New review by the investment firm examines how climate-tech investors are pivoting toward reliability, AI infrastructure, and domestic production
Success in 2026 will favor companies that integrate clean energy innovation with reliable, scalable infrastructure, and economic viability
NetZero Tech Ventures, one of Israel’s most active early-stage investors and venture builders in climate and energy deep tech, today released a review examining the major strategic shifts reshaping climate-tech investment in 2026. The review concludes that the climate-tech ecosystem is undergoing its most significant reset in a decade. The global narrative is shifting from a singular focus on advancing the “energy transition” toward a more pragmatic goal: delivering resilient, abundant, and clean power to meet surging demand, strengthen energy sovereignty, and support economic competitiveness.
A Changing Narrative in Climate and Energy Tech
Climate and energy technology is no longer approached solely as a means to bend the global emissions curve. Instead, it is increasingly recognized as critical infrastructure for the digital economy, underpinning AI, data centers, and other technologies that require reliable, high-capacity power. In the United States, the perceived urgency to invest purely for emissions reduction has eased. This change is influenced by federal policy shifts emphasizing sovereignty, resilience, and cash flow, as well as a prominent belief that technological innovation has reduced the imminent risk of a climate catastrophe.
In contrast, the EU, Canada, and parts of Asia continue to prioritize emissions reduction. However, there is now a heightened emphasis on energy security, affordability, and infrastructure resilience, reflecting concerns about supply chain vulnerabilities and energy independence.
Even as innovation lowers projected emissions enough to avert worst-case scenarios, many clean technologies remain more expensive than traditional options. Consumers often face a “green premium” before these solutions can scale. NetZero emphasizes that closing this cost gap remains a critical barrier to widespread adoption of climate-supporting technologies.
The review highlights that climate-tech investors are now rebranding as AI-enabling infrastructure investors, focusing on opportunities at the intersection of decarbonization, reliability, and energy supply. Climate tech is increasingly embedded in national strategies, opening opportunities in domestic production, critical minerals, and circular-economy technologies designed to reduce dependence on long and fragile supply chains.
Investment Themes Reshaping Climate Tech in 2026
NetZero grouped climate-tech investment priorities from the perspective of early-stage investors into three categories: The Heat, The Breeze, and Cooling Down, reflecting where capital is flowing most rapidly, where investment is cautious, and where innovation faces significant competitive pressures from industrial incumbents.
The Heat: Accelerating Demand and Infrastructure-Driven Investment
The Heat represents sectors attracting rapid investment due to accelerating demand, clear economics, and urgent infrastructure needs. These are areas that can deliver steady, large-scale power for data centers, ensure energy efficiency, and support critical AI infrastructure.
Global electricity demand from data centers is rising about four times faster than overall global electricity demand, projected to grow from 1.5% of global electricity use in 2024 to 3% in 2030. In the U.S., regulators are already warning that electricity demand will hit record levels in 2026, with much of the pressure coming from AI workloads and the rapid build-out of new computing facilities. Investors are prioritizing technologies that can provide stable, predictable power, moving beyond the intermittent supply that dominated the past decade.
Key investment areas include geothermal and nuclear energy, large-scale energy storage, and long-overdue grid transmission upgrades. These investments are aimed at expanding and stabilizing the grid, providing the resilience necessary to power the digital economy.
With the concentration of heat in high-density servers and AI accelerators, advanced cooling technologies—including liquid cooling, immersion systems, and other electronics-cooling solutions—are emerging as critical infrastructure. Investors are increasingly viewing these as AI-enabling infrastructure, reflecting the convergence of climate tech, energy reliability, and digital infrastructure.
Domestic manufacturing capabilities and supply chain resilience are also attracting attention. Critical minerals, essential to high-value industries such as semiconductors and battery production, face import dependence risks. The U.S. Department of Energy has announced significant funding to advance domestic critical minerals production, and the proposed CIRCLE Act could create a 30% tax credit for recycling and reuse facilities. These measures signal strong political support for circular economy solutions and domestic production, creating new opportunities for investors.
The Breeze: Selective, Cost-Focused Investment
The Breeze includes sectors where investor interest remains, but capital is deployed more cautiously. Success in this category depends on cost competitiveness, scalability, and proven market demand.
Sustainable and alternative fuels, particularly Sustainable Aviation Fuel (SAF), remain a focus due to regulatory mandates. Europe’s binding blending targets under ReFuelEU Aviation, coupled with persistent supply shortages, continue to drive innovation. NetZero notes that meeting the 10% SAF target by 2030 will be challenging, yet the sector remains an important area of development, particularly for aviation resilience.
Shipping decarbonization is progressing more slowly. While the International Maritime Organization (IMO) maintains a broad decarbonization strategy, detailed net-zero rules are paused for a year, leaving European mandates as the primary near-term driver for adoption of ammonia and e-methanol fuels.
CO₂-to-value solutions are gaining traction. This includes carbon capture, storage, removal, and conversion into fuels or materials, addressing emissions from oil and gas operations. Investors favor approaches where captured carbon becomes an input into products with durable economic value, rather than depending solely on volatile carbon credit markets.
Energy efficiency outside of hyperscale data centers—such as commercial buildings, industrial processes, and refrigeration—remains relevant. Regulatory frameworks like New York City’s Local Law 97, which limits carbon emissions for buildings over 25,000 square feet, provide incentives for retrofits and efficiency improvements. While attention has focused on hyperscale facilities, these broader applications represent a substantial, underexploited market for energy efficiency technologies.
Hydrogen continues to pose challenges for investors due to cost inefficiencies. However, it remains critical for decarbonizing steel, chemicals, and other hard-to-electrify sectors, as well as producing fuels such as synthetic kerosene, SAF, and methanol. Investors are focusing on cost-effective pathways including methane pyrolysis, niche electrolysis innovations, and exploration of naturally occurring “white hydrogen” deposits.
Cooling Down: Innovation Facing Industrial Incumbents
Cooling Down covers areas where innovation struggles to compete against established industrial players. In solar and EV battery manufacturing, Chinese producers and large global conglomerates dominate through scale, cost efficiency, and continuous optimization, leaving early-stage innovators with high barriers to entry.
Low-carbon materials and petrochemical alternatives—including sustainable polymers, bio-based inputs, and other novel materials—also face challenges. Many solutions continue to carry a “green premium” and lack clear demand, limiting scalability without strong policy mandates or procurement standards. Meanwhile, incumbent petrochemical products maintain advantages in cost and infrastructure, making it difficult for newcomers to compete.
NetZero’s Insights and Conclusion
“Climate-tech investors are not walking away from decarbonization; they are changing the lens,” said Dr. Gideon Friedmann, CTO at NetZero Tech Ventures and former Chief Scientist at the Israel Ministry of Energy. “AI and data centers are adding new perspectives and requirements to what we already knew about the energy transition. In addition, national strategies emphasizing onshoring, domestic production, and supply chain resilience create tailwinds for circular economy solutions that reduce dependence on long, fragile supply chains.”
Dr. Gideon Friedmann, CTO of NetZero Tech Ventures Credit: NetZero Tech Ventures
Looking ahead, NetZero emphasizes that the bar for climate-tech companies has risen. Investors now expect technologies to demonstrate cost efficiency, market demand, and resilience to policy shifts. Success in 2026 will favor companies that integrate clean energy innovation with reliable, scalable infrastructure, and economic viability.
Header photo: Israel Pinhasov
