What we look for in winning climate tech businesses: an Investment Director’s perspective 

Solving pressing environmental problems demands years of research, significant capital and the ability to navigate a sector where commercial success and environmental impact must prove inseparable. Increasingly, many of the most ambitious businesses in this space fall under the umbrella of climate tech – innovations that support, for example, decarbonisation, energy transition and emissions reduction.

For climate tech founders, the challenge lies not just in developing breakthrough solutions but in clearly demonstrating to investors that technical innovation can translate into viable, scalable businesses. Alex Petri, Investment Director at IW Capital, explains how the best sustainability start-ups approach this dual mandate and what has changed in the investment landscape. 

 

Alex Petri, Investment Director

 

What makes a climate tech start-up stand out? 

The fundamentals for climate tech start-ups mirror those of any sector, but the technical and commercial risks are higher. 

“When we look at a climate tech start-up, we always look firstly at the team,” Alex explains. “Their passion for the climate problem they’re solving, their knowledge of the sector and strong leadership with complementary skills in the management team are essential.” 

“At the end of the day, it’s all about people,” he continues. “In early-stage climate tech businesses, how founders deal with pressure and technical challenges is key at this stage of the journey.” 

Differentiation is also critical. “What is different about what they’re doing? Why are they solving a real climate problem in a way that nobody else has done?” Alex asks. In climate tech, this typically means proprietary technology or systems-level innovation that can drive decarbonisation, enable the energy transition or materially reduce emissions. That advantage must be defensible over time. 

Market size completes the picture. “The opportunity to address climate-related challenges is enormous,” Alex notes. “We have a real problem, highlighted again and again at, for example, COP summits and numerous data-driven publications, and we need many more scalable solutions in the climate tech space.” 

For investors, that urgency translates into significant long-term opportunity across areas such as grid decarbonisation, industrial efficiency and low carbon materials. 

 

What sets climate tech businesses apart? 

Climate tech companies face a dual mandate. They must deliver commercial returns while proving measurable climate impact. 

“It’s really important to track metrics beyond the financials,” Alex emphasises. “Climate tech companies must be deeply committed to measuring environmental impact, carbon emissions reduced, energy saved, resource efficiency, and other tangible outcomes.” 

In this sector, impact data is often embedded in the product itself. Whether developing circular economy solutions, advanced recycling systems or low-emission food production, quantifiable decarbonisation is central to the value proposition. 

This measurement must be rigorous. “We’ve unfortunately seen cases of ‘greenwashing’, where generic metrics are used,” Alex observes. “The climate tech businesses that stand out are those that can clearly show how they track impact and prove they are solving part of the climate problem in a meaningful way. That’s fundamental.” 

Innovation is typically highly technical. “These climate challenges are complex technical problems that require deep innovation,” Alex explains. “The most successful companies combine technology, research and sector expertise to develop unique solutions. Granted patents and defensible IP are particularly valuable from an investor perspective.” 

In climate tech, engineering capability, proprietary data and protected intellectual property often form the backbone of long-term competitive advantage. 

 

 

What excites investors about climate tech right now? 

The climate tech sector has accelerated significantly in recent years. “What’s really exciting now compared to five or ten years ago is the level of awareness,” Alex says. “People understand there’s a serious climate issue and that creates real opportunity for companies developing credible solutions.” 

That awareness has translated into capital, policy momentum and corporate demand. Investors are increasingly backing technologies that, for instance, accelerate decarbonisation, enable renewable integration, electrify infrastructure and reduce emissions across supply chains. 

Government action reinforces this shift. “We’re seeing more regulatory change, particularly in UK and Europe. For example, countries banning certain plastics and introducing new environmental standards,” Alex notes. “This combination of awareness and regulatory pressure creates opportunity for start-ups. Regulation often follows innovation, but it helps establish and scale the market.” 

Mechanisms such as carbon pricing, net zero commitments and energy transition mandates are creating long-term demand signals across the climate tech ecosystem. 

 

The unique challenges facing climate tech start-ups 

“These are hard problems that require truly innovative solutions,” Alex explains. “Innovative solutions often involve years of research, which means companies may not generate revenue immediately. Some spend significant time developing the technology before commercialisation.” 

This is particularly true in areas such as advanced materials, clean energy infrastructure and industrial decarbonisation, where validation requires pilots and real-world deployment. 

Funding becomes a key hurdle. “We need to be patient and trust the research and innovation,” Alex says. “For example, developing a solution in a lab or a research accelerator is one thing. Scaling the business or expanding to support larger clients often requires substantial development and investment” 

Commercialisation can also be complex. “For a founder to take on something deeply embedded in the system, such as replacing fossil-based inputs or legacy materials, is brave and bold,” Alex observes. “The challenge is articulating the vision with evidence, especially when there are no direct comparisons because it’s a completely new solution.” 

This is where conviction matters. “Sometimes there’s a leap of faith for investors,” Alex admits. “We spend significant time understanding the team, their background and why they’re committed to solving that specific climate problem. It’s a people business. Belief in the team is crucial.” 

 

Trends reshaping the market  

Several clear trends are emerging across the climate tech landscape. 

• Low-carbon materials and circular products & systems are accelerating: The transition away from fossil-based inputs and high embodied carbon or plastic -based materials is gathering pace, driven by regulation and corporate net-zero commitments. “We’re seeing solutions that, for example, reduce reliance on plastic and improve recycling outcomes,” Alex explains. Companies such as Impact Recycling demonstrate how material science and process innovation can reduce emissions and waste at scale. 

 

• The reuse economy is moving mainstream: Extending product life cycles is becoming a recognised decarbonisation strategy, particularly in electronics and high-value equipment. “People don’t always realise how impactful reuse can be,” Alex notes. Reconome, for example, repurposes electronic devices while maintaining strict data protection standards. “There’s a way to treat data very safely whilst reusing and repurposing electronic devices,” Alex says. What was once a niche sustainability initiative is increasingly embedded in procurement and ESG strategy. 

 

• Food system transformation is gaining investment momentum: Food system transformation is attracting increasing investment momentum. With agriculture responsible for a significant share of global emissions, innovation in food production has become a key focus within climate tech. “We’re seeing new investments in companies exploring alternative ways to produce food that reduce carbon emissions and environmental degradation,” Alex explains. Brands are therefore adopting alternative production methods to lower emissions intensity. Daily Dose, a cold-press juice company, reduces food waste by rescuing surplus or imperfect fruit and vegetables that would otherwise be discarded by supermarkets, helping to minimise environmental impact.  

 

• Enabling infrastructure for the energy transition is expanding: Battery storage, grid flexibility technologies and carbon accounting platforms are fast-growing segments. As renewable penetration increases and reporting standards tighten, these enabling systems are becoming foundational. Alongside low-carbon construction materials, they illustrate how climate tech is evolving into an interconnected ecosystem anchored in measurable emissions reduction and system-wide decarbonisation. 

 

 

The European advantage 

Policy divergence globally is influencing strategy. “Europe is often ahead in terms of environmental regulation,” Alex observes. “The European market tends to introduce new climate-related standards earlier than other regions.” 

For UK and European climate tech founders, this creates opportunity. “There’s a huge opportunity in the UK and Europe to grow and validate solutions here first, moving through R&D, testing and optimisation,” Alex advises. “After reaching maturity, companies can then expand globally.” 

Net zero targets, industrial decarbonisation frameworks and regulatory clarity provide fertile ground for climate tech validation and scale. 

 

How IW Capital supports climate tech founders 

Backing climate tech requires more than capital. “We spend significant time understanding each company’s moat and their commitment to solving a specific climate challenge,” Alex explains. 

“Our network of experienced investors and successful operators helps us test assumptions and identify blind spots,” he adds. “That strengthens our due diligence and long-term partnership approach.” 

Regulation remains a key consideration. “Regulation can create markets, we’ve seen that with carbon credit systems, for example” Alex says. “The risk is when restrictive rules arrive too early and stifle innovation. Early-stage climate tech companies need space to experiment before heavier tax or compliance burdens are introduced.” 

For founders, aligning innovation timelines with regulatory evolution is critical. 

 

Looking ahead 

For UK climate tech founders, the opportunity is substantial. Climate tech, encompassing technologies that address the climate crisis through decarbonisation, energy transition and emissions reduction, is becoming central to economic transformation. 

Success will depend on rigorous innovation, defensible technology and the ability to demonstrate commercial scalability alongside measurable climate impact. In a market where capital, regulation and demand are increasingly aligned, the strongest climate tech companies are positioned to build significant businesses while driving meaningful decarbonisation.