Perspectives Report #1: Climate Tech Is Becoming Industrial Tech
We asked leading climate VCs where they’re placing their bets and why. Across energy, manufacturing, AI, infrastructure and adaptation, we saw a bigger shift: climate is increasingly becoming a consequence of building better industrial systems.
For a long time, climate tech was defined primarily by the problem it was trying to solve.
Renewable energy. Carbon removal. Alternative fuels. Electrification.
But look at where climate investors are placing bets today:
Smart transformers. Industrial AI. Weather forecasting. Robotics for ship hulls. Building retrofits. New computing architectures. Infrastructure inspection.
These don't necessarily sound like traditional climate tech companies.
We think that's precisely what makes them interesting.
Climate tech is increasingly becoming industrial tech.
The climate opportunity is moving into the systems we already use
The energy transition is creating enormous demand for new infrastructure. But much of the opportunity isn't simply in producing more clean energy. It's in making the physical systems around it work better.
Zero Carbon Capital highlights the grid as a fundamental bottleneck. Electrification, renewables, EVs, heat pumps and AI are all increasing pressure on infrastructure designed for a very different energy system. Their portfolio company Ionate tackles the physical layer with intelligent transformers that provide real-time control over power flows.
SET Ventures looks at the same market from another angle. Grid operators need new technology, but they cannot take unnecessary risks with critical infrastructure. The companies that succeed need to understand not only the technology, but also procurement, risk appetite and how utilities actually operate.
This is an important distinction.
A huge market doesn't automatically create a huge startup opportunity. You still need to understand how customers buy.
Decarbonization works better when the economics already work
We see the same pattern in industry.
AENU points to cement, where reducing emissions isn't separate from the industry's economic pressures. Producers are dealing with energy costs, tight margins and quality requirements at the same time as they face pressure to decarbonize.
Their portfolio company Alcemy uses AI to improve production control, helping manufacturers reduce costs and improve consistency while enabling lower-carbon cement production.
Planet A makes a similar argument around industrial AI. Digital twins can optimize throughput, energy consumption and quality, but the technology only moves beyond pilot stage when the payoff is tangible to the customer's P&L.
That last point matters to us.
The strongest climate technologies don't create a separate economic case for decarbonization. They make decarbonization part of the economic case.
Some of the biggest opportunities are hiding in plain sight
Perhaps the most interesting example comes from adaptation.
Third Sphere argues that some of the largest opportunities sit in old infrastructure that has received relatively little attention. Their focus includes using robotics and AI for inspection, maintenance, repair and upgrades, often delivering a better, faster and cheaper solution regardless of whether the customer is motivated by climate.
Its portfolio company Pallon uses AI to automate inspections of water and sewer infrastructure, lowering inspection costs while reducing the risk of catastrophic failures.
It's not the stereotypical image of climate tech.
The Endgame view: the definition of climate tech is becoming less useful
The best climate companies increasingly don't need a “climate customer.”
They need an industrial customer with an expensive problem.
A grid operator needs more capacity and reliability. A cement producer needs lower energy costs and consistent quality. A ship operator wants to reduce fuel consumption. A building owner wants cheaper retrofits. A manufacturer wants more throughput.
Solve those problems better than the incumbent and the climate impact can scale with the business.
This was also the premise behind our own contribution to the report. In textiles, sustainable alternatives won't reach mass adoption simply because they're sustainable. Global brands need materials that can integrate with existing manufacturing and compete on economics and performance too.
We think the same principle applies far beyond textiles.
The next generation of climate companies won't all sell sustainability. They'll sell productivity, reliability, resilience, lower costs, better materials and better infrastructure.
And they will happen to remove a lot of emissions along the way.
We believe calling them “climate tech” is already beside the point.
They'll simply be better technology.
Inside the Minds of Climate VCs: Download the full report
