they tend to sink or swim together. Traditional risk models might be missing these hidden correlations. 2. The Northvolt situation is a wake-up call - throwing money at climate tech isn't enough. These companies need investors who roll up their sleeves and get involved. We're seeing a shift from passive to active investing, where deep operational expertise is just as crucial as the capital itself. 3. SolarZero, a major player in New Zealand Energy Sector, was far from an early-stage startup when BlackRock acquired it in 2022. Despite its 50-year history , something went wrong. It hints at a broader challenge: global funds rushing into new markets might be overlooking local market dynamics and regional complexities in their eagerness to deploy capital in the renewable space. As this sector matures, we need a new framework for resilient investment strategies that can better weather the failures of individual companies while capitalizing on the overall growth trend in clean energy. #climatetech #VC #investment #newbook #fundclimatetech #blackrock Link for the news in the comments.

Alastair Marsh's recent thought-provoking piece in @Bloomberg highlights critical challenges with the current climate tech investing landscape Climate tech projects are capital-intensive with long timelines. Unlike software, much of climate tech requires massive upfront capital for R&D, pilot plants, and manufacturing before significant revenue. This demands longer development and deployment cycles (often 7+ years to scale) that exceed typical 5-7 year VC exit horizons. The classic VC model - built for rapid, asset-light scale-ups - often misaligns with the realities of many climate tech solutions, especially "hard tech." While there’s an abundance of early-stage VC capital for entrepreneurs, later-stage growth that bridges these projects from venture to infrastructure stage is basically absent—that’s called the missing middle. We need to adapt and supplement that approach by layering in other types of capital and bridge the "missing middle." A broader array of financing instruments is essential for climate tech to scale, including patient equity and growth capital, project finance, blended finance, and specialized debt models. Marsh’s piece lays out how family offices are uniquely positioned to be catalyzing players in this space. Their flexibility allows them to deploy capital across diverse segments, filling the gap and driving significant financial returns alongside impact. https://lnkd.in/gUf85Bwy

Did we get climate finance all wrong? Yes, I tell Akshat Rathi on his Bloomberg Green podcast, Zero. The core problem is that we use "climate finance" to describe many fundamentally different objectives: managing physical & transition risks, financing decarbonization, pricing & distributing risk, building resilience, ensuring fiscal stability, etc. These objectives involve different institutions, mandates, incentives & tools. Some protect/maximize financial value; others aim for climate safety & societal protection. For 10+ yrs, we have profoundly conflated these purposes, institutions and tools. When results don’t materialize, we blame accountability to, and precision of, the frameworks - spending more time refining disclosures, metrics, and methodologies, and pushing for more financial regulation. In 2015, Carney famously (correctly) warned that markets would feel climate impacts only when it was too late to self-correct. But the field drew the wrong implication, focusing on the idea that if long-term climate risk were better understood, priced, and disclosed, markets will reallocate capital to reduce that risk. That fundamentally misunderstands how finance works. Information on how climate affects markets helps institutions manage exposure. It does not make non-viable projects viable or substitute for the coordination, market design, and risk-sharing needed to make modern, integrated, decarbonized, energy systems financeable. (https://lnkd.in/enp6hqun) A related consequential confusion: we atomized the imperative of achieving global, atmospheric 'net zero' emissions into entity-level methodologies, as if the sum of individual net-zero targets would achieve systems decarbonization. But entities cannot, on their own, decarbonize their power, transport and industrial value chains, so the result has been increasingly elaborate accounting exercises that often bear little relationship to physical realities: https://lnkd.in/eN65DrGx The irony is that these confusions obscure the good news: decarbonized energy systems are eminently achievable, and often economically compelling, when the right conditions are in place. We are not constrained by capital or technology. Where clean solutions are cheaper, finance is driving deployment. Where investment stalls, it's because of unaddressed offtake risk, policy uncertainty, currency risk, system integration challenges, or missing coordination, NOT because investors don't understand climate risk. This relates to a final inversion: finance can't phase out fossil fuels; only decarbonizing the consuming sectors can. Fossil finance will end when clean alternatives are cheaper, more reliable, and more accessible -- which, as I note, is possible if we're clearheaded about the approach. 🎧 listen to the podcast here: https://lnkd.in/ecRKR4wR (I look forward to a new Zero episode every thursday as I 🚲 to work, so it was an incredible privilege and joy to meet Akshat in London for this convo.)

India’s Green Financing Opportunity Could Shape a Century   India stands at a defining moment where a growing economic momentum meets an urgent climate imperative. The capital we choose to deploy today, and the priorities that guide this deployment, will influence not just our development trajectory but also the century that India shapes for the world.   At a global scale, the key outcomes from the recently concluded COP30 point towards the immediacy of climate action and the pivotal role of green financing. With strategic policymaking and the emergence of a climate-focused entrepreneurial ecosystem, India has a real opportunity to lead the global cleantech transition and achieve its commitment to reach net-zero by 2070.   Today, Green finance is powering innovation and scaling climate action while enabling entrepreneurship and opening avenues in infrastructure and job creation. At the heart of this transition is India’s rapidly expanding climate-tech or cleantech entrepreneurship ecosystem. Entrepreneurs are building impactful solutions across solar microgrids, battery storage, EV charging, carbon capture and sustainable packaging. According to a news report published by Inc42, Indian climate tech startups attracted over $2.2Bn in new funding over the last 18 months. Despite this momentum, early-stage climate ventures, especially in Tier 2/3 regions, often face barriers in accessing institutional capital. The government is addressing this through policy pivots that strengthen transparency and build confidence in the climate innovation ecosystem.   Subsequently, upper-layer NBFCs, lenders and development finance institutions are collaborating to bridge funding gaps. We are also seeing the rise of innovative financing structures, including blended finance models that combine concessional and commercial capital, thematic green funds to de-risk early-stage investments and ESG-aligned investment frameworks. These tools are helping channel capital to the most impactful and scalable climate innovations. As policy intent aligns with an expanding pool of capital, I truly believe India is well-positioned to become a global cleantech hub. This convergence of finance, innovation and sustainability promises to power India’s transition, strengthens local economies, create green jobs and ultimately shape the green trajectory of the next century not only for the Global South, but for the world.   Now is the time for policymakers, lenders, investors and corporations to take unified action. If India accelerates its green financing architecture with the same ambition as digital and infrastructure transformation, India could set a global benchmark for climate-led growth. The next century will be defined by those who fund the future and India is on the right track to lead the change.

The Baku to Belém Roadmap to 1.3 Trillion is a plan for action, building on COP29's finance milestone agreement, and carrying momentum into #COP30.  At its core, the Roadmap is about turning commitments into practical, inclusive climate finance action that’s effective in delivering outcomes that protect lives and strengthen economies.   For the first time, more than 200 governments, banks, businesses, and communities have joined forces to outline workable solutions for mobilizing climate finance.     The Roadmap shows how, by working together, we can scale up climate finance towards USD 1.3 trillion a year by 2035, helping developing countries meet their climate goals.     This can bring tremendous benefits for the global economy – generating jobs, protecting communities, and driving innovation.    The task is ambitious, but achievable. The tools exist; what’s been missing is coordination and shared commitment.     This Roadmap provides a guide to both, aligning public and private finance behind a common direction, and building confidence that 1.3 trillion is within reach.     Times are tough; many governments have scarce resources and hard choices. But positive tipping points are already taking hold: from dramatic declines in the cost of clean energy, to innovation in sectors of the economy we thought would take decades to decarbonise.     It's also high time for a paradigm shift. Treating climate finance purely as cost, or as charity, is misguided and self-defeating, and has held back the progress we need.    Make no mistake: scaling up climate finance hugely benefits every nation. It’s a vital investment in resilient global supply chains, supporting low-inflation growth, food security, and a stronger, more productive global economy that underpins peace and prosperity.    Getting finance flowing means expanding access to catalytic grant finance. It also means unlocking low-interest capital, creating fiscal space, managing debt pressures, and de-risking investment.     Innovative tools – such as debt swaps and private capital reinvestment – can help put money to work where it matters most: into clean energy and resilience, enabling countries to implement Nationally Determined Contributions and National Adaptation Plans more quickly and fairly.    Recent climate shocks show what’s at stake, as climate disasters like Hurricane Melissa rip through communities and economies. So, every early dollar deployed now helps avoid far greater costs later for all nations. There’s no time to waste.    The Paris Agreement is working to deliver real progress, as our three recent reports show, but not nearly fast enough.     By scaling climate finance to match the scope of the climate crisis, we can turn ambition into momentum, making climate action a driver of economic growth, stability, and shared prosperity.    From Baku to Belém, we are moving from agreement to action, focusing on solutions and alignment for people, prosperity, and the planet.

What’s holding back natural climate solutions? Natural climate solutions (NCS)—from reforestation and agroforestry to wetland restoration—have long been championed as low-cost, high-benefit pathways for reducing greenhouse gases. In theory, they could provide over a third of the climate mitigation needed by 2030 to stay under 2°C of warming. But in practice, progress is stalling. A sweeping new PNAS Nexus study reveals why. Drawing on 352 peer-reviewed papers across 135 countries, researchers led by Hilary Brumberg cataloged 2,480 documented barriers to implementing NCS. The obstacles are not ecological. Rather, they are human: insufficient funding, patchy information, ineffective policies, and public skepticism. The result is a vast “implementation gap” between what is technically possible and what is politically, economically, or socially feasible. The analysis found that “lack of funding” was the most commonly cited constraint globally—identified in nearly half of all countries surveyed. Yet it rarely stood alone. Most regions face a tangle of interconnected hurdles. Constraints from different categories often co-occur, compounding difficulties: poor governance erodes trust; disinterest stems from unclear benefits; technical know-how is stymied by bureaucratic confusion. These patterns vary by region and type of intervention. Reforestation projects, for instance, face particularly high scrutiny over equity concerns—especially in the Global South, where land tenure insecurity and historical injustices run deep. Agroforestry and wetland restoration often struggle with the complexity of design and monitoring. Meanwhile, grassland and peatland pathways remain understudied, despite their importance. The study’s most striking insight may be spatial. Countries within the same UN subregion tend to share a similar profile of constraints—more so than across broader development regions. This geographic clustering suggests an opportunity: Supranational collaboration, if properly resourced and attuned to local context, could address shared challenges more efficiently than isolated national efforts. Crucially, the authors argue that piecemeal fixes will not suffice. Because most countries face an average of seven distinct constraints, many from different domains, effective solutions must be integrated and cross-sectoral. Adaptive management—a flexible, feedback-based approach—could help. By identifying which barriers arise at each stage of an NCS project’s lifecycle, it may be possible to design interventions that are not just technically sound, but socially and politically viable. Natural climate solutions still hold vast potential. But unlocking it will require less focus on where trees grow best—and more on where people can make them thrive. 🔬 Brumberg et al 2025. Global analysis of constraints to natural climate solution implementation. PNAS Nexus. https://lnkd.in/gDmYJEph

The climate tech ecosystem is growing 🌎 The climate tech sector has entered a new phase of maturity, driven by a more sophisticated and diverse capital stack. From early-stage innovation to full-scale deployment, the Climate Capital Stack highlights how funding sources have expanded to meet the evolving needs of climate solutions. The map illustrates the layers of this stack, showcasing key investors and capital providers across venture capital, growth equity, infrastructure, and catalytic funding. In the early stages, venture capital continues to play a critical role in financing innovation. Early-stage VC investors are supporting high-risk, high-reward opportunities, particularly in emerging technologies. Late-stage venture capital is increasingly selective, with a focus on companies that demonstrate strong market fit and scalability. These investments are essential for pushing breakthrough technologies past the “valley of death.” As companies grow, growth equity and private equity step in to provide larger checks for scaling proven solutions. Investors in this layer are gravitating towards mature business models with clear profitability paths, such as industrial decarbonization, energy software, and renewable supply chains. The rise of infrastructure funding reflects the sector’s shift toward deployment and project finance. Infrastructure investors are now more willing to support technologies beyond traditional solar and wind, expanding into energy storage, grid management, and low-carbon fuels. These funds offer lower-risk, long-term capital critical for financing large-scale, capital-intensive projects. Catalytic capital remains crucial for addressing funding gaps, particularly for first-of-a-kind (FOAK) projects and technologies that are too risky for traditional investors. This patient, impact-driven capital ensures that promising innovations can progress towards commercialization. At the base of the stack, corporate investors, banks, and governments are pivotal players. Corporate venture capital aligns strategic priorities with financial returns, while banks provide both venture and commercial debt for scaling operations. Governments, through grants and infrastructure funding, continue to accelerate climate action by backing early-stage R&D and incentivizing large-scale deployment. This evolving capital ecosystem underscores the need for alignment between funding sources and climate solutions. Matching the right capital to the right stage is essential to drive progress, enabling climate tech to move from innovation to implementation and deliver meaningful impact. Source:  Sightline Climate #sustainability #sustainable #business #esg #climatechange #climateaction #investment #tech