Climate Capital at the start of 2026

3 Feb

January 2026

Climate Capital in the UK: Taking Stock After 2025

At the start of the Blue Earth Investment Forum, Earth Set, together with Zinc, convened an investor breakfast to take stock of UK climate tech investment, not looking at sentiment or headlines, but data and lived experience.

The session brought together Sarah Mackintosh (Cleantech for UK) and Sammy Fry (Tech Nation) for a grounded discussion with climate and impact investors, LPs and fund managers. The focus was deliberately narrow: what actually happened in 2025, what the numbers do and do not tell us, and how investors should read the current moment.

1. The 2025 funding picture: a partial recovery, unevenly felt

The discussion opened with an overview of UK climate tech investment in 2025, drawing directly on the data presented in the session.

Total equity investment rose to £3.9bn in 2025, up from £2.5bn in 2024, while debt financing increased to £3.2bn from £2.9bn the year before. Grant funding, however, fell sharply to £70m, down from £200m in 2024.

The topline figures suggest a return of capital, but the composition was uneven. While growth equity recovered more quickly, earlier stages remained under significant pressure.

Seed investment fell to £144m, with early-stage capital increasingly constrained. Series A funding, at £366m, remained well below peak levels, and Series B investment (£460m) was volatile and not evenly spread. The familiar “valley of death” between early innovation and scalable deployment has not disappeared.

The data pointed to a market that is moving again, but not in a way that benefits all parts of the ecosystem equally.

2. Sector concentration: energy and power continue to dominate

Sectoral breakdowns in the data showed a continued concentration of capital in energy and power.

As discussed in the room, this dominance reflects scale and policy certainty, rather than investor preference alone. Energy projects tend to support larger deal sizes, clearer revenue pathways and more established financing structures. In contrast, capital in other climate sectors remains structurally constrained by smaller ticket sizes and less developed scale-up frameworks.

This does not imply a lack of innovation elsewhere, but it does shape which solutions are currently able to attract capital at scale.

International comparisons shared during the session reinforced this pattern. In the US, targeted investment continues to flow into areas such as nuclear, battery storage, hydrogen and energy systems responding to AI-driven power demand, while transport and logistics are seeing renewed interest where manufacturing and deployment pathways are clearer.

3. Early-stage pressure and the persistence of the “valley of death”

A recurring theme in both the data and the discussion was sustained pressure at early stages.

While growth equity is recovering, seed and Series A remain difficult environments for founders. Companies are often too advanced for grants but not yet sufficiently derisked for larger private rounds. This mismatch continues to strand promising activity.

One notable shift discussed was investor behaviour in response. Rather than pushing companies rapidly through funding rounds, many investors are now staying closer to startups for longer, extending runways and adjusting expectations around pace and scale. This reflects greater capital discipline - longer diligence, smaller cheques and fewer new funds - but also has implications for the future pipeline.

The concern raised in the room was not simply about short-term funding gaps, but about what prolonged early-stage constraint means for the depth and diversity of companies reaching later stages over time.

4. Climate tech under pressure to unbundle

Another important thread in the discussion was the growing pressure on “climate tech” as a single category.

Rather than moving as one, different parts of the sector are increasingly behaving differently. Energy and power are pulling ahead, while other areas, particularly those with complex deployment pathways, face tighter capital conditions.

This unbundling was seen as a sign of maturation. Capital is sorting itself according to risk, scale and policy alignment, forcing greater clarity about what different parts of the transition require in order to grow.

5. Emerging themes: health, adaptation and system resilience

While still small in investment terms, the discussion also touched on areas beginning to come into clearer view for founders and investors, including health, adaptation and broader system resilience.

These areas cut across traditional sector boundaries and do not always fit neatly into existing climate mandates. As climate impacts become more tangible in daily life, however, their relevance is increasing, even if capital structures have yet to catch up.

6. What this means for investors heading into 2026

The session closed by looking forward.

The discussion suggested a market characterised by greater discipline and selectivity, rather than retreat. Public capital and policy direction are playing a growing role in shaping where private investment follows, particularly as the UK’s industrial strategy becomes more prominent.

There was also a clear sense that climate investment narratives need to reconnect with real-world outcomes. Energy pricing, visible impacts on bills, jobs and health, and credible deployment pathways matter as much for investor confidence as they do for public trust.