Unlocking 9% Higher Returns: Climate Tech Investment Opportunities for Early-Stage Investors in Germany

Investments in Climate Tech offer early-stage investors in Germany 9% higher returns than other technology sectors. This is due to a combination of growing market demand, regulatory support, and technological advancements. According to a McKinsey report, climate tech startups are attracting record levels of venture capital globally, with Europe—and Germany in particular—emerging as a hub for innovation and investment.

Key Points:

• Growth Market: Climate Tech is the largest segment in the German venture capital market. Investments have doubled over the past five years, reflecting a broader global trend where climate tech investment reached $70 billion in 2022, up from $28 billion in 2020 (PwC).
• Technological Developments: Solutions such as CO₂ capture, renewable energy, and battery storage are driving the market forward. The rapid pace of innovation is lowering costs and expanding the addressable market.
• Government Support: Programs like the DeepTech & Climate Fund (DTCF) and EU initiatives reduce investment risks. The German government’s €100 billion Climate and Transformation Fund and the EU’s Innovation Fund are among the largest public funding mechanisms for climate innovation worldwide.

Your company can benefit directly through partnerships, corporate venture capital, and ESG strategies. Now is the optimal time to take action and seize these opportunities, as the window for first-mover advantage is rapidly closing.

2024 Climate Tech Startups to Watch

Key Drivers for Higher Returns in Early-Stage Climate Tech Investments

The above-average 9% returns in the climate tech sector can be traced back to a mix of specific market factors. These elements create unique investment opportunities, supported by real-world examples and regulatory measures. Here, we illustrate how these factors contribute to attractive returns.

Innovation and First-Mover Advantages

Companies in the climate tech sector are developing solutions to urgent problems and benefit from their innovation lead. Unlike earlier cleantech approaches, these companies focus on measurable climate impact and often less capital-intensive business models. According to BCG, climate tech startups that demonstrate clear impact metrics and scalability attract higher valuations and more investor interest.

Some examples illustrate this approach:

• Anodyne Chemistries closed a Seed+ funding round of 6.5 million CAD on June 5, 2025. The company is developing an innovative, nature-inspired technology platform for sustainable, non-toxic raw materials in the chemical industry. By using bioelectrical manufacturing processes that utilize CO₂ directly at industrial sites, Anodyne offers an alternative to traditional petrochemistry and fermentation. The technology enables safer, cost-efficient, and supply-chain-compatible chemicals with significantly reduced carbon intensity. The funding will be used, among other things, to build a pilot plant in Vancouver and expand product lines.
• New Iridium secured a Seed funding round of 2.65 million USD on June 11, 2025. The company focuses on developing a sustainable chemistry platform that provides eco-friendly solutions for industrial applications. This funding aims to accelerate the commercialization and scaling of their technologies.
• Jolt Electrodes, a Barcelona-based company, raised 6 million EUR in a Series A round in June 2023. Jolt develops innovative electrodes for green hydrogen production, aiming to reduce the cost of green hydrogen and thus save megatonnes of CO₂ emissions. The investment supports further development of their technology to advance the energy transition.

These examples show how technological innovation and the use of AI give companies a decisive edge, which directly translates into higher returns. According to the International Energy Agency, digitalization and AI are accelerating the deployment and efficiency of climate solutions, further enhancing their investment appeal.

Rising Demand for Climate Solutions

The global climate tech market is growing rapidly: from $37.51 billion in 2025, it is expected to rise to $220.30 billion by 2035 – representing an annual growth rate of 24.6% (Future Market Insights).

"Companies are increasingly aligning their business strategies with net-zero emission goals, leading to significant investments in Climate Tech solutions."

This is how Sudip Saha, Managing Director at Future Market Insights, describes the market dynamics.

Some companies benefiting from this trend:

• Verkor secured €1.3 billion in funding to build its first battery cell gigafactory in Dunkirk, France. This factory, set to begin operations in 2025, will produce low-carbon, high-performance batteries and contribute to Europe’s industrial sovereignty in e-mobility (Reuters).
• Infarm raised over $600 million to advance modular urban agriculture, reflecting the growing demand for sustainable food systems (TechCrunch).

By 2030, it is expected that around 30% of all new industrial projects will incorporate climate-friendly technologies (IEA Net Zero by 2050). These structural changes offer stable growth opportunities and contribute to high returns.

Government Funding and Regulatory Incentives

Regulatory support, especially in Germany, significantly enhances the attractiveness of climate tech investments. The DeepTech & Climate Fund (DTCF) plans to invest up to €1 billion. In addition, instruments such as the EU Emissions Trading System and Carbon Contracts for Difference provide direct financial incentives that reduce investment risks. The EU’s Innovation Fund is one of the world’s largest funding programs for the demonstration of innovative low-carbon technologies.

"We need to have pressure from politicians, as well as demand from the corporate level and from consumers. But if a climate tech company can't make money, then it's not going to scale and it's not going to have an impact."

emphasizes Yair Reem, Partner at Extantia Capital.

Despite political uncertainties, the economic costs of climate change and the declining costs of renewable technologies remain strong drivers for the sector (LSE Grantham Institute).

The combination of technological innovation, growing market demand, and government support explains why early-stage investors in climate tech can achieve such attractive returns.

How Companies Can Benefit from Partnerships

Partnerships offer companies not only access to innovation but also strategic advantages that go far beyond financial returns. Especially in climate tech, such collaborations can be crucial for opening up new markets and promoting sustainable technologies. A thorough analysis of success factors is key, particularly when working with early-stage startups. Research by Harvard Business Review shows that corporate partnerships and venture capital are critical accelerators for scaling climate solutions.

Corporate Venture Capital and Direct Investments

Corporate Venture Capital (CVC) enables established companies to invest directly in promising climate tech startups. This brings not only financial benefits but also strategic insights and synergies.

"We look for a diverse and capable team with a deep understanding of the problem they are trying to solve",
emphasizes Yair Reem, Partner at Extantia Capital.

A key aspect of such investments is rigorous due diligence. This includes evaluating the business model as well as the potential for CO₂ emissions reduction. Technologies with short impact cycles that deliver fast, measurable results are especially in focus. One example is the startup Satelligence, which combines remote sensing technology with local data to make deforestation in supply chains visible (Satelligence).

Legal and economic safeguards are equally important. Thorough checks ensure the company has no legal conflicts and that its intellectual property is protected. Furthermore, climate tech companies should be economically structured so they do not rely on so-called “green premiums” to be successful (McKinsey).

In addition to direct investments, pilot projects offer a practical way to test technologies and minimize risks.

Partnerships and Pilot Projects

Strategic partnerships allow companies to test and further develop climate tech solutions in real-world scenarios. Pilot projects play a central role here, as they validate technological approaches while reducing risks. Carlos Esteban, Partner at Faber, highlights:

"If the startup's technology or solution does not have a clear and substantial positive impact on addressing climate-related challenges, it would be a major concern"
.

When evaluating such projects, not only technological advantages should be considered, but also economic drivers such as cost savings, revenue potential, or regulatory requirements. Partnerships are particularly successful when startups offer a clear competitive advantage, for example through innovative software-based solutions.

Open Innovation Programs

Open innovation programs provide companies with a systematic way to engage with the climate tech ecosystem—whether as investors or development partners. In Germany, there are special opportunities here, as about one-third of all German startups are active in the green economy (Startupdetector).

Planet-A Ventures describes its approach as follows:

"The company focuses on pitches involving climate mitigation, waste prevention, resource efficiency & biodiversity protection"
.

Companies should tailor their programs to attract the most promising startups. Particularly relevant sectors include green mobility, renewable energy, circular economy, climate fintech, industrial decarbonization, sustainable construction, as well as agriculture and food.

A strategic approach could involve collaborating with venture builders to jointly develop and scale innovative business models. At the same time, partnerships with ecosystem developers can help improve policy frameworks for startups. Focusing on meaningful impact metrics also attracts investors and socially conscious customers. Finally, such programs should prioritize technologies that support Germany’s climate goals—such as the production of green steel or cement.

Integrating ESG Innovation into Corporate Strategy

Embedding ESG principles into corporate strategy is now a key lever for business success. 72% of investors consider the management of sustainability risks and opportunities in their investment decisions (MSCI). Companies that proactively integrate ESG initiatives into their strategy not only meet regulatory requirements but also unlock new business areas in climate tech and can boost their returns—as current trends show.

A good starting point is clearly defined ESG measures. These include, for example, setting a net-zero target, promoting diversity and inclusion, assessing supply chains for risks, or linking ESG goals to executive compensation. Below are concrete approaches for companies to implement ESG innovation.

Decarbonization and Net-Zero Plans

Companies should align their decarbonization strategies with German climate targets and take concrete action. The results speak for themselves: In 2023, Germany’s greenhouse gas emissions fell by 10%, and 52% of electricity consumption came from renewable energy (Clean Energy Wire).

Three key areas of action are recommended: expanding renewable energy in operations and supply chains, implementing energy efficiency measures to reduce consumption, and researching technologies for carbon capture and negative emissions.

Germany’s expansion targets provide clear guidance: 115 GW onshore wind capacity by 2030, at least 30 GW offshore wind, and 215 GW solar capacity (Clean Energy Wire).

Life Cycle Assessments (LCA)

Life cycle assessments provide a scientifically sound method for evaluating a product’s environmental impact throughout its entire life cycle. They not only create transparency but also enable savings, for example through optimization of raw materials, energy use, and waste management. The US EPA highlights LCA as a cornerstone for sustainable product development.

A striking example comes from the biotech company C-Biotech. It commissioned an LCA for its C-Hemp sandwich insulation panel according to the ISO 14067 standard. The analysis showed 67.3 kg CO₂e per panel, with biogenic CO₂ uptake considered, resulting in -22.7 kg CO₂e. The panel thus achieved -7.6 kg CO₂e/m², while comparable products range from 10 to 60 kg CO₂e/m².

More than 80% of a product’s environmental impact is determined in the design phase (Ellen MacArthur Foundation). Companies can directly incorporate these insights into their R&D to develop low-emission products.

Particular focus is on Scope 3, which accounts for 70–90% of total emissions for many companies (CDP). LCAs help identify and reduce these often-overlooked emission sources. At the same time, they make it easier to comply with stricter regulatory requirements.

Regulatory Compliance and Reporting

Reporting requirements are becoming ever stricter—recommendations are turning into binding obligations. The Corporate Sustainability Reporting Directive (CSRD) will increase the number of reporting companies in Germany from 550 to 15,000. Jozef Síkela, Czech Minister for Industry and Trade, underscores the importance of this development:

“The new rules will hold companies more accountable for their impact on society and lead them toward an economy that benefits people and the environment. Data on ecological and social footprints will be publicly available to all interested parties.”

For successful CSRD implementation, companies should proceed systematically: A gap analysis helps assess the current state of reporting. Based on this, clear sustainability goals can be defined that meet or exceed CSRD requirements. Modernizing data collection is also crucial for accurately tracking key metrics such as emissions, energy use, and waste.

Equally important is involving stakeholders along the entire value chain. Teams should be familiar with CSRD and ESRS reporting standards to efficiently meet requirements. ESG reporting software can be a major asset: The global market for such solutions will grow from $0.7 billion in 2022 to around $1.5 billion (MarketsandMarkets). By consistently complying with regulatory requirements, companies strengthen their position and competitiveness in the climate tech sector.

Tools and Frameworks to Meet Investor Expectations

To convince climate tech investors, companies must make their sustainability performance measurable and transparent. More than 10,000 companies worldwide already use established frameworks to earn investor trust and secure their competitiveness. Here, we look at how regulatory instruments, science-based targets, and assessment methods help meet investor expectations.

Regulatory Tools: CSRD and EU Taxonomy

The EU Taxonomy defines which economic activities are compatible with a climate-neutral path by 2050. For climate tech investors, these criteria are increasingly decisive in portfolio selection.

In the EU, 49,000 companies will soon be subject to the European Sustainability Reporting Standards (ESRS) under CSRD—depending on the outcome of the omnibus process. While implementation will incur one-off costs of €748 million and annual costs of €1.4 billion, investors benefit from the ESG data provided, which forms a solid basis for decision-making (European Parliament).

To simplify reporting obligations, the EU Commission plans to reduce requirements by 25% for large companies and 35% for SMEs with the omnibus proposal. Practical support is provided by the EU Taxonomy Navigator with tools such as the EU Taxonomy Compass and Calculator.

Science-Based Targets Initiative (SBTi)

The SBTi provides a science-based framework for setting emissions reduction targets that enjoys high trust among climate tech investors. Over 7,000 companies worldwide have already set SBTi targets, including 1,666 companies with net-zero goals. Notably, in 2023, participation by small and medium-sized enterprises rose by 113% compared to 2022 (SBTi).

Mads Nipper, CEO of Ørsted, highlights the importance of such approaches:

“We need bold but credible net-zero plans from companies. If you are a leader who wants to turn words into action, I encourage you to align your company’s climate strategy with what science demands.”

The process is clearly structured: Companies make a commitment, develop emissions reduction plans according to SBTi criteria, have them validated, and report annually on their progress.

Life Cycle Assessment (LCA) for Investors

LCA data give investors measurable insights into CO₂ emissions, energy consumption, and resource efficiency. These quantified results underpin companies’ climate targets and strengthen their credibility.

With LCA tools, companies can analyze different product alternatives during the development phase and identify low-emission solutions before making major investments. This data-driven approach provides investors with the precise information they need for sound decisions in the climate tech sector.

By using these tools, companies integrate a data-driven sustainability strategy that meets the rising demands of climate tech investors.

Conclusion: Making the Most of ClimateTech Opportunities

A return that is 9% higher clearly shows how innovation, rising demand, and government support are strengthening the climate tech sector. For German companies, this presents a rare opportunity to boost their competitiveness and benefit from current growth trends.

The numbers speak for themselves: German companies are increasingly adopting climate protection measures, and renewable energy already covers more than half of electricity consumption. This demonstrates how well-established this market already is.

Success lies in the consistent implementation of initiatives such as CSRD, EU Taxonomy, and SBTi. This data-driven approach ensures the transparency investors need for sound decisions. Partnership models built on these foundations give companies a clear advantage.

A structured investment approach that combines equity and debt has proven particularly effective in 2024. With corporate venture capital, pilot projects, and open innovation programs, companies can integrate innovative climate tech solutions early and benefit in the long term.

Now is the right time to act: With the €100 billion initiative and EU funding programs like Horizon Europe, the conditions are ideal. Combined with well-thought-out ESG strategies, it’s clear that entering the climate tech market is not only sensible but also forward-looking. An integrated ESG strategy is the key to fully harnessing the momentum of this market.

FAQs

How Can Companies in Germany Benefit from Investments in the ClimateTech Sector?

Companies in Germany have the opportunity to actively benefit from the dynamic climate tech sector by engaging in the development and implementation of sustainable technologies. The federal government supports this transformation with comprehensive funding programs, including the €100 billion Climate Fund, which specifically drives innovation and the green transition (German Federal Ministry of Finance).

In addition, rising investments in climate protection measures—around €85 billion was invested in 2023 alone—offer exciting opportunities for collaborations with startups and other industry players (Clean Energy Wire). Such partnerships bring fresh ideas, create new business areas, and strengthen competitiveness both nationally and across Europe. Companies that recognize and leverage these trends early not only secure long-term economic advantages but also make a vital contribution to achieving climate goals.

How Do Government Funding and Legal Requirements Make Climate Tech Investments More Secure?

Government Funding and Legal Requirements: A Key for Climate Tech Investments

In Germany, government funding programs and clear legal regulations play a crucial role in minimizing risks for climate tech investments. Through targeted financial support and a reliable regulatory framework, they create a stable environment that fosters innovation and provides security for investors. For example, the National Climate Initiative and the EU Innovation Fund offer grants and incentives that reduce the financial risks associated with new technologies.

These measures help advance sustainable technologies, strengthen the confidence of capital providers, and enable companies to plan more reliably. Especially in a dynamic and rapidly growing field like climate tech, such incentives are essential—not only to achieve attractive long-term returns but also to actively contribute to climate protection.

How Can Companies Successfully Integrate ESG Principles into Their Business Strategy?

Successfully Integrating ESG Principles

To effectively embed ESG principles (environmental, social, and governance) into your business strategy, start with a thorough analysis of your current ESG performance. This assessment helps you set clear, measurable goals—a solid foundation for developing a concrete action plan. This way, you can systematically incorporate social, environmental, and corporate responsibility into your strategy. Deloitte recommends integrating ESG into core business processes, supply chains, and leadership incentives for maximum impact.

Implementation should take place in well-considered steps. It’s important to regularly check whether measures are delivering the desired results and adjust them as needed. Equally crucial is open and transparent communication about your progress. Clear communication strengthens stakeholder trust and demonstrates that you take your responsibilities seriously.

Don’t forget to consider legal requirements such as the CSRD and EU Taxonomy. These regulations are not only necessary to meet legal obligations but are also a key building block for long-term sustainable and future-proof business. By firmly integrating these aspects into your processes, you lay the groundwork for responsible action and sustainable success.