Cleantech investment has slowed significantly in recent months, but for those still deploying capital, investment terms are becoming increasingly attractive. That’s the perspective of Peter Davidson, CEO of Aligned Climate Capital, an early-stage cleantech investment firm that just closed an $85 million second flagship fund—double the size of its first fund launched three years ago.
“So many people have gotten very cautious because they’re worried about being targeted by the current administration,” Davidson said regarding U.S. cleantech investments. “So those of us that are in the market with capital, we’re finding better opportunities at better valuations.”
Aligned’s successful fundraise comes amid a period of declining cleantech investments. So far in 2025, only around $2.9 billion has been invested in sustainability-related categories worldwide, according to Crunchbase data. This represents a two-thirds drop from the same period in 2024, which itself was already a slow year for funding.
In the U.S., the decline is even steeper, with just $1.5 billion invested in sustainability-related ventures this year.
While political uncertainty plays a role, Davidson notes that big cleantech exits have been scarce. The last major wave of successful exits occurred during the IPO and SPAC boom from 2020 to early 2022, when companies like ChargePoint and Energy Vault surged in valuation. Today, many of those once high-flying companies are worth just a fraction of their peak values.
Private markets have also been shaken by Northvolt’s financial troubles. The Swedish battery maker, which raised over $6 billion in equity and $7 billion in debt financing, filed for U.S. Chapter 11 bankruptcy protection in November 2024.
For smaller cleantech-focused investment funds, raising capital has been extremely challenging, and startups seeking funding are facing tough hurdles.
Despite Cleantech Challenges, Climate Demand Continues to Rise
Even as cleantech investment slows, the demand drivers continue to accelerate. Climate change, increasing energy demand, and technological advancements in carbon reduction solutions remain at the forefront.
Some key climate tech funding trends over the past year include:
- Carbon capture and sequestration
- Clean concrete technologies
- Nuclear fusion advancements
Davidson, who previously led the U.S. Department of Energy’s Loan Programs Office under the Obama administration, describes Aligned Climate Capital’s strategy as a “picks and shovels” approach—focusing on startups that solve infrastructure and operational challenges for larger energy players rather than direct-to-consumer brands.
The firm’s portfolio includes startups that provide practical solutions for energy efficiency and carbon reduction. Some of its most recent investments include:
- CarbonQuest: Participated in a $20 million round for this company, which helps building owners implement on-site carbon capture to manage emissions from natural gas usage.
- BoxPower: A startup focused on microgrid solutions for rural communities in California and beyond, helping to mitigate wildfire risks caused by traditional grid power lines.
Looking Ahead: Opportunities and Risks
Davidson sees strong investment potential in cleantech areas driven by:
- Rising electricity demand from EV adoption
- Expansion of data center infrastructure
- Grid modernization efforts
However, he also expresses concern about the Trump administration’s stance on clean energy and potential 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 cautioned.
Despite political and financial headwinds, Aligned Climate Capital remains optimistic, betting on the long-term necessity of sustainable energy solutions in a rapidly changing world.
