Funding for European climate tech fell 71% in the first half of this year, compared to the same period in 2024, though early-stage investing remains relatively isolated from the drop off.
The sector has faced mounting pressures in recent years, with industry leaders like Northvolt collapsing while the White House under Donald Trump has sought to undermine green initiatives in favour of fossil fuels.
In the first half of 2025, €6.2bn was invested into European climate companies, including both debt and equity. That’s a significant drop on the €21.7bn invested in the first half of 2024.
The debt drop-off
The drop was largest among late-stage debt deals: €14bn of which were written in H1 2024, compared to €748m in H1 2025.
The debt figure for the first half of 2024 is primarily made up of four deals: a €5bn round for Swedish gigafactory Northvolt, a €4.2bn round for Swedish metal producer Stegra, a €1.3bn round for French gigafactory Verkor and €1.1bn for German domestic energy tech provider Enpal.
“Large debt deals often come in waves, but this was extraordinary even by those standards,” says Reid Carroll, investor at climate-focused fund SFV.
The largest debt deal so far this year was a €500m round for German company Bees & Bears, which provides domestic energy tech solutions.
“We see the last 12 months as a bit of a hangover for big deals in the space,” says Carroll, “but in the background we are continuing to see availability of venture debt and asset backed lines for companies with solid revenues and strong equity raises.”
Burhan Pisavadi, investor at PT1 Ventures, which invests in climate-focused real estate and infrastructure companies, suggests part of the later-stage dip could be down to some investors moving their focus to more hyped sectors.
“The hype eye of Sauron has left climate behind and is now looking at industrialisation, rearmament, manufacturing and robotics,” he says.
The decline in debt deals could also be because projects which received funding are now building rather than fundraising, Pisavadi says. “The need for new debt has fallen until the next generation of projects comes online.”
Equity remains stable
Underneath the debt fluctuations, equity investing has remained more stable, dipping 40% from €6.7bn invested in the first half of 2024 to €4bn in the same period this year. Within that, early-stage investing has remained at the most consistent levels.
"Anecdotally, I've not felt a slowdown as we're a pre-seed/ seed investor, and it feels like we're seeing the same number of climate tech deals,” says Pisavadi.
Carroll agrees. “We’ve anecdotally found the European climate funding ecosystem to be relatively stable over the last 24 months, with valuations and traction thresholds remaining steady even as deal count decreases a bit. By contrast, we’ve seen a rising bar in the US for Series A and Series B deals, which is putting more pressure on valuations and round sizes.”
“What we are seeing in the climate space is a shift to quality,” says Matthew Blain, investor at climate-focused fund Voyager Ventures.
“The best companies are raising eye-popping rounds at high valuations, particularly in buzzy spaces like data centre cooling, energy efficient chip design, manufacturing productivity, photonics and b2b energy procurement. Whilst appetite for capital-intensive companies requiring big projects and large amounts of debt has significantly decreased over the last 18 months."
Some of the shift is also likely to be down to the framing of deals. A recent $42m investment into London-based EV parcel delivery company Hived, for example, focused on the company’s use of AI rather than its climate tech credentials.
