Market Conditions Influencing ClimateTech Development

Carbon removal is becoming a necessary component of the transition to net zero. Achieving climate targets requires both deep emissions reductions and large scale removal of CO₂ already in the atmosphere. Despite this, current deployment remains well below the levels required to align with net zero pathways. The market for carbon dioxide removal is evolving, but remains constrained. Only 32 companies out of nearly 6,000 with science based targets have purchased durable carbon removal credits. At the same time, high durability pathways such as direct air capture and BECCS continue to face high costs and complex financing requirements. Current prices range from $500 to $1,200 per tonne for DAC and $200 to $600 per tonne for BECCS, while more mature pathways such as biochar average around $192 per tonne. These differences reflect broader trade offs across technologies. High durability solutions require long term investment and structured contracts. Lower cost pathways show higher levels of deployment but operate with different levels of permanence and verification complexity. The main constraints are not limited to technology. Regulatory uncertainty, particularly around the treatment of carbon removal in Scope 3 emissions, continues to limit corporate adoption. Carbon markets remain fragmented, with limited alignment between voluntary and compliance systems and inconsistent standards for measurement, reporting and verification. In this context, offtake agreements are playing a central role. They provide revenue certainty for suppliers, enable access to capital, and support the development of projects that would otherwise struggle to reach commercial scale. In emerging pathways such as direct air capture, this dynamic is reflected in a sold to delivered ratio of approximately 750 to 1, indicating that future capacity is being committed well in advance of delivery. Demand remains concentrated among a limited group of buyers. Technology companies account for the largest volumes, with individual transactions significantly exceeding those of other sectors. Microsoft alone has purchased more than 8 million tonnes of carbon removal to date. Scaling carbon removal will depend on coordinated progress across multiple areas. This includes clearer regulatory frameworks, standardized verification systems, stronger demand signals, and improved integration between carbon markets. Carbon removal is moving from early commercialization toward broader adoption. The pace of this transition will be determined by how quickly market structures evolve to support long term investment and deployment. Source: World Economic Forum – Carbon Dioxide Removal Technologies: Market Overview and Offtake

India’s Green Financing Opportunity Could Shape a Century   India stands at a defining moment where a growing economic momentum meets an urgent climate imperative. The capital we choose to deploy today, and the priorities that guide this deployment, will influence not just our development trajectory but also the century that India shapes for the world.   At a global scale, the key outcomes from the recently concluded COP30 point towards the immediacy of climate action and the pivotal role of green financing. With strategic policymaking and the emergence of a climate-focused entrepreneurial ecosystem, India has a real opportunity to lead the global cleantech transition and achieve its commitment to reach net-zero by 2070.   Today, Green finance is powering innovation and scaling climate action while enabling entrepreneurship and opening avenues in infrastructure and job creation. At the heart of this transition is India’s rapidly expanding climate-tech or cleantech entrepreneurship ecosystem. Entrepreneurs are building impactful solutions across solar microgrids, battery storage, EV charging, carbon capture and sustainable packaging. According to a news report published by Inc42, Indian climate tech startups attracted over $2.2Bn in new funding over the last 18 months. Despite this momentum, early-stage climate ventures, especially in Tier 2/3 regions, often face barriers in accessing institutional capital. The government is addressing this through policy pivots that strengthen transparency and build confidence in the climate innovation ecosystem.   Subsequently, upper-layer NBFCs, lenders and development finance institutions are collaborating to bridge funding gaps. We are also seeing the rise of innovative financing structures, including blended finance models that combine concessional and commercial capital, thematic green funds to de-risk early-stage investments and ESG-aligned investment frameworks. These tools are helping channel capital to the most impactful and scalable climate innovations. As policy intent aligns with an expanding pool of capital, I truly believe India is well-positioned to become a global cleantech hub. This convergence of finance, innovation and sustainability promises to power India’s transition, strengthens local economies, create green jobs and ultimately shape the green trajectory of the next century not only for the Global South, but for the world.   Now is the time for policymakers, lenders, investors and corporations to take unified action. If India accelerates its green financing architecture with the same ambition as digital and infrastructure transformation, India could set a global benchmark for climate-led growth. The next century will be defined by those who fund the future and India is on the right track to lead the change.

One data point worth pausing on… According to the latest Sightline Climate (CTVC) analysis (https://lnkd.in/ezEChF5h), TDK Ventures was the most active corporate VC in climate tech in 2025 by deal count. In that context, being at the top of the list feels less like an accolade and more like a mirror held up to the market. At this point, the scale of what is happening in energy is no longer debatable. AI-driven power demand, grid modernization, electrification, and industrial transformation are converging fast. The need for clean, firm, and resilient energy is no longer cyclical or thematic. It’s structural. Against that backdrop, being highly active shouldn’t feel exceptional. It raises a different question: if this opportunity is so clear, who is choosing not to lean in, or not to stay the course? Most of the technologies that truly move the needle — grid infrastructure, long-duration storage, advanced materials, power electronics, and AI-enabling systems — do not fit neatly into short funding cycles or hype-driven timelines. They demand endurance paired with conviction. We see this firsthand across our 2025 investments and broader portfolio: - Grid-scale and long-duration storage with Peak Energy, including a $500M+ deployment agreement reshaping the economics of the grid - Advanced grid infrastructure and power electronics through Amperesand’s $80M raise for solid-state transformer technology - AI infrastructure at the physical layer, from photonics with Mixx Technologies Inc’ $33M Series A to inference compute with Groq’s $750M recent funding round (and $20B moment) - Electrification at scale, from industrial systems to mobility, including Ultraviolette Automotive’s electric motorcycles in India - Edge and systems intelligence, with EdgeCortix as our first investment in Japan, bringing AI closer to where energy and data meet - Data center and logistics infrastructure, from Nubis Communications’ acquisition by Ciena to Starship Technologies’ $50M Series C for autonomous delivery What is emerging across the ecosystem is a clear divide: 🔹 Plenty of capital is willing to show up early 🔹 Far less capital is willing to remain engaged when progress is nonlinear, engineering-heavy, and occasionally quiet At TDK Ventures, we invest with urgency because the transition demands action, but we approach the work with endurance, mindful that only patient capital has the chance to compound over time. Conviction without endurance fades. Endurance without conviction stalls. From that perspective, this moment is less about volume than about consistency: the responsibility to remain engaged in sectors that matter, even when they are capital-intensive, technically complex, or temporarily out of favor. The work continues. And so does the commitment.

A SaaS company in trouble cuts marketing spend and headcount. A climate venture has all of that, plus inventory sitting in containers, panels in warehouses, and payments locked behind commissioning milestones. Last week’s post covered universal cost cutting lessons: Be decisive, treat people well on the way out. The climate-specific layer matters most to anyone building or backing a hardware-heavy business. Climate ventures carry complexity that software businesses do not. They manage manufacturing, inventory, deployment, hardware warranties, project financing, and working capital that sits in the system for months before revenue arrives. Where climate intersects with agrifood, you add the volatility of farmer income tied to a successful harvest. Unit economics can be strong. Growth itself still creates cash flow pressure. A solar company buys panels, batteries, and irrigation systems before installation. A low-emissions rice platform supports farmers through a growing season and gets paid after harvest. Land restoration and agroforestry can take years before revenues fully materialise. That changes every cost decision. Each dollar saved extends runway, reduces dilution, and gives flexibility on when to raise next. Which is why I keep banging on about better debt finance for climate tech in emerging Asia. Expensive and dilutive equity is not built to finance working capital. Inventory deserves a loan against the asset, at a rate that matches the cash flow. $50k to $200k loans exist through microfinance. $50M+ facilities exist for established infrastructure. A fast-growing climate company needing $1M to $5M is where the system breaks down. It is easier for a bank to write a $100M green loan to a property developer than a $2M working capital line to a climate startup creating real emissions impact. That slows company growth and more importantly, it slows climate impact. Fewer solar systems installed, fewer farmers reached and fewer tonnes of emissions avoided. So climate founders in emerging Asia get creative. Agros started with a loan from me and a small group of LPs, which catalysed a $2M facility from EDFI. WasteX secured a $460k grant from P4G for biochar adoption. Ampd Energy and Full Circle Biotechnology took loans from existing shareholders for working capital. Rize secured a $650k facility from Rabobank for smallholder rice farmers transitioning to low-emissions. SOLshare’s loan from us catalysed a refinancing at a lower rate from a local Bangladeshi bank. It is still mostly cobbled together. The asset class deserves better. Finance is a core capability far earlier than in software. Map every order, every shipment, every install, every payment date. Build the worst case. Plan a more aggressive runway than projections suggest. Most need a fractional or full-time finance director far earlier than a SaaS business would. In climate, cash management is the strategy.

What climate tech capital is funding is changing. Pay attention to where it’s landing. Climate tech investment grew 8% to $40.5B in 2025, the first increase since the boom years. A CTVC/Sightline report shows capital concentrating into fewer, larger bets focused on resilience, reliability, and deployment-ready assets. Adaptation shows up less as a labeled category and more as a demand signal inside where money is actually going: grid flexibility, distributed energy, cooling, storage, and built-environment systems that keep operating under heat, load spikes, and volatility. Here are a few other signals from this week’s news. From the business side: 🌽 The European Environment Agency estimates Europe needs €53–137B per year in adaptation investment by 2050 across agriculture, energy, and transport, versus €15–16B today. The agency frames resilience spending as a productivity and competitiveness investment, not just loss avoidance. 🌪️ Munich Re reports $108B in insured disaster losses in 2025, still well above the long-term average, with total economic losses at $224B. Floods, fires, and storms dominate, and uninsured losses remain the structural gap. From the weather front: 🔥 Severe bushfires in Australia have destroyed more than 300 buildings and burned roughly 350,000 hectares across Victoria and New South Wales, with fires expected to last weeks and air quality impacts reaching Melbourne. ‼️ A new Exeter-led analysis warns warming may accelerate faster than expected as aerosol pollution declines and climate sensitivity proves higher, raising risks of early insurance withdrawal, climate-driven inflation, and systemic financial stress. ⛈️ The New York Times describes 2025 as a year of compounding climate anomalies, where fires, floods, heat, and storms stack across systems, reinforcing that climate risk is now systemic rather than episodic. If this roundup is useful, feel free to repost or share it with others following adaptation and climate risk. And if you’re investing or building in the space, let’s connect. Sources linked in comments.

Last month, I talked to 40+ finance professionals working across the climate capital stack. Here are the most pressing challenges, opportunities, and insights that emerged: ⚙️ Hard Problems - Even proven tech struggles to scale: EV chargers and energy storage are mature technologies, but their merchant risk makes traditional project finance models break down. - First-of-kind (FOAK) projects remain fundamentally hard: LPO funding is likely ending, and few alternatives exist. The good news? Several new funds are targeting this gap - worth watching closely. 💬 Communication Challenges - The climate finance ecosystem speaks multiple languages: VCs talk TAM and dreams, project finance talks DSCR, insurers talk actuarial risk. Getting deals done requires translating between all of them. - Risk/reward misalignment plagues deals: Startups and VCs chase upside, but deployment partners bear downside risk. This fundamental tension delays scaling. - Climate still fights for credibility: "Senior stakeholders don't even understand Scope 1, 2, and 3," one banker shared. "Anything labeled climate gets immediately written off as concessionary." 📚 Knowledge Gaps - Deal structures remain bespoke: While startups have SAFEs and mature sectors have established project finance precedents, new climate technologies lack standardized financing models. Knowledge sharing between successful deals is almost non-existent. - The "finance-ready" paradox: Capital exists, but most projects aren't structured to receive it. Companies often start thinking about project finance years too late. 🌡️ Climate Risk - Insurance is the canary: Companies are pulling out of high-risk regions and wildly hiking rates. - Markets haven't caught up: This risk repricing isn't reflected in broader valuations...yet. - This disconnect is both terrifying and the biggest opportunity in the space. 🔥 Hot Topics - Nature & Biodiversity: Hard to quantify but drawing serious LP interest - Resilience & Adaptation: Finding new momentum as climate impacts accelerate and we prepare for a "don't-say-climate" presidency - Data Centers: Energy use + AI boom = unavoidable focus - Geothermal: Rising star for baseload power, especially post-Fervo - Global Standards: EU's CSRD and Carbon Border Adjustment Mechanism will reshape supply chains regardless of US policy, with real ramifications for manufacturers in Asia and beyond. These conversations revealed just how hard—but also how essential—it is to align incentives, build trust, and bridge knowledge gaps across the climate finance ecosystem. As Eugene Kirpichov just wrote—we need systems thinking if we're going to tackle these wider problems. Anything missing here? What's on the top of your mind for 2025?

Electric Mobility in Africa is becoming a business. This week, Nigerian startup MAX raised 24 million dollars to scale electric mobility and clean energy infrastructure across West and Central Africa. On the surface it looks like another big round, but the real story is what it signals beneath the headline. MAX is selling an integrated stack. Electric vehicles, battery swapping, financing, and fleet software all in one platform. That level of vertical control is what makes the economics work on the continent, where infrastructure gaps can easily crush unit economics. And investors are paying attention. The round blended equity and climate-focused debt from global funds, development finance institutions, and asset partners. That combination tells you that capital pools are widening beyond traditional venture, especially for companies sitting at the intersection of climate, mobility, and infrastructure. Profitability in Nigeria is another signal worth pausing on. It tells us that clean mobility is not a future concept for Africa. It is commercially viable today when designed for local realities like cost per kilometer, utilization cycles, charging models, and operator financing. What founders should pay attention to is how the model unlocks demand. Battery swapping removes charging downtime. Financing lowers the upfront barrier to vehicle access. Solar and IoT reduce cost to serve. When you integrate these pieces, EVs stop being hardware and start becoming infrastructure. The next implication is geographic. MAX is active in Nigeria, Ghana, and Cameroon, and now expanding. That cross-border motion is showing up more often in climate and mobility plays because infrastructure companies scale on regional supply chains. The bigger takeaway is simple. Africa’s climate-tech momentum will be driven by infrastructure companies that make clean energy cheaper, accessible, and investable at scale. Those companies will attract blended capital, anchor long-term partnerships, and build durable moats fast. For founders, the lesson is to think in systems. The winners in this space are not the ones who bet on a single asset but the ones who redesign the rails the market runs on. That is where the real value will accumulate over the next decade. In my email newsletter, I am breaking down how companies like MAX design these infrastructure playbooks and what it means for operators building in climate, mobility, and energy across the continent. The next edition goes deeper into how blended capital and integrated stacks are reshaping Africa’s climate-tech wave. If this kind of thinking resonates, you can subscribe here: https://lnkd.in/gazv-kvn

Most of the big #ClimateTech projects in the next decade won’t be funded by VC. Solar and wind didn’t scale because VCs wrote bigger checks. They scaled because government stepped in, took the first hit on risk, and made projects look bankable. When government acted as first-loss capital, everything flipped: ✅ Debt terms got longer ✅ Interest margins dropped ✅ Equity needs shrank Fragile experiments suddenly became financeable assets. Now, long-duration storage, carbon removal, and more are at the same crossroads. The tech works. The market wants it. What’s missing? Capital that makes projects look like infrastructure, not science experiments. That’s what I cover in Part 2 of my Bankability Playbook: - How first-loss guarantees work - Why design matters more than dollars - The roadmap from pilot → commercial scale 👉 Read it here + subscribe: https://lnkd.in/gb2fs-q8 The investors who understand this playbook will decide which technologies scale and where billions of dollars flow.

I asked 3 well-respected and insightful climate tech investors their advice about navigating this uncertain moment in the market. Here's what they said: Amy Duffuor, Co-Founder and General Partner at Azolla Ventures: "In this moment, we're supporting our companies with two things: 1) In 2020-2021, there was so much capital flowing into climate and a lot of investors were managing their portfolios so that management teams would be strong fundraisers only. That's not the right way to build a strong, self-sustaining business. You need to be an operator first and focus on business fundamentals. 2) We should be building diverse investment syndicates that aren't dependent on climate tech investors--bringing in sector specialists, geographic specialists, and generalists. That way when capital is restricted downstream, you've diversified the ecosystem of investors you can go to, which helps mitigate risk." Terry Kellogg, Managing Director at Helios Climate Ventures: "The investment has to be able to stand on its own regardless of policy changes. From our perspective, in this moment we're looking at the end of climate tech 2.0 and the beginning of climate tech 3.0. The broad themes of climate tech 2.0 were free money with extraordinary growth stories (eg. Tesla and the cost of solar). Out of the wreckage of climate tech 1.0, we brought to scale all these technologies we had been hoping for for a long time. The next iteration is capital efficiency and integration." Rakesh Shankar, Partner of NextGen Infrastructure at Antin Infrastructure Partners: "When we set the fund up three years ago, we set it up as a next-gen infrastructure fund which has a broader mandate than the pure energy transition. We already have renewable energy assets in our portfolio and we want a diverse portfolio so we're spending more time now on waste-to-value carbon, water, transportation, digital infrastructure etc because that's where the opportunities are right now." I also asked them for their career advice. Listen to the whole Yale University Clean Energy Conference conversation on the Future in Bloom YouTube or wherever you get your audio podcasts. Links below in comments. Yale Center for Business and the Environment (CBEY) Yale School of Management Yale School of the Environment

Climate Tech in 2025: Stabilizing, Scaling, and Surging What I’m hearing across the climate tech ecosystem this year is encouraging. After a few volatile cycles, 2025 feels like the year things are starting to stabilize — and momentum is building again. 1. Capital is steadying. Early-stage deals remain strong, exits are back, and M&A is heating up. Infrastructure funds are leading, signaling long-term confidence. 2. Grid tech and storage are hot. Aging infrastructure, AI’s demand for power, and electrification are driving urgency. Long-duration storage and smart grid solutions are drawing serious investment. 3. Industrial decarbonization is scaling. Carbon removal, green steel, and clean cement aren’t experiments anymore — commercial viability is in sight. 4. Climate platforms are evolving. Tools once seen as ESG “nice-to-haves” are becoming core infrastructure, helping industries monitor forests, oceans, and risk in real time. 5. Investor focus is shifting. The conversation is moving from “green premiums” to “green discounts,” with more emphasis on resilience, domestic supply chains, and energy security. 👉🏼 But here’s the part I keep coming back to: capital and technology only go so far without the right people. The companies that scale fastest are the ones who bring in leaders who’ve done it before — people who know what it takes to move a business from this stage to the next. That’s the difference between momentum and execution. If you’re building, investing, or advising in this space, this is the time to lean in. #ClimateTech #EnergyTransition #GridTech #CarbonRemoval #ClimateInvestment #SalamonePartners