Climate tech tailwinds have turned to headwinds. Clean energy incentives are on the chopping block. Fundraising is a slog across the board.
The worst of times? More like the best of times for climate investors with capital on hand.
That’s the sentiment of some veteran climate tech investors who have been through a cycle or two.
“It’s the old adage,” says Colin le Duc, a founding partner of Generation Investment Management, the $30 billion sustainable asset manager whose other co-founders include Al Gore and David Blood. “The best time to invest is the worst time to raise a fund, and the best time to raise a fund is the worst time to invest it.”
Make no mistake: The green retreat, by some corporations as well as the US government, is causing casualties among companies dependent on incentives and subsidies. But other companies with robust business models will be fine, once they find other offtakers and sources of capital.
“Times like these in history, for us, have actually presented the very best times to be investing,” le Duc told ImpactAlpha. Generation, and its specialized offshoot, Just Climate, see opportunities to scoop up clean tech companies with good management and long-term potential.
“The fundamentals of the sustainability transition are very much intact,” says le Duc. “We’re increasingly making the case that you really want to work with a specialist who’s got a long term mindset to seize this opportunity, because this is a long term secular shift.”
Bargain hunters
The pipeline of stranded climate projects is growing longer by the week. More face danger as Republicans in the US Senate decide the fate of clean tech investment and production tax credits in their spending and tax bill. The credits and other incentives have spurred some $900 billion in planned private investment.
This week, Sunnova Energy, a residential solar installer, filed for bankruptcy protection after struggling with high interest rates and waning state solar incentives.
Last week, the Department of Energy cancelled some $3.7 billion in funding that had already been awarded to two dozen industrial decarbonization projects, from low-carbon cement and steel to chemical recycling and carbon capture. The cost-sharing awards from the Office of Clean Energy Demonstrations were aimed at commercializing the technologies.
Tom Steyer’s Galvanize Climate Solutions in February hired Chris Creed, who had been chief investment officer of the Energy Department’s Loan Programs Office in the Biden administration, in part to find orphaned projects ripe for private investment.
“If there’s a big supplier of capital who has decided, ‘I’m out,’ that’s a good thing,” Steyer told ImpactAlpha. “If you’re sitting there with cash, it’s an unequivocally good thing, because prices are going to be lower, there’s going to be less competition, and you’re going to get better returns.”
And the gloomy mood in the US, where President Trump has taken a wrecking ball to climate policies that were just beginning to bear fruit, does not extend overseas, where the energy transition is in full swing. For emerging markets, clean energy is often the fastest and least expensive option to power their growing economies.
Some 20% of Global South countries already generate a higher share of their electricity from solar and wind than the Global North, according to research firm Ember. “That is not because Kenya or Morocco is more climate-conscious—it’s because they’re less burdened by legacy systems and dogma. They see electrotech for what it is: a path to energy independence,” the firm’s Daan Walter, Sam Butler-Sloss, and Kingsmill Bond write.
Emerging market risks, or at least the perception of them, have grown with volatile interest rate and currency fluctuations as well as trade wars sparked by President Trump’s chaotic tariff pronouncements.
“There are compelling orphaned deals,” says David Cogut of Pegasus Capital Advisors, which sees attractive opportunities in Brazil, Mexico and Chile as well as in Indonesia and across Africa.
“Risk exists in every market, but unfamiliar investors can view emerging markets as especially risky, which softens valuations,” Cogut said. “The perception arbitrage is our opportunity.”
Positive signs
And capital is available to seize those opportunities. Among private equity buyout firms, there’s an estimated $1.2 trillion of dry powder available to be invested. As much as one-quarter of that has been committed for at least four years, putting pressure on fund managers to deploy it soon.
“In any disruption there are winners and losers – and the best opportunities often come at the most extreme moments of uncertainty, something that’s still true in 2025,” Bain & Company’s Hugh MacArthur said in the firm’s midyear private equity report.
Among the bargains may be the limited-partner stakes of other investors that are eager for a dose of liquidity in their own portfolios. Last month, New York City’s pension systems let go of $5 billion of private equity stakes in a secondary sale, reportedly to a unit of Blackstone.
China’s sovereign wealth fund, China Investment Corp., is looking to offload some $1 billion in private equity investments managed by US firms via the secondaries market. Yale University, which pioneered the idea of endowments investing in private equity, may sell up to $6 billion of stakes in its private equity portfolio.
New tailwinds may come from surprising directions. Europe’s push to reduce its energy reliance on both Russia and the US is spurring investments in renewable energy, which now meets half of the bloc’s electricity demand. Increased European defense spending may further boost clean tech.
“I do think that the increase in defense spending around the world is actually going to help the cost curves for climate tech,” le Duc said. From solar panels to batteries to nuclear fusion, he said, “A lot of defense technologies end up becoming climate technology.”
The long-term pipeline for such innovation in the US may be at risk. Cuts to university research, as well as to government initiatives such as ARPA-E, may not show up in the commercial market for five to 10 years, but it will. “There will be an impact there,” le Duc said. “And China will take over, because they’re investing really heavily in core R&D.”
One bright spot is nature-based solutions. Just Climate in March said it had secured $175 million from the California State Teachers’ Retirement System, or CalSTRS, and Microsoft’s Climate Innovation Fund. Just Climate’s Natural Climate Solutions strategy made its first investment in NatureMetrics, which uses DNA detection to monitor biodiversity. In March, it put $25 million into GreenLight Biosciences, which touts its RNA-based crop protection spray as an environmentally responsible alternative to chemical pesticides.
The darkest hour may be just before dawn.
“These things happen in big dislocations,” le Duc said. “Some things take a long time to happen, and then they happen faster than you thought they could happen. When you’re seeing the buildup of technology, the buildup of talent, the buildup of capital, even though emissions continue to rise globally, we are laying the rails for a clean economy.”
“So there are plenty of things to be very optimistic about.”
