Case study: Funding trends & deal flow — a leading organization's implementation and lessons learned

In 2024, North American climate tech investments reached $67.8 billion despite broader venture market contractions, representing a 12% increase over 2023 levels and defying predictions of a sector-wide pullback. Yet beneath this headline figure lies a more complex story: approximately 40% of climate-focused funds reported significant challenges with data quality and impact verification, leading to what industry practitioners have termed "measurement theater"—the superficial tracking of metrics that fail to capture genuine environmental outcomes. This case study examines how leading organizations have restructured their deal flow processes to prioritize authentic impact measurement, align with emerging standards, and build investment theses grounded in defensible unit economics rather than aspirational projections.

Why It Matters

The climate finance landscape in North America has undergone a fundamental transformation between 2024 and 2025. Following the implementation of California's Climate Corporate Data Accountability Act (SB 253) and the SEC's climate disclosure rules, institutional investors managing over $8.2 trillion in assets now require standardized emissions reporting from portfolio companies. This regulatory shift has exposed a critical gap: many climate-focused investments were made based on incomplete or inconsistent data, creating valuation risks that extend across the sector.

The stakes extend beyond portfolio returns. According to the Climate Policy Initiative's 2024 Global Landscape of Climate Finance report, North America requires approximately $800 billion in annual climate investments to meet its 2050 net-zero commitments—yet actual capital deployment remains below $200 billion annually. This gap cannot be closed through volume alone; capital must be directed toward solutions with verifiable, additional climate benefits rather than those that merely rebrand existing activities.

The emergence of the Corporate Sustainability Reporting Directive (CSRD) in Europe has created spillover effects for North American multinationals, with over 3,000 U.S. companies now subject to European disclosure requirements for their 2025 fiscal years. This regulatory convergence has elevated data quality from a compliance concern to a strategic imperative, fundamentally reshaping how sophisticated investors evaluate deal flow.

Perhaps most critically, the 2024-2025 period has seen a maturation in how climate investors evaluate unit economics. Early-stage climate companies that secured funding during the 2021-2022 boom on the basis of addressable market projections alone are now facing rigorous scrutiny of their path to profitability. Investors increasingly recognize that climate impact and financial sustainability are not competing objectives but rather mutually reinforcing requirements for durable climate solutions.

Key Concepts

Impact Measurement refers to the systematic quantification and verification of environmental outcomes attributable to a specific investment or intervention. In climate finance, this typically encompasses direct emissions reductions (Scope 1), indirect emissions from purchased energy (Scope 2), and value chain emissions (Scope 3). Rigorous impact measurement requires establishing counterfactual baselines—what would have occurred absent the intervention—and applying consistent methodologies across portfolio companies. The GHG Protocol Corporate Standard and the Partnership for Carbon Accounting Financials (PCAF) Standard provide the foundational frameworks, though implementation remains inconsistent across the sector.

Unit Economics describes the direct revenues and costs associated with a single unit of a company's core offering. For climate tech companies, unit economics analysis must account for the true cost of carbon abatement, typically expressed as dollars per ton of CO2 equivalent avoided or removed. A solution with favorable unit economics can scale without deteriorating margins, while solutions dependent on subsidies or credits for profitability face structural risks as policy environments evolve. The distinction between "green premium" pricing and genuine cost competitiveness has become central to investment evaluation.

Carbon Price represents the monetary value assigned to greenhouse gas emissions, either through market mechanisms (carbon trading systems) or policy instruments (carbon taxes). In North America, carbon pricing ranges from $65 per ton in California's cap-and-trade system to $170 per ton under Canada's federal carbon pricing framework (2025 levels). Understanding carbon price trajectories is essential for evaluating climate investments, as many business models are predicated on assumptions about future carbon values. The voluntary carbon market adds complexity, with prices ranging from $5 to $800+ per ton depending on credit quality and vintage.

CSRD (Corporate Sustainability Reporting Directive) is the European Union's comprehensive sustainability disclosure framework, requiring detailed reporting on environmental, social, and governance factors according to the European Sustainability Reporting Standards (ESRS). While enacted in Europe, CSRD affects North American companies with significant EU operations or revenues exceeding €150 million in the EU. The directive's double materiality concept—requiring disclosure of both how sustainability issues affect the company and how the company affects society and environment—represents a paradigm shift from traditional financial materiality.

Additionality is the criterion that a climate intervention produces environmental benefits that would not have occurred in a baseline scenario. This concept, borrowed from carbon offset verification, has become increasingly important in climate investing as stakeholders demand evidence that funded activities generate genuine climate impact rather than capturing credit for emissions reductions that would have happened regardless. Demonstrating additionality requires robust counterfactual analysis and often conflicts with investments in already-profitable or market-ready technologies.

What's Working and What Isn't

What's Working

Integrated Data Infrastructure: Leading climate investors have abandoned the practice of collecting sustainability data in parallel to financial data. Organizations like Generate Capital and Breakthrough Energy Ventures have implemented unified data architectures where environmental metrics flow through the same systems as financial reporting. This integration reduces reporting burden on portfolio companies while enabling real-time portfolio-level impact aggregation. Generate Capital's platform processes emissions data from over 2,000 sustainable infrastructure assets, applying consistent methodologies that allow for meaningful cross-asset comparisons.

Third-Party Verification Requirements: The most sophisticated investors now mandate third-party verification of impact claims before deal closure. Firms including TPG Rise Climate and BlackRock's climate infrastructure funds require limited or reasonable assurance from accredited verifiers for any impact projections used in investment memos. This practice has reduced instances of overstated climate benefits and created accountability mechanisms that persist through the investment lifecycle. TPG Rise Climate's portfolio companies undergo annual verification audits, with results tied to carried interest calculations.

Sector-Specific Due Diligence Frameworks: Rather than applying generic ESG checklists, leading investors have developed sector-specific evaluation frameworks that reflect the unique impact pathways and measurement challenges of different climate solutions. Congruent Ventures, for example, has published differentiated due diligence protocols for industrial decarbonization, food systems, and nature-based solutions—each with tailored metrics, verification requirements, and additionality tests. This approach acknowledges that a carbon accounting methodology appropriate for renewable energy projects may be wholly inadequate for agricultural interventions.

Outcome-Linked Financing Structures: Innovative deal structures are aligning financial returns with verified climate outcomes. Sustainability-linked bonds and loans, which adjust interest rates based on achievement of predetermined sustainability targets, reached $150 billion in North American issuance during 2024. More sophisticated variants tie equity returns to verified impact metrics, creating genuine incentive alignment between investors and climate outcomes. The Rocky Mountain Institute's Kigali Cooling Efficiency Program has pioneered outcome-based financing in the cooling sector, with payments contingent on verified energy savings.

What Isn't Working

Self-Reported Impact Data Without Verification: A significant portion of climate investments continue to rely on self-reported impact metrics from portfolio companies, often using methodologies developed internally without external validation. This practice has led to systematic overestimation of climate benefits, with academic research suggesting that self-reported emissions reductions exceed verified outcomes by 30-60% in many cases. The absence of verification creates adverse selection, as companies with less rigorous practices can market more attractive impact numbers.

Misapplication of Avoided Emissions Claims: Many climate investors count "avoided emissions"—the difference between a solution's emissions and a higher-emitting alternative—as equivalent to absolute emissions reductions. While avoided emissions can be meaningful when properly calculated, they are frequently inflated through questionable baseline assumptions and without attention to additionality. A solar installation displacing coal generation in a grid that was already transitioning to renewables, for instance, should claim only the incremental impact beyond projected baseline changes.

Standards Fragmentation and Selective Reporting: The proliferation of sustainability reporting frameworks—including GRI, SASB, TCFD, CDP, and now ISSB—has enabled "framework shopping," where companies select reporting standards that present their performance most favorably. This fragmentation undermines comparability and allows material information to remain undisclosed. While regulatory convergence around ISSB standards is progressing, the transition period has created confusion and opportunities for selective disclosure.

Carbon Credit Quality Variability: Investments predicated on carbon credit revenue face significant quality risks, with high-profile credit invalidations affecting projects across North America. Investigations by journalists and researchers have documented credits issued for forest preservation in areas with no realistic threat of deforestation, renewable energy projects that would have been built regardless of credit revenue, and systematic over-crediting of emissions reductions. Investors who incorporated carbon credits into financial models without rigorous quality assessment have faced substantial write-downs.

Key Players

Established Leaders

Generate Capital operates as a leading sustainable infrastructure investment firm managing over $10 billion in assets. The San Francisco-based company has pioneered "infrastructure-as-a-service" models that deploy distributed energy, water, and waste solutions with rigorous impact tracking integrated into asset management systems. Their approach emphasizes project-level unit economics and real-time performance monitoring across a portfolio spanning 2,000+ assets.

Breakthrough Energy Ventures manages over $3.5 billion across three funds focused on technologies capable of achieving gigatonne-scale emissions reductions. Founded by Bill Gates, the firm applies a rigorous "potential gigatonnes reduced" framework to investment screening, requiring quantified climate impact pathways before proceeding to due diligence. Their portfolio includes Pivot Bio, Form Energy, and Lilac Solutions.

TPG Rise Climate represents the climate-focused strategy of TPG's global impact platform, with $13 billion in committed capital. The firm has established detailed climate impact measurement frameworks with annual third-party verification and explicit links between impact performance and fund economics. Notable investments include Nextracker and Intersect Power.

Brookfield Renewable Partners manages one of the world's largest renewable power portfolios with over 31 GW of generating capacity, including significant North American hydro, wind, and solar assets. The firm applies institutional-grade environmental monitoring and has been a leader in aligning sustainability reporting with TCFD recommendations.

BlackRock Climate Infrastructure deploys capital through dedicated infrastructure funds targeting renewable energy, battery storage, and grid infrastructure. The firm has implemented portfolio-wide emissions tracking using the PCAF methodology and requires climate risk assessment for all investments exceeding $50 million.

Emerging Startups

Persefoni has emerged as a leading carbon accounting platform, enabling enterprises and financial institutions to measure, manage, and report greenhouse gas emissions. The company's software-as-a-service platform supports PCAF-aligned portfolio emissions analysis and has raised over $100 million in venture funding to scale its data infrastructure.

Watershed provides enterprise climate platforms that integrate emissions measurement, reduction planning, and disclosure management. The company serves clients including Airbnb, Stripe, and Shopify, and has developed methodologies specifically addressing Scope 3 supply chain emissions—the most challenging category for verification.

Sylvera operates as a carbon credit ratings agency, applying satellite monitoring, machine learning, and on-the-ground verification to assess offset project quality. The London-founded company with significant North American operations addresses the credit quality challenges that have undermined confidence in voluntary carbon markets.

Pachama combines remote sensing, artificial intelligence, and ground-truth data to verify forest carbon projects. The company's technology platform enables real-time monitoring of carbon sequestration and has been adopted by major corporate buyers seeking assurance that forest-based credits represent genuine climate benefits.

Sinai Technologies offers a decarbonization platform that models enterprise emissions, identifies abatement opportunities, and tracks progress against science-based targets. The company serves industrial clients where emissions measurement complexity has historically limited the accuracy of climate reporting.

Key Investors & Funders

Congruent Ventures manages over $800 million focused on early-stage climate and sustainability investments. The firm has developed sector-specific impact frameworks and publishes detailed methodologies for evaluating climate solutions across energy, food, transportation, and industrial sectors.

Prelude Ventures invests in early-stage companies developing solutions for climate change, with a portfolio spanning clean energy, sustainable food, and circular economy technologies. The firm emphasizes founder-market fit and technology defensibility alongside climate impact assessment.

U.S. Department of Energy Loan Programs Office (LPO) has emerged as a critical source of project finance for first-of-a-kind climate technologies, with over $40 billion in loan authority supporting projects that face deployment barriers in commercial markets. Recent commitments include financing for advanced nuclear, direct air capture, and clean hydrogen production.

Canada Infrastructure Bank (CIB) deploys capital to accelerate infrastructure investments in clean power, green buildings, and clean transportation. The public institution applies impact measurement frameworks aligned with Canada's 2050 net-zero pathway and has committed over $10 billion to climate-aligned infrastructure.

New York Green Bank operates as a state-sponsored specialty finance entity with over $1 billion deployed in clean energy projects across New York State. The bank's financing addresses market gaps where private capital remains hesitant, with rigorous evaluation of both financial viability and emissions reduction potential.

Examples

Generate Capital's Waste-to-Energy Portfolio Restructuring (2024): Generate Capital undertook a comprehensive reassessment of its waste-to-energy portfolio following concerns about emissions accounting practices. The firm engaged third-party verifier Verra to audit methane capture and displacement claims across 47 anaerobic digestion facilities. The audit revealed that 12% of previously claimed emissions reductions were based on outdated baseline assumptions that overstated counterfactual methane release. Generate Capital subsequently revised its impact accounting methodology, implementing quarterly verification cycles and satellite-based monitoring for fugitive methane emissions. The restructuring reduced portfolio-wide impact claims by 8% but increased investor confidence and enabled a $400 million capital raise at improved terms.
Breakthrough Energy Ventures' Direct Air Capture Investment Framework (2024-2025): When evaluating direct air capture (DAC) investments, Breakthrough Energy Ventures developed a standardized unit economics model requiring cost trajectories below $200/ton CO2 within five years of commercial deployment. The framework incorporated energy source requirements (clean electricity only), permanence specifications (minimum 1,000-year geological storage), and additionality verification (credits not double-counted against grid decarbonization). This rigorous approach led the firm to pass on several DAC opportunities with favorable headline costs but concerning energy source assumptions or questionable permanence pathways. The methodology has since been shared with other climate investors, contributing to improved sector-wide due diligence practices.
Canada Pension Plan Investment Board's Climate Impact Integration (2024): CPP Investments, managing over $570 billion in assets, implemented a portfolio-wide climate impact measurement system covering both direct investments and external manager allocations. The system applies PCAF-aligned methodologies with differentiated approaches for asset classes ranging from public equities to real assets. Critically, CPP Investments instituted a policy requiring external managers to demonstrate climate measurement capabilities as a condition of new mandate awards, with 23 managers upgrading their systems to meet requirements. The initiative has enabled CPP Investments to report portfolio emissions with greater precision and identify misalignment between manager representations and actual portfolio characteristics.

Action Checklist

FAQ

Q: How can investors distinguish between genuine climate impact and "measurement theater" in deal evaluation? A: Genuine impact measurement exhibits several distinguishing characteristics that investors can evaluate during due diligence. First, authentic impact frameworks include explicit baseline or counterfactual scenarios—what would have occurred absent the intervention. Second, rigorous approaches acknowledge uncertainty ranges rather than presenting single-point impact estimates. Third, credible measurement involves third-party verification, ideally from accredited bodies with relevant technical expertise. Finally, organizations committed to genuine impact measurement willingly disclose methodological details, including system boundaries, allocation procedures, and data sources. Investors should be skeptical of impact claims that lack these elements, particularly when headline numbers appear unusually favorable compared to sector benchmarks.

Q: What role should carbon pricing assumptions play in climate investment evaluation? A: Carbon pricing represents both a potential revenue driver and a proxy for policy commitment to decarbonization. Investors should evaluate climate investments under multiple carbon price scenarios, including current levels ($65-170/ton in major North American jurisdictions), announced trajectories (Canada's path to $170/ton by 2030), and stress cases reflecting policy reversal or acceleration. Critically, investments should demonstrate viability under current carbon prices rather than depending on future price increases—solutions that require $150+ carbon prices for profitability face significant policy risk. The voluntary carbon market adds complexity; given quality concerns, investors should apply substantial discounts to voluntary credit revenue projections and verify that underlying projects meet rigorous additionality and permanence standards.

Q: How are regulatory developments affecting climate investment due diligence requirements? A: The regulatory landscape has shifted dramatically between 2024 and 2025, with direct implications for investment evaluation. California's SB 253 requires large companies to disclose Scope 1, 2, and 3 emissions, creating transparency that enables investors to verify corporate climate claims. The SEC's climate disclosure rules, while more limited in scope, establish baseline expectations for climate risk disclosure in public company filings. For companies with European operations, CSRD imposes comprehensive sustainability reporting requirements that extend to North American parent companies. Investors must evaluate whether portfolio companies have adequate systems to comply with applicable regulations and whether disclosed information aligns with representations made during fundraising. Non-compliance creates both financial risk (penalties, investor liability) and reputational risk that can affect exit valuations.

Q: What metrics best predict whether a climate technology will achieve commercial scale? A: While no single metric determines commercial success, several indicators correlate with successful scale-up in climate technologies. Unit economics trajectory—whether per-unit costs are declining with cumulative production—provides insight into learning curve dynamics. Customer concentration and contract quality reveal demand certainty; reliance on a single customer or short-term contracts indicates vulnerability. Capital efficiency metrics, including revenue per dollar of invested capital and reinvestment requirements, distinguish asset-heavy business models from those capable of leveraged growth. For hardware technologies, demonstration at meaningful scale (not just laboratory proof-of-concept) significantly reduces technical risk. Finally, team composition matters: successful climate scale-ups typically feature operators with prior experience navigating the specific challenges of their target market, whether utility procurement processes, industrial customer relationships, or consumer market dynamics.

Q: How should investors approach Scope 3 emissions measurement given data quality challenges? A: Scope 3 emissions—those occurring across the value chain—represent the majority of climate impact for most companies yet remain the most challenging to measure accurately. Investors should adopt a pragmatic approach that acknowledges current limitations while demanding continuous improvement. Initial assessments can rely on spend-based methodologies using sector-average emissions factors, accepting lower precision in exchange for comprehensive coverage. Over time, investors should push portfolio companies toward activity-based methodologies using supplier-specific data, particularly for high-impact categories identified through materiality assessment. Engagement with key suppliers to improve data quality represents a higher-impact strategy than demanding unattainable precision across all Scope 3 categories. Investors should evaluate whether companies have identified their highest-impact Scope 3 categories, established baseline measurements, and implemented improvement programs—the trajectory matters more than initial precision.

Sources

Climate Policy Initiative. "Global Landscape of Climate Finance 2024." November 2024. Analysis of climate finance flows including North American investment trends and gap assessment against net-zero requirements.
Partnership for Carbon Accounting Financials. "The Global GHG Accounting and Reporting Standard for the Financial Industry, Third Edition." December 2024. Methodology for measuring and disclosing financed emissions across asset classes.
BloombergNEF. "Energy Transition Investment Trends 2025." January 2025. Comprehensive analysis of climate technology investment flows including sector breakdowns and regional trends.
Science Based Targets initiative. "Financial Sector Science-Based Targets Guidance, Version 2.0." 2024. Framework for setting and validating emissions reduction targets for financial institutions.
International Sustainability Standards Board. "IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information" and "IFRS S2 Climate-related Disclosures." 2023. Global baseline sustainability disclosure standards with implementation guidance.
California Air Resources Board. "SB 253: Climate Corporate Data Accountability Act Implementation Guidance." 2024. Regulatory requirements for corporate emissions disclosure applicable to companies operating in California.
European Commission. "European Sustainability Reporting Standards (ESRS)." 2023. Detailed disclosure requirements under CSRD affecting North American multinationals with European operations.