The Climate Tech Capital Stack from Sightline Climate

Reaching net zero will require rapidly scaling existing solutions, while helping to seed the nascent technologies that will be vital to the transition. According to the International Energy Agency, 35% of the emissions reductions needed by 2050 will come from technologies not yet at commercial scale¹.

The growing adoption of first-generation climate tech, from solar, wind and batteries to EVs, shows what is possible. The next generation of climate tech will be critical to help decarbonise energy, mobility, industry, food and land use, and the built environment. Early-stage financing will play a vital role in supporting pioneers to demonstrate technology feasibility, to scale and accelerate commercial adoption, and to grow internationally.

Catalysing these innovations, and the new and evolving sectors and ecosystems they depend on, won’t be a linear process. It will require both expertise and agility to adapt and seize opportunities as they emerge. HSBC Innovation Banking has sponsored a report by Sightline Climate that explores the latest data and trends from 2024 on the different types of capital available in the climate tech landscape.

The report, titled The Climate Capital Stack and New Funds, has found a 20% year-on-year increase in amount of capital for climate tech investment despite a challenging backdrop of rising interest rates and increased scrutiny on valuations. And the findings suggest an industry showing signs of maturity, with a diverse and more complex capital stack for stakeholders to navigate and leverage.

• The amount of investable capital reached $86bn with funds deploying more slowly and with more discipline than in previous years.
• Total AUM raised for climate tech since 2021 hit $164bn in 2024, an increase of 20% in new AUM compared to last year.
• The majority of the $47bn new AUM closed in 2024 were in growth and infrastructure funds.
• Infrastructure funds now make up nearly 60% of the dry powder (build-up of cash reserves) in climate tech, suggesting investors are looking to large-scale, lower-risk projects in mature climate sectors, such as wind, solar, and energy storage that aren’t dependent on new technologies.
• 2024 saw an 18% reduction compared to 2023 in the number of investors participating in a climate tech deal. Despite the overall reduction, there was a significant increase in the number of mid-sized funds ($125-500m), up 23% on 2023.
• European climate tech funds also remained resilient, with carbon taxes and government funding bolstering the case for investment.