Rethinking the Climate Tech Landscape: Where to Play?

2025 is a critical year to pause and reflect on how we invest in climate technologies. As green investment fell by 6.8% in the EU and 12% in the UK (Bloomberg), and with growing geopolitical uncertainty, we continue to ask: Where should we play—and how can we design the right capital structures in climate tech?

At First Impact Partners (FIP), we stepped back to map the climate tech and funding landscape from first principles. This article presents the first section of our assessment: a deep dive into climate technologies with quantitative and qualitative analysis across technical maturity, economic viability, environmental impact, and investment readiness, to provide a comprehensive view of the current state and future outlook of climate technology development in both the near and long term.

The Climate Tech Landscape: A Complex Web of Trade-offs

We assessed 13 core climate technologies that fall into five strategic pillars (table 1&2):

1. Clean Electrons (energy): Renewables, nuclear, energy storage, electrification, heat pumps

2. Clean Molecules (energy): Hydrogen, sustainable fuels & chemicals

3. Carbon Management (agri and industry): CCUS, nature-based solutions, carbon removals

4. Circularity and Resources (waste and agri): Circular technology, alternative proteins

5. Enablers (across sectors): Climate intelligence and data analytics

These pillars span the energy, agriculture, waste, and industrial sectors (Our World in Data)—which together address over 90% of global greenhouse gas emissions (McKinsey).

Using a combination of qualitative and quantitative analysis, we assessed each pillar in depth.

Quantitative Insights: What’s Ready, What’s Not

Our analysis reveals a simple but powerful conclusion: Clean Electrons—renewables, energy storage, and electrification—are the most mature and investment-ready technologies today.

• They offer one-third of global emissions reduction potential and are already cost-competitive in many markets.

• Solar and wind deliver some of the cheapest electricity globally, while battery prices have dropped low enough to enable parity with fossil fuel-powered vehicles.

• These technologies are already being deployed at scale, especially where grid infrastructure and permitting are in place.

Table 1. Quantitative analysis

The Cost Challenge: LCOE—and What Lies Beyond

Where data is available, we used LCOE (Levelised Cost of Electricity) as a benchmark. We recognized that many climate technologies are not economically viable without structural support.

While capital expenditures can be a strategic lever for growth, reliance on ongoing operational subsidies can be concerning for long-term viability.

• Clean Molecules and tech-led Carbon Management are still early in their cost curves: Hydrogen, sustainable aviation fuel (SAF), and direct air capture (DAC) remain expensive and reliant on government support or structured offtake.

  However, we also note standout examples like Terraform Industries, whose system produces hydrogen at <$2.50/kg (vs. current $5–11/kg) and captures CO₂ at <$250/ton, with potential to drop further through tax credits and cheap solar (TechCrunch).

• Circular technologies and alternative proteins, while essential for long-term sustainability, currently face both high costs and low consumer readiness.

The real challenge is not just capex or LCOE, but system-level costs, which include integration, infrastructure, and operations.

• SAF only raises ticket costs by ~2% per seat-mile, yet still struggles to scale due to complex offtake arrangements.

• EVs have reached price parity, but adoption is held back by “invisible” costs—charger access, grid upgrades, and behavioral inertia.

• Hydrogen and SMRs remain trapped in pilot purgatory, not for lack of innovation—but because of infrastructure bottlenecks and policy fragmentation.

• Circular technologies like chemical recycling or cultivated meat are still far from cost-competitive with mainstream alternatives.

Environmental Impact Over Time

While some technologies (e.g., nuclear) show high theoretical abatement potential, cumulative CO₂ reduction over time tells a different story. We need to evaluate environmental impact not just by total emissions avoided—but also by how fast a technology can deliver, which depends on technological maturity and economic readiness.

Beyond the Numbers: Grid Bottlenecks, NIMBYism, Consumer Friction

Table 2. Qualitative Analysis

Even cost-effective and mature technologies face barriers beyond economics:

• Over 100 GWh of clean energy is stalled in the UK due to grid connection delays.

• Only shovel-ready battery projects with grid and planning approval are receiving financing—others are stuck in development limbo.

• A local energy project in a small UK village could deliver 60 GWh/year, but still face local opposition (a.k.a. BANANA: Build Absolutely Nothing Anywhere Near Anything).

• Heat pumps offer sub-10 year payback, yet uptake is limited due to installation disruption and consumer hesitation— solutions such as “heat pump holiday” provided.

• EV adoption is no longer limited by cost—but by access to infrastructure and regulatory clarity.

  
  

Key drivers and barriers

• Policy support is uneven—some technologies benefit from clear mandates (like EU heat pump targets), while others (like hydrogen clusters) require more coordinated incentives.

• Market demand for climate-aligned solutions is growing, but consumer friction, misinformation, and behavioral resistance still slow adoption.

• Grid infrastructure and permitting remain universal bottlenecks, even for commercially viable technologies.

  
  

So… Where Should We Play?

Based on both data and expert discussions, we’ve identified near-term (2025–2030) priorities that align with a typical five-year fund horizon. The "low-hanging fruit" lies in funding scalable, cost-effective solutions with clear economics—specifically:

• Renewables

• Batteries & Electrification

• Energy Storage (e.g., LAES, CAES)

• Climate Intelligence (AI/ML, data platforms)

This doesn’t mean other emerging technologies is off the table, far from it. It’s a nuanced space, and one chart doesn’t capture the full picture.

Not every solution needs to be perfect. We must embrace the “good enough now” to hit 2030 targets, where software improves mature tech (e.g., optimization, predictive maintenance) and focuses on deployment while hardware drives step-changes in energy and carbon systems.

We also need to challenge the misconception that hardware is too hard to fund—as discussed in Lakestar’s recent deeptech report on the deeptech dilemma. But to do so, we need stronger policy, more patient capital, and de-risking mechanisms that support real innovation.

So coming next in part two, we will discuss our findings on Funding Landscape, including:

• Current funding pain points

• Our proposed Triangle Framework to unlock climate capital

• Strategic considerations for different stakeholders

  
  

The future of climate tech isn’t just about the tech. It’s about matching the right capital to the right technology at the right time.

Let’s collaborate. If you’re a founder building in this space or an investor navigating your next move, we’d love to hear from you.

Special thanks to our team who contributed to this research: Von Chua, Sampriti Dwivedy, Shivangi Kumra, Sherry Yin

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Disclaimer: This content is for informational purposes only and does not constitute investment advice or a recommendation. We do not take responsibility for any decisions or outcomes resulting from how you choose to use or interpret this information.