Climate Tech Startups See Record Funding as VC Bets on Green Innovation

Climate technology startups raised a record $54 billion in 2025, a 35% increase from the previous year, according to PwC's annual State of Climate Tech report. The surge comes despite a broader venture capital pullback, as investors recognize that the energy transition represents one of the largest investment opportunities in history. Carbon capture, green hydrogen, and grid-scale energy storage are leading the charge into 2026.

Carbon Capture Leads the Way

Carbon capture and storage (CCS) startups raised $8.2 billion in 2025, a 62% increase driven by regulatory tailwinds and corporate net-zero commitments. Companies like Climeworks, Carbon Engineering, and Heirloom Carbon are scaling direct air capture (DAC) facilities, with the first commercial-scale plants now operational in Iceland, Texas, and Louisiana. The U.S. Department of Energy's Regional DAC Hub program has deployed $3.5 billion to support four large-scale projects.

Green Hydrogen Goes Big

Green hydrogen — produced by splitting water using renewable electricity — attracted $12 billion in global investment in 2025. The technology is seen as essential for decarbonizing heavy industry, shipping, and aviation that can't easily electrify. European and Middle Eastern projects lead deployment, but U.S. hydrogen hubs are advancing with support from the Bipartisan Infrastructure Law's $8 billion allocation for regional clean hydrogen hubs.

"Climate tech isn't a niche anymore — it's the largest growth market in venture capital. The convergence of regulation, technology maturity, and corporate demand has created a once-in-a-generation investment opportunity." — PwC State of Climate Tech 2025 Report

Grid Storage Breakthrough

Grid-scale energy storage startups are solving the intermittency challenge that has long limited renewable energy adoption. Iron-air batteries from Form Energy, flow batteries from ESS Inc., and next-generation lithium iron phosphate systems are enabling utilities to store solar and wind energy for days, not just hours. Battery storage capacity deployed globally in 2025 exceeded 100 GWh for the first time.

The Unicorn Herd Grows

The number of climate tech unicorns — private companies valued at $1 billion or more — grew to 47 in 2025, up from 31 the prior year. Notable new entrants include Form Energy (iron-air batteries, $4.6B), Twelve (CO2-to-chemicals, $1.8B), and Monolith (clean hydrogen, $2.1B). The average Series A round for climate tech startups now stands at $28 million, reflecting the capital-intensive nature of hard tech and infrastructure businesses.