A new report by data insights firm Sightline Climate found that climate venture capital investments rose to an average deal size not experienced since 2020, with multiple $1bn deals recorded.
Investments are shifting away from emissions reductions to meeting rising energy demand from data centres and the booming growth of AI. Investors are increasingly focused on new clean power capacity, grid flexibility and back-up power solutions.
Climate tech deals actually fell by 14% in 2025 – a four-year low, but the average deal size has increased. More than half of the ten highest deals recorded last year were more than $1bn, including six energy sector deals and two rounds for data centre developments.
Climate investments in the built environment sector climbed 23% last year, although this was largely focused on data centre infrastructure. The energy sector also experienced a 31% investment increase, with a focus on nuclear and grid deals.
The UK is focusing on hard-to-abate sectors such as aviation, but across the board, investment in such sectors lost momentum. Sightline Climate stated that sectors driving action via decarbonisation targets or those reliant on policy signals saw funding decline by almost a quarter last year. Industrial decarbonisation funding also fell by 3%.
In total, climate venture capital investment reached $40.5bn in 2025, an 8% increase on 2024 levels.
Sightline Climate’s co-founder Kim Zou said: “Just like the wider market right now, energy systems, climate tech, and AI are now inextricably linked. Data centres are driving the energy demand that has caused a boom in clean firm power and gridtech investment. And decarbonisation is no longer the primary motivation; it’s all about energy supply and security.
“2025 was the year of the shift, 2026 will be all about speed and scale.”
In 2024, global funding for climate technology slumped, but the UK delivered a 24% increase in investment in the sector.
According to PwC, investment in UK-based AI climate tech firms increased by 128%, rising from £440m in 2023 to £1.01bn in 2024. As a result, UK-based companies accounted for 22% of global investments in AI-related climate tech, highlighting the UK’s emerging leadership in this transformative sector.
Energy innovation barriers
In related news, Bosch’s Tech Compass 2026 survey has highlighted attitudes amongst the UK public towards AI and its energy intensity.
Bosch surveyed more than 11,000 adults across seven countries, including the UK, which accounts for around 10% of survey respondents.
In total, 35% of Brits aged 18–29 claimed that AI is having a “positive impact” on their lives, ranked second only to smartphones.
The survey, which examined approaches to technology innovation found that four in 10 people believes that expensive energy prices are hindering innovation in the UK.
When asked what could unlock decarbonisation across the UK, 78% of respondents claimed they were open to utilising hydrogen in the form of transport, provided the UK could invest in infrastructure and fuelling networks.
Bosch UK & Ireland’s managing director Steffen Hoffmann said: “Hydrogen has the potential to transform how we power our lives and industries. Many people are ready to make the switch, but progress is being held back by limitations within infrastructure.
“If we are truly serious about reaching our net-zero ambitions and leaving behind a better world for future generations, we must prioritise the investments that make this transition possible.”
