The State of Climate Tech Today: Why We Remain Bullish
There has been significant discussion lately about the supposed “end” of climate tech. Political headwinds such as Donald Trump’s withdrawal of $300 billion in IRA grants and high-profile failures like Northvolt filing for bankruptcy have sowed doubt. While the political winds have changed, and there are undeniable hurdles, one fact remains unchanged: the climate crisis is intensifying, and the need for energy abundance, resilience, and resource efficiency persists.
The Climate Challenge Isn’t Going Anywhere
Despite steps towards decarbonisation, last year was the hottest on record, with global temperatures reaching 1.6°C above pre-industrial levels and emissions hitting an all-time high. Disasters like the Los Angeles fires - fuelled by dry conditions and powerful winds - brought it all into focus this year for the West Coast. Secretary-General Antonio Guterres summed it up well in 2024 as he said:
“Climate catastrophe is hammering health, widening inequalities, harming sustainable development, and rocking the foundations of peace.”
From a technology standpoint, AI's rapid expansion and energy demands serve to further amplify the need for a swift energy transition. As AI scales, so does the urgency to invest in sustainable clean energy solutions, such as nuclear, wind and solar, that can support its exponential growth.
Bright Spots in the Transition
Fortunately, the clean energy transition is accelerating. Wind and solar power are expanding faster than any other energy source. In 2024, solar energy had a record year, and Europe now generates more power from wind and solar than fossil fuels. Battery storage capacity in the US also grew by 70%, further solidifying the long-term viability of clean energy infrastructure. As clean energy costs plummet and long-duration battery storage ensures reliability, adoption rates continue to rise. As I wrote in a previous piece about data centres and energy, Big Tech’s reliance on energy for data centres is also catalysing entirely new ways of looking at energy.
It is worth remembering that many innovations that are bright spots of the transition today, such as solar and electric vehicles, emerged from the Cleantech 1.0 boom from 2006-2011, which focused on a narrow set of energy technologies (solar PV, wind turbines, biofuels). These products are now crucial pillars of the transition.
Why We Remain Bullish
The same innovation engine that brought us solar panels and electric vehicles is still roaring today— AI to discover new materials, Small Modular Reactors for nuclear power, and robotics for solar installations are a few of the ideas we’ve recently backed. There may have been a recent “vibe” shift as people grapple with new ways of defining climate tech, but the entrepreneurial juices have not stopped flowing.
We launched Giant in 2019 with a then-contrarian thesis to back climate-tech founders. A couple of years later, from 2021-2022, abundant capital flowed into the category; in 2022, more than one-quarter of all venture capital funding went to climate technology. During the heyday, we felt some of our peers were repeating the same mistakes of the cleantech 1.0 boom: investing in science projects, relying on altruism and regulation to drive spending decisions, and focusing too little on fundamental unit economics.
We have avoided investing in products that we believe rely purely on the climate philanthropy of corporations or governments. We never allowed our top-down belief in the opportunity to distract from the bottom-up analysis of the businesses we were considering and their potential for venture scale returns in a venture timeline.
While “climate tech” has always been a non-precise umbrella term that groups disparate business models, technologies, and industries, it has been a useful wrapper to explain the ‘why’ behind the business. While there is an ethical imperative to decarbonise, the financial opportunity exists independent of that. On Andreessen Horowitz’s “American Dynamism 50,” a quarter of the companies could be termed climate companies - from Commonwealth Fusion and Last Energy - scaling fusion energy and nuclear power, respectively - to Jetti Resources, mining copper more cheaply. What does that tell you? The same opportunity, or at least big chunks, exists under different branding with a national-interest bent. Companies may not choose to define themselves as ‘climate’, but the transition to a new global economy that values energy abundance, resource efficiency, and resilience continues.
Looking Ahead
At Giant, we remain hard-headed about backing fundamentally sound businesses that deliver climate impact. We’re under no illusions that the environment and the political mood have shifted drastically. But with less noise and fewer speculative investors, we can focus on supporting the ambitious entrepreneurs who will drive real impact, cut global emissions, and prepare for a changing world. Less profligate times lead to better business.
This is the time to stay focused, double down, and support companies solving the world’s most pressing challenges. The sector continues to attract world-class talent and tackle huge markets. Big Tech investments in data centres are driving a range of innovations, and the legacy of the recent regulatory momentum remains despite the Trump administration’s recent actions. Our commitment to backing mission-driven founders remains stronger than ever, and we are excited about the opportunities ahead.