This climate tech moment is different from Cleantech 1.0 for a whole blog’s worth of reasons—from procurement and customer demand to aggressive policy to cheaper clean electrons. But perhaps the biggest departure from Cleantech 1.0’s days, when VCs alone pumped expensive equity into energy commodities businesses, is the depth and breadth of specialized climate tech capital support. Heck, the climate capital stack is different now from when we first named this newsletter.
The best outcomes in climate tech happen when companies can align their development milestones with their capital strategy. While we're proud that our Running List of Climate VCs has supported founders in their fundraising, we’ve long been preaching that VC is a tiny part of the overall climate capital stack.
Our intent is for the Climate Capital Stack, our updated directory of funds spanning venture to deployment, to be the most useful and impartial source of capital identification for climate founders looking to go the full marathon. To meet the new moment, we’ve expanded the running list of investors that lives on our website—slicing deeper into the multi-layered and increasingly sophisticated "cake" that is the full climate capital stack.
Connecting the dots
The last three years have included plenty of exciting announcements from both funds (see: our fresh dry power report) and startups about the resources earmarked for climate and the tech advancements that can help lower emissions and create more circular economies. But the valleys of death remain.
In the first half of 2023, the steepest climate tech funding declines occurred among later-stage investments. Series B+ dollars are dropping off at exactly the time that many startups within this climate tech cohort need to start building big, expensive facilities and projects to prove commercial viability.
There’s a mismatch between the type of financing climate startups (especially those building hardtech) need now and the typical venture-backed roadmap. The large, traditional lenders have come around to wind and solar, but less mature technologies need creative funding solutions to take steps toward scaling.
Dry powder ready to deploy in climate is growing, but mostly at the very early or very late stages. That missing middlemeans the funds with high risk tolerance don’t have the necessary check size and the investors with the deepest pockets won’t tolerate today’s perceived technology and scale-up risks.
Recent activity: Growing climate capital
Fortunately, investors with deep pockets for growth and physical assets are starting to raise and deploy investment vehicles earmarked for climate:
Mega-firms: Mega-shops like Brookfield, TPG, Apollo, KKR, Carlyle, Stonepeak, and Blackstone are also flocking to climate raising tens of billions to finance the net-zero transition.
Baking the climate capital cake
As climate tech becomes more fully baked, so do the layers of capital sources. Think of pulling together these sources of capital as building a multi-layered cake—stacking VC rounds on top of government grants, then piling growth, debt, or project finance on top of that, to satisfy the capital requirements necessary for scale.
Across the Atlantic, H2 Green Steel has raised more than $5B in combined debt and equity since 2021 as it works toward building the world’s first large-scale green steel plant in Sweden. The ambitious hydrogen steelmaker recently closed a $1.5B round co-led by Altor, GIC, Hy24, and Just Climate—an example of new climate funds translating into real deployment capital.
Cakeaways: State of the climate capital stack
Venturing beyond venture: The capital resources for climate tech are stacking higher and becoming more fully-baked, with an increasing range of growth, private equity, and debt options. In other words, the climate capital cake is layering up, and adding dilutive and non-dilutive flavors to taste.
Public and catalytic capital unlocking private dollars: In a world where Series B+ deals seem largely stalled, the support of strategic or government players can help push investments across the finish line. Government programs like the DOE Loan Programs Office in the US are designed to encourage more private investment in climate tech projects, and new incentive structures like tax credit transferability and direct pay help put early climate projects in the money.
Enter corporate balance sheets and asset owners: Investors with access to substantial balance sheets or large pools of capital are starting to appear on growth-stage cap tables. Corporates (like SK) used to buying or financing large physical assets are beginning to participate from their own balance sheets rather than solely through CVC arms. Pension and sovereign wealth funds (like Temasek) have a lot of capital to put to work, and funneling it into climate tech gives them an opportunity to participate in this transition.
The bridge to bankability won’t be built overnight, but it’s starting to take form as climate tech announcements from both companies and investors transition into action. Climate tech companies are entering a capital-intensive maturation period, and large funds announced over the last three years are beginning to cut big checks in climate tech.
📢 We’ve given our existing climate investors list a big refresh! This is one of the most substantial updates since we first published our list of climate tech VCs in 2020. This revised list includes the latest climate investors from:
Venture Capital: Investing in early-stage companies
Corporate VCs: Venture arm or fund associated with a corporation
The list of climate investors that lives on our website here was created and maintained with the intention of being an open-source tool for climate-first founders and developers. We’ve updated it to included more categories of investors, sourcing funds through deal-by-deal tracking, as well as review of inbound submissions (which can be shared directly via this form). Transparently, our methodology is as follows:
Must be private institutional capital sources with an AUM >$5m that are actively deploying, defined as >1 climate deal within the past 12 months.
Must meet minimum threshold of climate companies as a % of overall portfolio, approximate by fund category:
Climate-specific: 75% (Note: we’ve consolidated legacy “vertical-specific climate funds” into this category)
General: 20% (Note: we’ve consolidated legacy “deeptech funds” into this category. Likewise, 20% is an increase up from 10% concentration in prior methodologies.)
Excludes accelerators / incubators, foundations, venture debt, public funding, or philanthropy.
Investment firms can be repeated and listed across multiple categories if the firm has multiple funds relevant across asset classes.
Translating ideas from the VC-funded innovation phase into capital-intensive, real-world undertakings, like building commercial facilities and energy infrastructure, requires a more creative and complex capital stack with bigger checks. This moves the conversation from VC-only into Growth, PE, and eventually Infra investors who can offer larger cash infusions and more intricate financing structures.
From idea to infra
Growth / PE investors typically invest in companies, but as climate tech startups reach scaling checkpoints, financing projects through resources besides expensive equity capital may also be necessary. Project finance / infrastructure investing is for financing projects or assets, rather than purchasing equity in the company itself.
While Growth / PE players explicitly fund companies, and Project Finance / Infra investors finance assets (projects included), these investors can come in many flavors across a spectrum of check size, risk tolerance, and appetite for corporate equity.
The investors in this section have varied priorities and preferences, but the labels and lines used to differentiate them are often blurry between categories. If the capital stack is a layered cake, investors can slice down vertically through the whole thing. We aimed to delineate them as clearly as possible here to give climate tech builders an understanding of capital allocators without splitting too many hairs on definitions.
The bottom line: What firms call themselves is less important than the types of investments they’re willing to make, and a few key questions can help founders and operators determine which investors could be a good match.
Growth / Private Equity
Definition: Funds investing in growth-stage climate tech companies or acquiring controlling stakes in climate tech companies.
Caveat: Think of the differences between late-stage venture (Series B+), growth, and private equity as gradients, rather than well-defined lines.
- Do you typically look to take a minority or majority stake? - Are you underwriting to growth or profitability / cash flow? - Growth funds typically like to buy minority stakes in companies growing significantly, while PE investors more often look to buy a controlling stake in companies that provide a steady stream of cash flow.
Project Finance / Infrastructure
Definition: Infrastructure investors are PE funds that invest primarily in assets (i.e., solar farms, bridges, airports), rather than companies. The infra investing umbrella includes project finance, which refers to investments specifically aimed at projects like wind or solar farms, energy storage facilities, etc. Investors direct capital to the project entity, rather than the corporate owner (aka, sponsor or developer) in the form of equity or debt, and makes returns on the cash flow of the project, its resale, or tax credits the project generates. Investors are primarily funds, but also banks and corporates.
Caveat: This one’s also a gradient, with assets spanning a spectrum from small-scale “projects” to behemoth-scale physical infrastructure and some hybrid investors prepared to finance both physical assets and the project sponsor.
Here’s a handy framework to break this out:
Tech Risk Level (TRL)
Minimum Check Size
Corporate Equity too
FOAK, Early Okay, Only Mature
<1M, 10M, 50M, 200M
Distributed or utility-scale
Debt / Equity / Tax Equity
Yes / No
Key questions for founders to ask: - Risk: How much tech risk are you willing to take? How much project risk (i.e. scale-up)? Even if a technology is mature, are you willing to finance projects without a long track record of success? - Scale: What is your minimum check size or average check size? - Structure: How do you think about project financing structures - Corporate Equity: Do you make corporate equity investments? If so, how early will you go?
Definition: These firms typically work in the ~$10-75M check range, investing in climate or clean energy projects and assets with the potential for hybrid crossover into corporate equity investments. In this category, investors can look to create unique corporate equity value in partnership with a company by innovating on asset financing.
Scale & Risk: Smaller size and potentially more tech risk. Diligence can be fairly similar to an equity investment (TAM matters a lot), given that some firms are looking to corporate equity to drive a material portion of returns.
Cost of capital: Typically highest in cost among investor types in this project finance / infra category, including warrants
Definition: These firms work in the ~$75-250M range and are looking to deploy a relatively large amount of capital at similar rates to the emerging players, but are less likely to seek returns via equity investments. Some might still buy an entire company so they can deploy asset financing through it.
Scale & Risk: Larger check size, less tech risk. If an individual opportunity is large enough, these investors will engage even if the TAM is not giant, since they’re making more profit on the interest from bigger checks and are less likely to make an equity investment alongside asset financing.
Cost of capital: The overall cost is typically lower than emerging infra with less warrants/dilution.
Definition: Large assets owners or corporate strategics scaling up direct investment.
Pension / Sovereign wealth funds: Asset owners managing billions of dollars (each!) that have already put some money into climate investment funds and are now beginning to enter the market as direct investors, often via climate-specific vehicles alongside their existing LP positions.
Of note: With national net-zero mandates and the overlay of geopolitics in climate tech supply chains, the capital-intensive realm of climate infra is a great place for these big investors to put their billions of dollars to work.
Corporates: Big players that can help finance or acquire facilities or projects from their own balance sheets (rather than through a Corporate VC). Oil and gas majors, real estate developers, and other incumbents in emissions-intensive industries are circling in on climate investments.
Key Players: Companies like Exor (a Dutch/Italian conglomerate/holding company), and strategics like Engie, Aramco, Shell, BP, Schneider, Enbridge, Borg Warner, Next Era and Kinder Morgan
There are a host of other players helping capital allocators to assess and de-risk climate tech projects, along with traditional lenders. (NOTE: We’ve purposefully put debt on hold for this feature, but keep an eye out for more soon on how debt fits into the climate capital stack.)
Banks: Provide debt and loans for climate tech companies and projects as well as advisory and syndication services to help companies raise capital and facilitate relationships with investors or acquirers.
Key Players: Bank of America, HSBC, JPMorgan, Citibank, SVB, Wells Fargo, Goldman Sachs
Insurance: Insurance providers lead the way for lenders in de-risking climate tech projects.
Key Players: MunichRE, Climate Risk Partners, New Energy Risk, Energetic Insurance, CAC Specialty, Resurety, kWH Analytics
We’ve endeavored to be comprehensive and transparent in open-sourcing this list as a public good, but please share your feedback about what may still need to be added. Send us a note at firstname.lastname@example.org with your take on the most useful ways to think about climate tech capital and use the button below to submit any investors we might have missed.