From AI Hype to Hard Reality

Daisy Moll from Sustainable Times attended Sifted Summit to find out what’s Shaping the Future of Climate Tech.

For anyone wanting to gauge the mood of Europe’s climate-tech sector, the Sifted Summit in London offered a clear snapshot. Run by Sifted - the Financial Times backed platform for Europe’s startups and investors - the event surfaced three themes that founders and funders in climate tech would do well to watch.

Firstly, the growing debate over the AI bubble was a prominent factor throughout. Attention shifted from predicting when the AI bubble might burst to examining how long it will continue to divert investment from climate tech. Secondly, there was a focus on how other countries influence Europe’s climate innovation. Trump’s America was mentioned frequently, but is it a distraction from a more immediate reality that China is delivering at a scale and cost European and US innovators can’t compete with. Finally, when the conversation shifted to regulation, there was agreement that policy can help, but it can’t be a foundational pillar of the business plan. No climate startup can afford to build its future on what governments may or may not do.

AI: a double-edged sword for climate tech

Sifted’s  biggest talking point was the rise of AI and its growing influence on early-stage investment trends. In 2025 alone, AI received $192.7 billion in venture capital (VC) investment - a figure that dwarfs funding for almost every other sector. Many drew parallels between today’s frenzy and the hype of the dotcom boom of the early 2000s. As the summit unfolded, JP Morgan Chief Executive Jamie Dimon said in an interview with the BBC that “AI in total will pay off” - but those investing right now will likely lose out, just as early investors of the dotcom boom did. 

This matters because the largest backers of AI are not fringe speculators but some of the world’s most powerful institutions - tech giants like Google and Microsoft, global private equity firms, and national governments. The US remains the largest investor by far, but the UK’s contribution is also substantial. Between 2013 and 2023, it channelled around $26 billion into AI, making it the world’s third-largest investor. If the sector fails to deliver on its promise, the fallout won’t just hit individual portfolios. It could ripple through entire economies, distorting capital flows and in the meantime starving other critical areas like climate tech of the funding they need to scale.

For businesses building in the sustainability sector, the implications are mixed. Paul Heiden, CEO of Optics 11, a global leader in fibre-optic technology and exited founder of a company acquired by Microsoft, said the discussion around AI investment overlooks energy capacity as a critical constraint. “AI is the biggest driver of productivity and growth but it can’t run without stable energy. Europe talks about digital sovereignty and green progress, yet we don’t even have the reliable power needed to fuel AI, defence systems, or data centers,” he said.

In drawing the link between AI and energy, Heiden highlighted grounds for optimism among climate founders. The “green premium” that buoyed climate tech in 2021 may be gone, but demand is only rising. These growing industries are energy-hungry, and meeting that demand at scale is a compelling investment opportunity. 

Is Trump a distraction?

While US politics surfaced frequently, opinions were divided on whether Trump’s rollback of climate policies is truly slowing the global shift to clean energy. His administration has dismantled the Global Change Research Program, withdrawn US participation from the IPCC, and declared a sweeping “energy emergency” to fast-track fossil fuel extraction and infrastructure. The Environmental Protection Agency, formerly a powerful regulatory watchdog, has been recast as a cost-cutting economic enabler, with environmental protections increasingly framed as barriers to affordability. It’s estimated that the Trump administration has cancelled $7.6bn in grants that supported hundreds of clean energy projects across more than 16 states.

The policy reversals have slowed some projects, but some see this moment not as the end of climate ambition, but as a phase of greenhushing, where innovation carries on beneath the political noise. This issue was raised at a panel exploring “the next sustainability wave”. Matthew Blain, Principal at Voyager Ventures, an early-stage climate technology investor, argued that, “the gap between perception and reality in climate tech has never been wider. People assume that (US President Donald) Trump means the sector is on its knees, but that’s not what we’re seeing. Many of his priorities - reshoring manufacturing, securing critical minerals, lowering energy costs - align with the technologies we’re investing in.”

Blain’s view was tempered by fellow panellist Susanna Campbell, Co-founder of Syre, a sustainable textile company, and an experienced investor and board member (including former Senior Advisor to Northvolt, the failed Swedish electric vehicle battery startup). Cultural and political pressures are reshaping how companies talk about sustainability, she said, reflecting growing unease in the market. “Many customers are continuing their commitments, but the rise of greenhushing, cleaning your annual report of climate language, isn’t good. There’s definitely a negative there.”

Chinese innovation

Matthew Blain, Susanna Campbell, Paul Heiden, Freya Pratty (Left to right)

When America votes again in 2028, Trump will leave office and attention is already shifting beyond Washington. Many see a larger force reshaping the geopolitical landscape. One of the clearest threads at Sifted was the growing recognition that China is outpacing the West in climate tech, renewables, and innovation more broadly. “Back in 2021, we were talking about the Inflation Reduction Act and the subsidies going into climate tech,” said Campbell. “The huge change is the role of China. Their advances have been nothing less than tremendous; they're ahead of the US and Europe in so many areas.”

Blain added a recent example, underlining the speed, efficiency and appetite of leading Chinese firms. “One of our portfolio CEOs had a meeting with (electric vehicle company) BYD one day and returned the next to find 25 top engineers, some flown in from across the country, ready to discuss his technology.” The consensus among speakers was that competing head-to-head with China’s pace and scale is unrealistic. Instead Campbell argued that investors and founders must “think strategically about where we have the right to win” in areas driven by R&D, unique IP, or market access - rather than cost or speed.

The role of climate regulation

At a roundtable bringing together voices from across the climate tech ecosystem, discussion turned to the state of investment in the sector and the influence of policy and regulation. Moderator Christian Hernandez, Co-founder of 2150, a transatlantic VC firm with more than $1 billion in assets under management, acknowledged the sector’s particular funding bottlenecks. “It is hardest to raise a hard-tech Series B,” he said . 

But he and other speakers cautioned against founders of climate-focused businesses relying too heavily on the power of regulatory change to open up markets for their innovative solutions and technologies.  ”Governments should focus solely on “providing stability of laws and empowering people’s purse,” said Hernandez. 

Greg Jackson, Chief Executive of Octopus Energy, a renewable energy supplier that has challenged some of the largest incumbents, and recently appointed UK government advisor, captured the day’s scepticism. “Investors are fickle and they chase whatever’s in fashion,” he said. “Focus on building something ten times better or cheaper that customers actually buy. Regulations change all the time, don’t chase them.” Jackson argued that genuine innovation comes from markets, with  policymakers responding to signals. “Markets aren’t perfect,” he said, “but they’re the best place to test innovation. In energy, too often innovation happens in rooms instead of in markets.”

Bright future for climate tech 

The message from Sifted was that the climate tech story is no longer about hope or a desire for a greener or more just world, but hard realities of capital, competition, and cost. AI may have the spotlight, China may have the scale, and regulation may keep moving the goalposts, but there is a bright future for founders who are addressing energy costs and uncertain supplies . As Octopus’s Jackson concluded during his fireside chat, there is no future sticking with flawed models. “We should remember that gas cost the UK £100bn in subsidies for energy bills just a few years ago. We have to reform the market so consumers get the benefit of cheap renewables.”