Tourist investors are ditching climate tech for AI

Generalist investors' rush into buzzier artificial intelligence has added to funding woes for climate-tech startups at just about the worst time for an industry racing to combat the effects of climate change.

- Michelle Ma

Globally, climate-tech companies raised roughly $10.3 billion (about R181 billion) in equity across public and private markets in the third quarter, putting full-year funding on track to fall about 50% this year, data from BloombergNEF show.

Meanwhile, capital for AI has climbed, with startups in that space raising more than $21 billion in the quarter, Pitchbook estimates.

"AI has sucked all the oxygen out of the room," said Matt Eggers, a managing director at Prelude Ventures, which invests in climate startups. "It's not like anything we've seen since perhaps mobile in 2010."

It's not just competition from AI that's impacting climate-tech funding, which began inching lower even before the generative AI frenzy in 2023 amid high interest rates, elevated inflation and geopolitical upheaval.

Still, it's a contributing factor, and a slowdown in funding for climate tech at such a critical time for the nascent sector could have irreversible consequences.