Cleantech investors have largely hit pause on new deals in the past few months. But for those who are writing checks, terms are increasingly favorable.
That’s the take from Peter Davidson, CEO of Aligned Climate Capital, an early-stage cleantech investor that just announced it has closed on $85 million for a second flagship fund. The fundraise comes three years after the firm launched its first fund, which was half the size of its second.
“So many people have gotten very cautious because they’re worried about being targeted by the current administration,” Davidson said regarding U.S. cleantech investment. “So those of us that are in the market with capital, we’re finding better opportunities at better valuations.”
Cleantech funding down
Aligned’s fundraise comes amid a period of weak investment for cleantech. Only around $2.9 billion has gone to seed through growth-stage investments in sustainability related categories globally so far this year, per Crunchbase data.
The total to date for 2025 marks a decline of more than two-thirds from the same period last year, which was already a sluggish time for investment. U.S. sustainability related funding — about $1.5 billion so far this year — is down even more sharply.
A change in presidential administrations may be among the driving factors, but it’s not the only one. Big cleantech exits also have been few and far between. The last major run was during the IPO and SPAC boom of 2020 to early 2022. Many of the high-flyers then, like EV charging network ChargePoint and Energy Vault, are worth a tiny fraction of their former highs.
In the private markets, meanwhile, investors were roiled by troubles at Swedish battery-maker Northvolt, which filed for U.S. Chapter 11 bankruptcy protection in November. The company had previously raised over $6 billion in equity and over $7 billion in debt financing.
For smaller cleantech-focused investment funds, it’s also been “brutally difficult to raise capital” in recent months, said Davidson. Startups on the fundraising trail haven’t had it easy either.
And yet it keeps getting hotter
Yet while cleantech investment is down, we’re only seeing continued acceleration of the drivers underpinning demand, including climate change and attendant risks, energy demand, and progress in technologies to reduce carbon footprints.
We’ve touched on some climate-related funding hot spots of recent quarters in previous coverage. These include carbon capture and sequestration, clean concrete and fusion.
At Aligned Climate Capital, Davidson, a former chief executive of the U.S. Department of Energy’s loan programs office during the Obama administration, describes the investment strategy as a “picks and shovels” approach. The portfolio is heavy on startups fixing issues for larger players in the energy space. They’re not necessarily companies that will become household name brands, but they are targeting large revenue streams.
The firm’s most recent disclosed investment was in a $20 million round for CarbonQuest, which works with building owners and operators to provide on-site carbon capture for emissions from natural gas. Another portfolio company, BoxPower, provides microgrid power to rural communities in California and elsewhere, with an eye to reducing the fire risk that comes with grid-connected power lines.
Looking ahead, Davidson said he’s bullish about opportunities driven by heightened demand for electricity, as a result of trends in EV adoption and growing data center infrastructure. At the same time, however, he’s worried about the Trump administration’s unsupportive stance for clean energy, coupled with deep cuts to research funding.
“It hasn’t happened yet, but there definitely will be a crisis looming if the actions we see this administration doing continue,” he said.
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Illustration: Dom Guzman
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