Who’s Funding Climate Innovation?
How Venture Capital and Philanthropy Can Seize the Moment
The funding that served as a launchpad for the clean energy boom? It’s being dismantled.
With the EPA’s $20 billion funding freeze, ‘green bank’ nonprofits are struggling. Rural businesses and farmers have been left without critical clean energy funding. The result? Uncertainty, stalled projects, and missed opportunities.
As public dollars shrink, there’s an opportunity for venture capital (VC) and philanthropy to step up to fill the gap—funding the next generation of climate innovation. This interplay between risk-tolerant philanthropy and high-growth venture capital has already led to some of the most significant advancements in climate tech today.
VC and Philanthropy: A Powerful Partnership for Climate Tech
Clean energy and climate tech require big capital and long-term commitment—something traditional investors often hesitate to provide. That’s where venture capital and philanthropy play a critical role. Venture capital fuels high-risk, high-reward startups, bringing groundbreaking climate technologies to market. Philanthropy de-risks early-stage investments, making them attractive for private capital. Together, they create a financial ecosystem that accelerates clean energy adoption.
So how does this partnership work in practice? Let’s start with venture capital’s role.
How VC Funds Climate Innovation
Venture capital is essential for scaling climate solutions that might otherwise struggle to secure funding.
Funds Early-Stage Breakthroughs – Think green hydrogen, geothermal and long-duration battery storage.
Bridges the “Valley of Death” – The gap between research and commercialization is where many startups fail.
Drives Market Disruption – VC-backed startups challenge fossil fuel incumbents and introduce game-changing technologies.
Venture capital provides essential funding for these solutions through four basic stages of investment. Pre-Seed & Seed Stage funds research and technology development (e.g., lab-scale carbon capture). Series A & B supports product commercialization and market entry. Series C & Growth Stage expands operations, manufacturing, and market penetration. And an Exit Strategy ensures investors realize returns through Initial Public Offerings (IPOs), acquisitions, or secondary sales.
Examples: Bill Gates' Breakthrough Energy Ventures (BEV) backs startups like Form Energy, which is developing multi-day battery storage to enable grid reliability. And Indigo Ag uses AI and microbial seed treatments to enhance soil carbon sequestration and promote regenerative agriculture.
How Philanthropy Attracts Private Investment
Philanthropy plays a pivotal role in early-stage funding, often using:
Grants – No repayment required, used for R&D or pilot projects.
Low-Interest Loans – Offered at below-market rates to help startups scale.
Loan Guarantees & First-Loss Capital – Reducing investment risk for private investors.
By absorbing early risks, philanthropic capital makes climate tech investments more viable for venture firms, institutional investors, and corporate partners, giving VCs confidence to invest.
Example: The Prime Coalition mobilizes philanthropic dollars to de-risk the most promising climate tech startups—allowing private capital to follow.
The Path Forward: Three Key Priorities and Impacts
To scale climate innovation effectively, VCs, philanthropic organizations, policymakers, and industry leaders must align their efforts. Here are three ways to seize opportunities and the potential impacts:
Strengthen Public-Private Partnerships: When governments, investors, and nonprofits co-invest in critical infrastructure projects (e.g., hydrogen hubs, offshore wind) with matching grants and tax credits, they encourage further private investment, which expands capital access, makes projects with longer-horizons possible, and accelerates infrastructure deployment.
Expand Blended Finance Models: Combining philanthropic dollars with VC investment lowers risk, and unlocks new capital pools which creates a more sustainable investment model. When philanthropy funds early-stage R&D, venture capital can focus on scaling and commercialization.
Invest in Workforce Development: A clean energy transition needs skilled labor—vocational training and tax incentives for hiring in climate tech and clean energy industries will ensure economic benefits extend beyond investors.
Navigating the Future of Climate Investment
The climate tech funding landscape is shifting. Whether you're a VC firm seeking policy insights or a philanthropic organization looking to maximize impact, understanding the evolving capital ecosystem is critical.
Viewpoint PA helps investors, philanthropies, and clean energy leaders navigate this shifting landscape. If you need strategic insights on how policy changes could impact your clean energy investments, let’s talk.