The climate tech investment landscape is undergoing a major recalibration. After a period of rapid growth and inflated valuations, investors and startups are now navigating a complex environment shaped by tariffs, shifting incentives, and economic clouds.

In this episode of Open Circuit, we examine the latest data and investor sentiment trends with Kim Zou, CEO of Sightline Climate. 

Sightline’s data shows climate tech investment declined 19% in the first half of 2025, reflecting both macroeconomic pressures and sector-specific challenges. 

The firm’s recent investor survey reveals how the sector is grappling with extreme policy whiplash, with tariffs leading the list of worries. The ongoing reconciliation bill debate adds another layer of uncertainty around IRA tax credits, leading investors to search for “policy proof” business models. 

Startups are also facing a growing funding gap. Companies developing first-of-a-kind projects face a particular hurdle: they need infrastructure-scale capital but still carry venture-level risk, creating a mismatch that "most private investors aren't really willing to accept," said Zou.

That gap — what Zou calls "the missing middle within the missing middle" — is heavily weighing on companies ready to build their first commercial facilities.

Despite the headwinds, new opportunities are emerging: grid-enhancing technologies had their best quarter ever, driven by the growing power demands of AI; companies focused on cost savings rather than green premiums are attracting more attention; and innovative financing structures are evolving beyond traditional equity models.

Acquisitions doubled in the first half of the year, driven by bargain-hunting “where corporates and strategics are buying up companies at more opportunistic costs,” said Zou.

We also explore how U.S. investors and companies are increasingly looking to European markets, the practical challenges of scaling hardware-intensive technologies, and why some sectors are better positioned to navigate the current environment than others.

Open Circuit is brought to you by Natural Power. Natural Power specializes in renewable energy consulting and engineering, supporting wind, solar, and battery storage projects from concept through financing. Discover how we're creating a world powered by renewable energy at naturalpower.com.

Open Circuit is brought to you by Sungrow, the trusted provider of PV inverters and battery storage. With over 605 GW installed worldwide and a BloombergNEF ranking of “most bankable” in power conversion and energy storage, Sungrow provides solar tech you can count on. Learn more at sungrowpower.com. 

Credits: Co-hosted by Stephen Lacey, Jigar Shah, and Katherine Hamilton. Produced and edited by Stephen Lacey. Original music and engineering by Sean Marquand.