Climate investing is entering a more demanding phase. As fundraising volumes slow and investor attention shifts, capital is becoming more selective and expectations more exacting. According to Matteo Squilloni, Head of Climate Transition, Equity Investments, EIF, this moment does not reflect a retreat from climate strategies, but a maturation of the market. What is being repriced is not ambition, but execution, with greater emphasis on industrial capability, operational expertise and credible delivery. For allocators and managers alike, the transition is moving beyond narrative positioning toward disciplined implementation and long term value creation, a timely stance ahead of SuperReturn Energy Transition.
A reset in climate investment sentiment
The climate investment landscape is undergoing a visible reset. After several years of strong - if still insufficient - momentum, 2025 has brought a slowdown that is impossible to ignore.
Pipelines are thinner. In our experience, funds closed in 2025 are down roughly 40% compared to 2024. Market statistics confirm the trend. At the same time, broader investor attention has shifted. Technology, defence, and AI are absorbing capital and headlines. In some regions, climate action has even encountered political resistance. A number of managers have responded defensively, softening or even removing explicit climate language from their strategies.
"At first glance, this shift may appear to signal a retreat. In reality,
it may reflect something healthier.”
- Matteo Squilloni
At first glance, this shift may appear to signal a retreat. In reality, it may reflect something healthier: a transition from a phase driven largely by narrative and capital abundance to one defined by execution and capability.
Today, credibility matters more than positioning. And the managers who will stand out are those able to demonstrate not only ambition, but operational and industrial expertise.
Climate as a structural economic variable
While fundraising cycles fluctuate, climate risk does not. Since 2000, climate-related disasters - floods, hurricanes, wildfires - have caused more than $3.6 trillion in global damages. The acceleration is stark: approximately $450 billion between 2000 and 2004, compared to nearly $1 trillion between 2020 and 2024. For companies, the implications are material. The World Economic Forum estimates that the cost of climate inaction could reduce corporate EBITDA by between 5% and 25% by 2050, depending on sector exposure.
"Climate is therefore not simply a thematic investment angle or a reputational concern.
It is a structural economic variable.”
- Matteo Squilloni
Climate is therefore not simply a thematic investment angle or a reputational concern. It is a structural economic variable that increasingly shapes operating costs, supply chains, regulatory frameworks, and long-term competitiveness. As this reality becomes clearer, the sustainability agenda itself is evolving.
Initially, the focus was on “doing less harm” - screening exclusions, reducing emissions intensity, and improving reporting transparency. This evolved into a neutrality agenda: net-zero commitments and minimization of negative externalities.
Yet neutrality is not the end point.
The most ambitious GPs increasingly recognize that the real destination is being net-positive—systematically generating value for businesses while contributing positively to environmental, social, and economic systems. The objective is not merely to offset damage, but to help rebuild and strengthen the foundations on which economic activity depends.
This requires acknowledging the deep interconnections between environmental, social, and economic outcomes. Clean air and water improve public health and workforce productivity. Green spaces enhance community wellbeing and social cohesion. Educated and healthy populations drive innovation and long-term growth. Social stability creates investable business environments. Inclusive growth expands markets. Resource efficiency reduces both operating costs and environmental impact. Clean technologies unlock new industries. Natural capital provides ecosystem services that underpin supply chains.
These dimensions are deeply interconnected. Investors who adopt a systemic perspective are often better positioned to identify durable, risk-adjusted opportunities.
Industrial capability is becoming the key differentiator
If the strategic direction is increasingly clear, execution is where the real differences between managers are emerging. Especially for emerging managers, the current environment is particularly demanding. LPs are more selective. Track records are examined carefully. The difference between thematic positioning and true expertise has become visible, with real failures and real successes that are finally evident on the market.
Recent market write-offs have often occurred in funds where GPs entered the green transition opportunistically, without dedicated strategies or deep sector and industrial knowledge. In contrast, managers with clearly defined investment mandates - and teams combining financial and industrial experience - have generally demonstrated stronger resilience.
The green transition is not a spreadsheet exercise. It requires operational expertise, sector and technological understanding, and adaptability to frequent regulatory and/or technological changes. Industrial value creation must sit at the core of a successful strategy.
Many climate-relevant sectors remain highly fragmented. Water management, environmental services, energy efficiency solutions, and circular economy platforms offer compelling Buy & Build opportunities. With the right operational integration, procurement synergies, and digital upgrades, value creation can be substantial.
Conversely, failures frequently stem from familiar causes: excessively high entry multiples in competitive auctions, inability to adapt to rapid regulatory shifts, or underestimation of technological disruption. In each case, sector-specific experience is critical. Teams with hands-on industrial backgrounds are better positioned to navigate complexity and pivot when conditions change.
From strategy to implementation
Beyond industrial expertise, successful climate strategies increasingly depend on disciplined implementation.
- First, a holistic mindset is essential. Climate transition cannot be reduced to isolated KPIs; it requires understanding the interaction between regulation, technology, supply chains, and social dynamics.
- Second, intentionality matters. Impact rarely occurs by coincidence. Investment theses must explicitly integrate long-term sustainability objectives from the underwriting stage onward.
- Third, measurement and governance are non-negotiable. Clear KPIs, robust impact metrics, and transparent evaluation frameworks are essential to maintain credibility and avoid mission drift.
- Finally, alignment of interests plays a critical role. Mechanisms such as impact-linked carried interest can meaningfully connect financial performance with environmental and social outcomes. When incentives reflect both return and impact objectives, accountability strengthens.
A more disciplined phase, not a retreat
The current slowdown in fundraising should not be misinterpreted as declining relevance. Climate transition remains a multi-decade structural transformation affecting energy, mobility, water, food systems, and infrastructure. What is changing is not the scale of the opportunity, but the level of discipline required to capture it.
"What is changing is not the scale of the opportunity, but the
level of discipline required to capture it”
- Matteo Squilloni
Climate investing is entering a more mature phase—one where success depends less on narrative positioning and more on operational capability, rigorous underwriting, and credible impact frameworks.
Managers able to combine industrial expertise, systemic thinking, and genuine alignment with investors will not only navigate this more selective environment. They will help define the next generation of climate-focused private capital.
