Climate Tech VC Funds Down 40%, But AI Deals Pick Up Slack

Fundraising by climate-specialist venture capital firms fell nearly 40% in 2025 compared with 2024, according to PitchBook data — yet AI is pulling capital back into the sector through the deals side of the market.

The figures frame a split market. Climate-focused funds are struggling to raise new vehicles, while startups, especially in energy, are commanding massive amounts of capital from generalist technology investors drawn in by the data center building boom.

John MacDonagh, senior research analyst at PitchBook, cast AI as a net positive for the sector. "AI I think is both a headwind and tailwind for the space, but more a tailwind than a headwind," he said by email. "Data center developers are looking for energy sources to support their projects, and the climate tech space has core technologies like renewables, which can be fast to deploy and relatively low-cost, but also face intermittency challenges that can then be addressed by energy storage technologies. Firm power sources are potentially better suited to datacenter applications, but are less mature, and require substantial funding to develop and commercialize."

The dynamic dominated a Climate Week NYC discussion on September 22 at The Nest Campus, the climate-focused gathering at the North Javits Center that has become something of a mini climate CES, complete with electric vehicles on the show floor. Dawn Lippert, founder and CEO of Elemental Impact and GP of Earthshot Ventures, and Mike Schroepfer, founding partner of Gigascale Capital, laid out how the money is actually arriving.

"90% of the companies that Earthshot backs have generalist tech investors as our co-investors," said Lippert. "We think it's really helpful to be a climate investor on the cap table of these companies, asking about social impact, asking about environmental impact, sometimes we're the only ones in the room asking those questions."

Schroepfer, the former CTO of Meta, raised $250 million for a climate-focused fund announced in June. He said he was asked to consider renaming it as an AI fund. He declined.

"Like Dawn said, our most frequent co-investors are generalists or follow-on investors, and we've seen more capital coming from there," Schroepfer said. "It is a little bit of a tale of two cities, though. If you're in the energy space, critical minerals, anything that's supply chain, there's more money than I've ever seen from an investing standpoint to do that work."

The context matters. Over roughly the past 15 years, climate tech has cycled from must-have category to a label some investors avoided outright. AI's voracious demand for electricity has now made grid capacity and domestic energy supply unavoidable questions, and with them, sustainable energy and the U.S. industrial base have regained investor attention.

For climate-focused investors, the strategic consequence is a shift in where they sit at the table. Rather than leading rounds themselves, specialists increasingly co-invest alongside generalist funds, providing diligence on environmental and social impact that other backers may not perform. Schroepfer's refusal to rebrand his $250 million fund as an AI vehicle signals a bet that the climate thesis does not need the label to capture the capital now flowing toward energy and supply-chain startups.

The near-term test will be whether the generalist-led flow of capital into energy, storage and critical minerals can offset the roughly 40% decline in specialist fundraising — and whether climate investors can keep a seat at the table as the AI-driven buildout accelerates.