Despite the urgency of the climate crisis and a wave of climate-focused startups across Europe, climate tech funding is declining.
VCs love to boast about their long-term vision — that mythical “10-year horizon” where today’s bets become tomorrow’s unicorns. But if that’s true, why aren’t more of them investing in the only thing that guarantees there will still be a market to sell to: a liveable planet?
Instead, many are piling into AI, SaaS and even defence, while climate tech, arguably the most pressing challenge and opportunity of the decade, is getting sidelined.
According to Sifted data, funding for European climate tech fell 71% in the first half of this year, compared to the same period in 2024, dropping from €21.7bn to €6.2bn. Meanwhile, investments in European AI companies grew by 61% and funding into European defence jumped by nearly 30% over the same time period.
But the reality, according to VCs, is more complex than a simple retreat. Climate investing, they argue, hasn’t vanished — it has fractured. Some sectors have overheated and crashed, others are being rebranded as “resilience” or “infrastructure”, and a new wave of startups is being forced to prove not just impact, but profitability.