In 2007, venture capitalists poured billions into clean tech. Solar, wind, biofuels — the thesis was elegant, but the timing was not. When the financial crisis hit, credit evaporated and capital-intensive businesses were hit hard. The first great climate investing wave ended abruptly.
Climate 2.0 — roughly 2015 to 2023 — was more institutional and grounded in policy support. The Paris Agreement provided momentum, dedicated climate-focused investments proliferated and infrastructure capital entered alongside venture funds. Technology costs fell, deployment accelerated and climate investing began to look scalable.
I saw this firsthand from 2021 to 2023, when raising capital for climate strategies was often remarkably straightforward. Today, the environment looks very different. Climate fund closes dropped to 112 in 2025 and just 32 as of early May 20261, reflecting a challenging fundraising environment.
Rising interest rates have reset the cost of capital. The shifting tectonic plates of geopoliticshas elevated energy security above decarbonisation priorities. Government support for the energy transition remains meaningful, but is less predictable and no longer taken for granted resulting in a more demanding investment environment.
This is not the end of climate investing. It is the transition to a more disciplined phase. Climate 3.0 is defined not by less opportunity, but by a different kind of opportunity — and four shifts in particular stand out.
1. AI and the energy abundance imperative
The gargantuan electricity appetite of AI has reframed the debate. Data-centre demand is rising faster than almost any prior forecast, creating a powerful incentive to expand energy supply rapidly.
Climate 2.0 focused largely on replacing existing generation within a relatively stable demand environment. Climate 3.0 is focused on expanding total generation capacity at scale. The U.S. offers the starkest example: after two decades of electricity demand growing at an anaemic 0.6% annually, power demand is now projected to rise nearly four times faster through 2040, driven by AI data centres, electrification and industrial reshoring.2
Renewables remain central, but the mix is broadening to include other forms of reliable, low-carbon power such as nuclear and geothermal energy sources. The investment case is therefore no longer only about decarbonisation, but about ensuring sufficient, reliable energy supply - and that widening comes with real world trade-offs.
An abundance mindset means accepting a broader technology mix and, in some cases, transitional assets that would not have cleared a strict Climate 2.0 screen. The response is to underwrite each asset on its measurable carbon trajectory and its role in the wider system, rather than on its label.
2. Grid stability as the real bottleneck
Generation is no longer the only constraint. Transmission, storage and grid flexibility are emerging as critical bottlenecks as renewable build-out accelerates and existing grid infrastructure ages. In the U.S., roughly 70% of transmission lines are over 25 years old. In Europe, around 40% of grid infrastructure is more than four decades old. These systems were not designed for a decentralised, electrified and renewables-heavy energy mix.3
As a result, much of the compelling capital deployment in Climate 3.0 is shifting towards the less visible parts of the system: grid infrastructure, balancing capacity and storage. These assets may be less prominent than generation, but they are essential to the system and, because they are structurally scarce, may offer attractive risk-adjusted returns.
3. Dual-use and defence-adjacent capital
Technologies once viewed through a clean-tech lens are now attracting capital under defence or dual-use framing - autonomous logistics, satellite monitoring, advanced materials, and distributed energy systems. In a world of great power competition and energy insecurity, the demand base for these technologies has expanded well beyond climate.
For a climate strategy, incorporating dual-use capital widens deal flow beyond climate-labelled companies into businesses serving defence, industrial and public-sector buyers. Revenue becomes less dependent on subsidy cycles, but the guardrails on impact outcomes has to tighten: a measurable environmental contribution must hold even when the primary customer is not a climate buyer.
4. Adaptation: a widening opportunity set
Mitigation dominated Climate 2.0. Adaptation is becoming more central in Climate 3.0.
Water systems, cooling infrastructure, climate-resilient logistics and agricultural adaptation are seeing growing attention, alongside data and analytics for managing physical climate risk. Global natural disasters caused roughly $224 billion in losses in 2025 alone, with more than half uninsured.4
For investors, this expands the opportunity set across physical infrastructure, specialised services and businesses addressing the direct economic impact of climate risk - often with contracted, non-cyclical revenue profiles.
Investing in Climate 3.0
The market is broadening beyond early-stage innovation towards large-scale deployment. Infrastructure strategies accounted for 77% of new climate AUM in 2025 (Source: Sightline Climate5), while venture fundraising has become markedly more constrained. For investors, this creates a broader risk-return palette across infrastructure, buyout, growth and venture. As capital moves towards deployment, underwriting increasingly encompasses execution, permitting and offtake risk alongside technology risk.
In practice, our underwriting focuses on four key questions:
- Is the technology sufficiently proven for the strategy and stage of investment?
- Do returns work without incremental policy support and at higher rates?
- Is there a clear role for private capital in enabling or accelerating a measurable outcome? and
- Is demand durable regardless of the political climate agenda?
From an investment perspective, the current environment is arguably more attractive: capital is more constrained, competition more rational and entry points more disciplined.
I saw much of this reflected in the conversations I had at Climate Week in New York in September: less focus on ambition and commitments, and more on deployment, resilience and the economics of getting things built.
Climate investing is evolving, from a phase defined by ambition to one defined by execution. What comes next is also more likely to endure.
References
1 Climate fund closes: New Private Markets (as of 7 May 2026)
2 US power demand +0.6% CAGR historically BNEF New Energy Outlook 2025
3 U.S. DOE, Oct 2026, Grid Deployment Office, "What does it take to modernize the US electric grid?"
4 MunichRe, Jan 2026, Climate change presses on: Devastating wildfires and intense thunderstorms exacerbate losses for insurers
5 Sightline Climate, 22 April 2026, 2026 Climate Dry Powder & New Funds Report
Maddalena Orlandini
Director, Private Markets and Impact Investing
Montana Capital Partners
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