By Gretchen Haga

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A few years ago, Erin Davis began to sense a downturn in climate investing: “That climate sparkle kind of lost its shimmer,” she said.

Now, rising domestic backlash and policy changes are forcing the ecosystem to react quickly.

According to Robeco’s June 2025 Global Climate Investing Survey, North American investors expect government support for net-zero goals to decline over the next five years, much unlike their counterparts in the Europe and Asia-Pacific markets.

Despite this dip, Davis—Co-Founder and COO of climate capital allocator Enduring Planet—is still seeing companies raising, and none in her own pipeline have folded under new pressures.

However, she has observed investors turning inward, with many protecting existing portfolios rather than making new bets. According to Sightline Climate’s June 2025 climate tech investor pulse check, 24% of surveyed investors who delayed or slowed their investment pace this year followed this trend, signaling “triage mode” with priority given to runway extensions and inside rounds.

Another 60% of global investors are waiting to see how the US agenda unfolds further before making any policy-sensitive decisions.

ADAPTING STRATEGIES

Entrepreneurs like Betty Watson are working quickly to shield their companies from shifting political headwinds. Watson is the Founder and CEO of Venki Energy, a venture using technology solutions instead of policy solutions to remove the biggest barriers to rooftop solar.

After 15 years in clean energy policy—including at the Federal Energy Regulatory Commission, Tesla, SolarCity, and Apple—Watson remembers thinking: “Policy is not only moving way too slowly to help us scale clean energy in the way that we need to, but in some cases, it’s moving in the wrong direction.”

Watson launched Venki Energy with that reality in mind—and she continues to adapt her model to stay protected in an unsettled regulatory climate.

Over half of investors flagged policy uncertainty as their top concern for climate tech in 2025-6 above commercialization shifts, macroeconomic conditions, or lingering overvaluation hangovers.

Many of these investors are now hedging their bets globally.

“In the Global South and in emerging markets between Africa and Latin America and the Caribbean (LAC) where we saw climate innovation happening, that was never going to be reliant on large-scale government subsidy, and so those founders were building in contexts that maybe are more similar to what we’re experiencing now,” said Dan Barker, President and CEO of Halcyon.

“You have to build something that is for the market and something that demonstrates value much more immediately and relies less on subsidy,” he said.

While sourcing domestic and global climate founders for its accelerator, Barker says the Halcyon team hasn’t felt the need to reactively change course.

“I think in any company, we’re going to evaluate how changing political and economic dynamics impact the business model,” he said. “It would be a significant red flag if you see a business model that is solely reliant on federal incentives for their growth trajectory, and so maybe we’ll ask more of those questions.”

This domestic pushback has also prompted the Halcyon team to continue exploring where and how climate capital flows. Now, there may be even greater opportunities to connect founders with regionally based resources across LAC, Africa, and beyond.

ADAPTING STORIES

80% of sustainability executives say their companies are changing the way they talk about climate, and half fear backlash for even mentioning net-zero goals or climate targets.

“Sometimes you say something like ‘clean energy’ or ‘rooftop solar,’ and [you think that] there’s already a set of shared assumptions, like those things are good for carbon reduction, for creating jobs, for helping people save money,” Watson said. “But what we’re seeing right now is that we don’t all have those shared assumptions, so we’re needing to go back and constantly reiterate those arguments.”

Watson, a Halcyon alum, has gone down a new path to strengthen her venture’s use case, emphasizing topics such as resilience amid extreme weather.

American consumers typically average six hours or fewer of power outages per year, Watson explained. However, Texas faced 740 hours of power outages in 2022, Louisiana had 697, and California had 414—a number that is increasing rapidly.

“It’s a really interesting moment to really talk about economics, because it’s not just, ‘Hey, this is clean,’” Watson said. “We really do need a lot of new, inexpensive, efficient energy sources that you can spin up fast.”

This urgency is already reshaping markets. Texas has now become the largest producer of renewable energy in the nation—not because of state incentives, but an economic imperative.

One anecdote that sticks with Davis involves a company pitching its clean energy solution to a remote US Army outpost in Hawaii, where troops relied on diesel-powered generators. Midway through their Zoom call, one of the generators roared to life, drowning out the conversation.

“’Everybody was like, ‘Ah, I can’t hear you!’ and [the entrepreneur] was like, ‘This is the problem I’m solving!’” Davis recalled.

“For the Army, the diesel generator wakes them up at night,” she continued. “So, you’re not just solving a climate issue, but you’re solving other problems, and it just happens to be with solar.”

“There are pragmatic solutions that are better than what we currently have and also are climate-friendly—and now it’s time to position these products as more cost-saving, or more efficient, or whatever it is to continue the important work that these companies are doing,” Davis said.

LONG-TERM SOLUTIONS

Rethinking the Climate Capital Stack

This moment also amplifies existing gaps in the climate capital stack.

For climate ventures outside of software, revenue pathways often open quickly after the R&D stage—but reaching that point remains a major hurdle, Barker says. This is where under-utilized, purpose-suited vehicles such as revenue-based financing, working capital, loans, and others can be leveraged.

One group providing working capital to climate entrepreneurs is Davis’s Enduring Planet, which offers short-term loans to early-stage ventures facing a common cash flow challenge: they secure government or commercial contracts, but need upfront capital to deliver.

This stage is particularly critical, Davis said, pointing to disconcerting research: to achieve net zero by 2050, nearly half of the emissions cuts must come from technologies that haven’t yet reached commercial scale.

Rethinking the Role of Government Aid

Recent losses in government funding have also pushed climate leaders to reimagine their approach. While Barker believes local and international governments still have a role to play, he sees this moment as a chance to build something bigger:

“We’ve really under-invested in homegrown, sustainable solutions that generate both social and economic value for our local ecosystem,” he said. “How do we focus on developing solutions that were built for the environments in which they exist—which means both local cultural contexts as well as the local economic and cost structures—and figure out what those models are and bring them to scale to solve these gaps that aid was putting a band-aid on?” 

A MOMENT OF MATURATION

While she laments any progress lost, Watson is optimistic that the ecosystem can draw key learnings from this difficult moment and emerge stronger and more resilient.

“I think that this is maybe an opportunity, where it’s that pressure that creates the diamond,” she said. “[We can] go back and say, ‘Okay, how else can we be scrappy? How else can we reduce costs? How can we be more aware of all of the jobs that we’re really doing for customers? And how can we use vocabulary that’s more inclusive, that isn’t just for people who think about things the way that we do?”

Barker believes this period can also bring about new North Star; instead of focusing on how the work is being done, the climate ecosystem can align around the direct impact being made.

“We focus so much on science pieces and the long-term versus how these things impact people’s lives today. When we think about who you’re maintaining the climate for, it’s for people, and they have to feel like they’re benefiting from that in some way.” he said. “The last 10 to 15 years, the conversation has been far too abstract.”

Ultimately, the heart of the climate mission has persisted despite recent tests, Barker emphasized.

Watson agrees: “This is certainly not the end of the climate movement. This is certainly not the end of progress.”

“It’s just an uncomfortable moment that we all have to go through to get in the best shape of our lives message-wise and business model-wise, and then be ready to rock it forward again when we can.”

Halcyon is committed to supporting innovative founders and ventures through its Climate vertical focus, which empowers entrepreneurs across the United States and the globe tackling the world’s greatest climate challenges. In 2025, four out of seven of Halcyon’s programs fall within this Climate vertical, including the recently-completed DMV Climate Innovation Fellowship, the Climate Resilience and Food Security in Africa Fellowship, the Latin America and the Caribbean (LAC) Climate Fellowship, and the residential Climate Fellowship. To explore past Halcyon fellows and ventures in the Climate space, visit this link.