What does the climate-tech space need the most? Patient Capital. Avoiding MECO. When it’s lift-off time and not just while the plane is warming up on the runway. A VC world expert explains more
There is a lot of talk, fears and numbers around AI’s termite-effect on the environment. And it is the same world where AI is also being loaded in the sprays meant to kill the planet-eaters. Turn to CTVC’s H1 2026 Climate Tech Investment & Innovation report and we see Climate tech VC hit $26.1 billion in the first half, up 55 per cent year-on-year, with winners like Low-carbon data centres (they made up 34 per cent of the half’s investment). There was also a lot of hope coming from the fields of Energy IPOs and SPACs as well as Series C funding (a typically lower count category that had its biggest half on record, up nearly fourfold to $10.5 billion. Series A was up 55 per cent to $4.5billion). This report also indicated that built environment shot up more than 800 per cent, driven by data centres, overtaking Energy as the largest vertical. Grid tech and Climate Management also had an impressive first half (while Transportation went up 52 per cent and carbon equity funding collapsed)
According to Dealroom data, about $10 billion were raised in Q2 2026 in VC funding (the 2025 year number here was $39 billion). If we look at unicorns in this space, (with $1 billion+ in valuation or exit) there are about 305 of these while the combined enterprise value of VC-backed climate tech start-ups founded since 1990 is around $3 trillion.
So clearly there is a lot of flow and fizz when it comes to climate-tech money. But this is a piggy bank that needs to piggy-back on a lot of factors – bold founders, steady capital and the right wheels when they matter the most. For India, where data-centre capacity is expected to grow from around 1.4 GW in 2024 to nearly 9–10 GW by 2030, spurring new burdens on grid capacity, reliance on carbon-intensive power and freshwater consumption – there is a big appetite for clean power, efficient infrastructure, responsible supply chains and transparent measurement of both emissions and the climate benefits AI.
Vasudha Madhavan, Founder & CEO, Ostara Advisors calibrates a lot of questions in this space around greenwashing, energy security, geo-politics, China’s headstart in green tech, the irony of direct air capture, clean hydrogen production and the good old puzzle of whether AI is climate’s friend or foe.
What is your approach to climate-tech investments?
Our approach is about founders, technology and viability. Deep tech is a long journey, often taking years to move from technical validation to commercial scale. Second, genuinely differentiated technology. The technology must solve a real problem and create a meaningful advantage that can endure as the market scales. Ultimately, we look for businesses that have the potential to build a sustainable and scalable advantage, not simply raise successive rounds of capital. We examine the baseline being displaced, whether emissions are genuinely avoided rather than simply shifted elsewhere, and whether the lifecycle impact stands up to scrutiny.
We also work closely with founders on financial and growth strategy, positioning, investor mapping and diligence readiness because, in deep tech, translating technical proof into a compelling and investable commercial story is often just as important as the innovation itself.
How serious are current concerns and debates around greenwashing and China’s head-start in green tech?
The concern is real, but greater scrutiny is ultimately healthy for climate tech. From 27 September 2026, the EU’s Empowering Consumers for the Green Transition Directive comes into application, increasing the pressure on companies to substantiate environmental claims. That should favour businesses whose climate impact is a measurable feature of the product rather than simply a marketing message.
As to China’s head start, China’s leadership in clean technology is undeniable. The IEA estimates that China accounts for around 85 per cent of global solar supply-chain capacity and 80% of lithium-ion battery supply-chain capacity, while also processing over 70 per cent or more of the world’s lithium, cobalt, graphite and rare earths. Its dominance is particularly significant in rare earths, accounting for around 90 per cent of rare-earth refining and nearly 95 per cent of global permanent magnet production. The opportunity for India is therefore not necessarily to compete head-on in commodity manufacturing, but to build around structural advantages, including local feedstocks, domestic demand, circular economy solutions and technologies such as rare-earth-free motors that reduce dependence on concentrated supply chains.
What about the irony of direct air capture?
The irony around DAC is understandable: removing carbon through an energy-intensive process is expensive and difficult today. We believe carbon removal will eventually be necessary for genuinely unavoidable emissions, but the sector still needs to demonstrate a credible path to dramatically lower costs and large-scale deployment.
Is clean hydrogen production happening well?
The hydrogen market is becoming more realistic, which is a positive development. Global low-emissions hydrogen production reached almost 1 million tonnes in 2025, but still represents only around one per cent of total global hydrogen production, while project pipelines have been affected by high costs and uncertain demand. The strongest near-term use cases appear to be in refining, chemicals and industry, where electrification is more difficult and there is already an established hydrogen demand base.
What about electric vehicle solutions also showing dependence on electricity etc.?
It is fair to say that an EV is only as clean as the electricity used to charge it. But that is also a fundamental advantage over an internal-combustion vehicle: an EV gets cleaner as the electricity grid gets cleaner. Globally, EV sales exceeded 20 million vehicles in 2025, representing one in every four new cars sold, while the continued growth of renewable electricity strengthens the long-term emissions case for electrification. For India, the case is particularly compelling in high-utilisation applications such as fleets, corporate mobility and commercial vehicles, where the economics can already work alongside the environmental benefits.
Give climate-tech companies the time their technology requires, while holding them accountable to clear milestones
Vasudha Madhavan, Founder & CEO, Ostara Advisors
What should be the right market approach here?
The right approach is therefore patient but rigorous: give climate-tech companies the time their technology requires, while holding them accountable to clear milestones and a credible path to building a durable, financially viable business. With climate-tech, the market metrics should be about technical milestones, commercial validation, cost competitiveness, capital efficiency and the path to scale.
Can energy security and the recent geo-politically driven challenges be an unexpected driver for more momentum on climate-tech efforts?
Energy security is increasingly becoming one of the strongest commercial drivers of climate tech, particularly as geopolitical disruptions have highlighted the risks of dependence on imported fuels and concentrated supply chains. For India, this is especially relevant given its heavy dependence on imported crude oil and LPG. Technologies such as compressed biogas can reduce dependence on imported natural gas and LPG, while biofuels and electrification can reduce exposure to crude oil imports.
At the same time, China’s dominance of rare-earth supply chains has strengthened the case for technologies such as rare-earth-free motors, which can reduce dependence on strategically concentrated materials altogether. The opportunity is therefore much bigger than climate action alone: climate technologies can strengthen energy security, economic sovereignty and technological sovereignty by reducing import dependence, building domestic capabilities and making the country more resilient to geopolitical shocks.The important challenge, however, is ensuring that we do not simply replace dependence on oil with dependence on critical minerals, which is why material substitution, recycling and technologies that reduce critical-mineral intensity will become increasingly important.
Any of your favourite examples in the climate-tech area/from your own portfolio?
Honestly, it is difficult to pick a favourite because we become deeply invested in every company we work with and every founder we advise. We are advising companies across bio-energy, sustainable packaging, EVs and other areas.
One of our favourite examples is Routematic, where we were the exclusive financial advisor on its $40 million Series C raise in 2025, backed by Fullerton Carbon Action Fund and Shift4Good. What makes Routematic particularly interesting is that it demonstrates what we believe the best climate-tech businesses look like: the customer does not have to make a trade-off between economics and sustainability. Routematic uses AI to optimise corporate transportation, reducing unnecessary trips and dry runs while making employee mobility more efficient and reliable at scale. Today, it serves over 300 corporates across 23 cities and enables around 5 million employee trips a month. Its AI-driven optimisation and carpooling have helped reduce the number of trips by 69 per cent, carbon emissions by 59 per cent, and dry runs by 40 per cent, while the company is targeting an increase in EV penetration to 60 per cent by FY29. For us, Routematic captures the core climate-tech thesis perfectly.
How?
The strongest solutions are not those where customers pay extra to be green, but those where technology makes the underlying business fundamentally better, more efficient and more economical, with decarbonisation as a powerful outcome. That philosophy runs through much of the work we do across mobility, energy and the circular economy.
What does the climate-tech industry lack? What is your wish-list here, if any?
The biggest gap is patient capital at the commercialisation stage. There is growing interest in climate and deep tech at the early stage, but far fewer investors are willing to support companies through the difficult transition from proven technology to commercial scale, when capital requirements increase and the journey can take longer than a typical venture timeline. We need more investors who understand that deep-tech value creation takes time and are prepared to stay with companies through that journey. Equally important is better financial reporting and greater transparency from companies. Climate-tech businesses, particularly hardware and industrial companies, need to communicate their economics, capital requirements, path to scale and key milestones much more clearly. Better reporting helps investors distinguish genuine progress from promising narratives and gives companies a stronger foundation for raising growth capital.
Image courtesy Jyotirmay Datta Chaudhuri at Pexels
