Indian Climate Tech Startups: A Surge in Investment and Innovation

Summary

Indian climate tech startups have attracted over $2.2 billion in new funding over the past 18 months, marking a remarkable increase of 340% from 2022. However, only around 3% of these startups have secured Series B or later funding, pointing to the difficulties in raising capital at the growth stage. In response, venture debt funds and non-banking financial companies (NBFCs) are launching innovative financial products specifically designed for climate tech entities.

The Evolving Indian Climate Tech Ecosystem

The climate tech sector in India has traditionally been influenced by global capital movements and trends, often seen as a challenging environment for achieving scale and significant returns compared to other sectors. Nevertheless, this perspective is shifting significantly. The effects of international changes, inventive investment strategies, and increasing local engagement are nudging climate tech in India towards a new phase marked by momentum, relevance, and opportunity.

Global Signals: The Return of Big Climate Capital

Funding trends over the past few years have tested the resilience of global climate tech investments, revealing weaknesses but also indicating a recovery. Here are some key statistics:

By mid-2025, it is expected that venture capital funding will have already surpassed the total for 2024, with projections indicating it could exceed the figures from 2023 and potentially approach the record levels seen in 2022.

Impact Funds as Catalysts for Innovation

Alongside the uptick in venture capital investments, there has been a rise in impact funds that specifically target both financial returns and positive environmental outcomes. These funds facilitate access to longer-term capital for early-stage climate startups, enhancing best practices and building credibility, thus establishing the groundwork for this sector’s growth.

Policy and Business Dynamics

Corporate Roles in Climate Tech

Today, corporations are taking on multidimensional roles in India’s climate tech scene, moving beyond mere buyers or compliance partners. They are investing alongside startups to co-develop climate solutions, validate innovative business models, speed up market entry, and provide exit strategies for early investors. This cycle of cooperation helps transform innovative trials into established companies.

Philanthropic Contributions

Philanthropic organisations are playing an essential role, particularly in funding early-stage innovation where commercial returns are uncertain. They assist startups in measuring and monitoring critical impact metrics. As the landscape of Indian philanthropy continues to develop, its foundational role in the climate sector will broaden.

A favourable Landscape for Growth in India

Investment Trends and Startup Growth

In the last 18 months, the climate tech startups in India have seen significant investment growth, with over $2.2 billion in funding—a 340% increase compared to 2022. The ecosystem now includes more than 800 active ventures, encompassing various domains such as renewables, energy storage, climate-smart agriculture, and circular economy initiatives. This growth is indicative of improved business sustainability, a focus on tangible revenue, and effective carbon-reduction strategies.

Enabling Government Policies

Government initiatives are actively fostering investment through:

• Production Linked Incentive (PLI) Schemes aimed at promoting local green manufacturing.
• BRSR+ and Carbon Credit Trading that integrate sustainability into business compliance.
• FAME and NAPCC initiatives focused on advancing electrification and renewable energy.
• Middle to long-term goals of achieving 450GW of renewable capacity by 2030—representing significant market potential.

Infrastructure Supporting Climate Innovation

The surge in India’s climate tech is bolstered by a strong network of accelerators, incubators, and venture builders focusing on green technology. Their activities are often driven by a combination of private, philanthropic, and government investments. These platforms play a crucial role in testing impactful ideas while facilitating cross-border knowledge transfer, enabling Indian innovations to gain global recognition.

Diverse Financing Options for Climate Tech

While venture capital remains a core component, there is a growing presence of venture debt funds and NBFCs that are creating innovative financing solutions designed to suit the unique requirements of climate tech. Options encompass blended finance, project-based lending, and outcome-linked structures, all tailored to accommodate the prolonged development and impact timelines that are characteristic of climate innovation.

Managing the Challenges of a Growing Industry

While the climate tech sector is vibrant, it is essential to acknowledge that it is still a nascent and experimental field, especially in India. The startup funding landscape can be highly volatile and can experience dramatic downturns with minor shifts in investor attitudes. There is a notable scarcity of growth-stage capital, as only approximately 3% of Indian climate tech startups have raised Series B or later funding rounds, illustrating the hurdles in scaling from prototypes to commercial launch.