For much of the past decade, climate venture capital was framed around urgency: the need to decarbonise the global economy and deploy capital toward technologies capable of bending emissions curves.

But the conversations between venture firms and their limited partners (LPs) are evolving.

Today, climate alone is rarely the central investment narrative. Instead, LPs increasingly view climate and hard tech through the lens of industrial competitiveness, energy security, and resilient supply chains.

The shift reflects both macroeconomic realities and geopolitical developments that are reshaping how capital is allocated.

At the same time, the fundamentals of venture capital remain unchanged: LPs are still focused on returns, liquidity, and disciplined portfolio construction.

Climate hard tech sits at the intersection of these dynamics, benefiting from powerful structural tailwinds while still needing to prove that deep technological ambition can translate into scalable businesses and credible exits.

We caught up with 6 General Partners to hear their take on where LP tailwinds are headed and why the next era of industrial innovation will be built around Climate Hard Tech.

One of the clearest changes in LP conversations is the move away from climate as a standalone narrative.

“The first question LPs ask today is no longer whether climate matters,” says Doerte Hirschberg, General Partner of Climentum Capital. “It is how the strategy translates into returns.”

In practice, that means conversations quickly move toward technology risk, capital efficiency, and exit pathways. Climate remains a defining macro theme, but LPs increasingly expect strategies grounded in commercial realities rather than environmental impact alone.

“In our case, we frame climate through industrial resilience across energy systems, supply chains, and industrial productivity,” Doerte explains. “LPs want to understand where real strategic demand exists.”

This evolution reflects the maturation of climate investing. A decade ago, many funds positioned themselves around decarbonisation as a mission-driven thesis.

Today, LPs want to see clear market pull and durable economic drivers behind climate technologies.

Felix Leonhardt of Oyster Bay Ventures sees similar dynamics when speaking with investors.

“We do not pitch our fund as a climate strategy,” he says. “We pitch the huge opportunity that exists in food tech and agtech — which we need to solve if we want to solve climate.”

The first questions from LPs tend to focus on scalability and competitiveness.

“LPs have seen a lot of money burned on great technical solutions that do not have a real market pull,” Felix says.

Patrick Noller, General Partner at FoodLabs, says LP conversations today often begin with a similar diagnostic.

“Most LPs start with three core questions,” he explains. “What are the most pressing bottlenecks in the climate transition? Is the technology economically competitive without reliance on subsidies or green premia? And, is the solution globally scalable?”

Beyond the core thesis, LPs are also scrutinising execution risk more closely. “Additionally, LPs are looking more closely at how fast hardware moves from a prototype to deployment and whether the engineering teams are actually capable of pulling it off,” says Patrick

Danijel Višević, General Partner and Co-Founder at World Fund, says LPs often begin from a similar starting point — but increasingly focus on differentiation and geopolitical context.

“LPs’ first questions are generally around differentiation and defensibility,” he explains. “Why Europe, why now, and why do you stand out from other funds?”

“Some LPs are also increasingly asking how our decarbonisation investments link to energy security, European resilience, and sovereignty. So we usually pitch the resilience strategy proactively.”

For venture firms operating in climate hard tech, the implication is clear: the technology alone is not enough. LPs want to understand how innovation fits into existing industrial value chains and whether it can achieve cost and performance parity with incumbents.

Maximilian Schwarz, Founder and General Partner at Nucleus Capital sees this dynamic play out clearly in conversations with institutional investors.

“LPs usually move very quickly past the climate narrative itself and ask where venture-scale outcomes actually come from in this transition.”

For Nucleus Capital, the answer lies in how industrial production itself is changing.

“For Nucleus the answer sits in how things are manufactured. A large share of global emissions comes from how we produce food, chemicals, and materials, and those industries are starting to be reshaped by biotechnologies.”

From a venture perspective, the opportunity is rooted in replacing existing industrial markets rather than creating entirely new ones.

“What makes this interesting from a venture perspective is that you’re not trying to invent entirely new markets. You’re replacing enormous existing ones like fertilizers, food ingredients, industrial chemicals, materials. Once a new production method becomes cheaper or better, adoption can move surprisingly quickly. That dynamic is much easier for LPs to underwrite than purely policy-driven markets or arguments for green premiums.”

If climate alone is no longer the narrative, what is driving renewed LP interest in hard tech?

Across multiple investors, one theme consistently emerges: Europe’s growing focus on industrial sovereignty.

“The European ecosystem is really showing its strength right now,” says Daniel Niemi Partner at Atlantic. “Founders and investors are increasingly daring to take on bold, industrial-scale projects with all their complexity.”

The broader macro context is amplifying this trend. Governments across Europe are rethinking strategic dependencies in sectors ranging from energy systems to advanced manufacturing.

“The demand for European-made, sovereign alternatives in critical fields such as defence, energy, and space is a really powerful force shaping LP appetite today,” Daniel says. “Value chain dependencies are being fundamentally re-evaluated, and governments are sending serious signals that they’re ready to back new capabilities.”

At World Fund, Danijel sees the same shift playing out in LP discussions.

“Energy security and industrial resilience have become strategic priorities in Europe,” he says. “Climate technologies are increasingly seen as core infrastructure for economic competitiveness, supply chain security, and technological sovereignty — not just environmental solutions.”

For LPs, this dynamic creates a compelling investment case: climate and hard tech companies are no longer just decarbonisation plays, but part of a broader effort to rebuild industrial capacity and technological leadership.

Felix sees a similar shift in capital flows:

“The biggest tailwind is Europe investing in Europe — and accepting that we need to lead if we want to solve the climate crisis.”

Many institutional investors remain heavily allocated to US markets across both public and private portfolios. But geopolitical tensions and policy developments are beginning to prompt a reassessment.

“A rotation has started where LPs are at least beginning to shift some liquidity toward Europe instead of the US,” Felix notes.

Combined with growing European policy support for energy transition and industrial innovation, these factors create structural tailwinds for climate and hard tech venture funds.

Patrick also sees structural forces shaping LP interest, particularly in agriculture and industrial automation.

“In agriculture, We need automation to fix farming issues like soil depletion and labor shortages, while AI is speeding up hardware development. Our LPs recognize these factors as long-term structural challenges rather than temporary or cyclical trends. Europe is in a great spot here because of its top-tier engineers and strong university networks.”

Danijel argues that scaling capital remains Europe’s biggest bottleneck.

“European Series B rounds average $35.2 million compared with $45.5 million in the US,” he says. “Between 2020 and 2024 that created a $13.5 billion funding gap. If Europe wants sovereign industrial champions, institutional capital needs to step in.”

Despite these tailwinds, LP expectations around venture timelines are also evolving.

Deep technology ventures often require longer development cycles than software startups. Building new energy systems, advanced materials, or industrial processes can take years of engineering and validation before reaching commercial scale.

Professional investors are well aware of this dynamic.

“The pace of AI success stories is creating a new benchmark for what’s achievable in a given timeframe,” Daniel says. “But when I look at our own portfolio, the deep tech companies doing the most consequential work aren’t slow — they’re compounding over time and the journey just looks different.”

In other words, climate and hard tech follow a different trajectory than software. Progress often comes through steady technical breakthroughs rather than rapid product iterations.

“Professional investors understand that venture is, at its core, a long-term game,” Daniel adds.

At the same time, the broader macroeconomic environment has changed LP incentives.

Interest rates have risen sharply over the past few years, increasing the opportunity cost of illiquid investments.

“LPs have become less patient,” Felix says. “Interest rates went from negative to four or five percent in a couple of years, so the opportunity costs are very different today.”

Even for younger funds, LPs are already pressing for evidence of liquidity.

“Although our portfolio is on average less than 2.5 years old, LPs still ask for DPI and exits,” Danijel says. “Most understand that deep tech solutions require longer build cycles, but some companies can mature much faster. For example, our portfolio company IQM, where we led a €128 million Series A in 2022, is already planning a listing.”

For many institutional investors, this translates into a rebalancing of portfolios. Venture capital allocations expanded rapidly during the low-interest-rate era, and some LPs are now waiting for liquidity before committing new capital.

“There is still an overhang of portfolios on the LP side that include too much venture capital and are waiting on DPI that may never come,” Felix says.

The result is a more disciplined investment environment. One where patience still exists, but only when paired with credible exit potential.

“Our LPs appreciate our focus on early-stage investment, recognising that hands-on support yields the greatest impact at this stage,” Patrick points out.

He adds “Our platform team offers complimentary support to our portfolio companies in critical areas such as follow-on fundraising, hiring, partnerships, and go-to-market strategy. Furthermore, many LPs actively leverage their industry expertise and strategic guidance to serve as valuable sparring partners for our founders.”

This hands-on early-stage support complements the patience LPs must exercise, ensuring that even longer development cycles are paired with a clear path to value creation.

“LPs understand that climate and industrial technologies require longer development cycles,” Doerte says. “If you want exposure to this asset class, patience is part of the equation. That said, patience does not mean indefinite timelines.”

Climentum recently saw this dynamic play out in practice. The firm’s KNXT exit occurred just four years after the company’s founding.

“It shows that structured positioning and strategic buyers can generate liquidity earlier than many expect,” Doerte says.

Even with favourable macro trends, climate hard tech remains a challenging asset class.

The concerns LPs raise most frequently are familiar to venture investors working in the space.

“The main concerns remain capital intensity, long validation cycles, and uncertain exit pathways,” Doerte says.

Building physical technologies often requires significantly more capital than software startups, and commercial adoption can take years as products move through industrial testing and certification.

At the same time, LPs across venture capital are increasingly focused on realised returns rather than paper valuations.

“DPI. DPI. DPI.,” Felix concludes. “LPs are not looking for paper returns — they’re looking for cash back.”

Structural barriers also still shape LP participation in Europe.

“Some institutional investors remain hesitant due to regulatory constraints such as Solvency II,” Danijel notes. “If Europe wants sovereign industrial champions, policymakers need to unlock more capital from pension funds and insurers into climate venture.”

For emerging climate funds, demonstrating successful exits has therefore become critical to securing new commitments.

Yet many investors believe that these concerns will gradually ease as the ecosystem matures.

The key, Doerte argues, is proving that hard tech companies can move beyond technical validation to strategic relevance.

“Hard tech companies need to transition from technical success to strategic relevance, where industrial buyers, infrastructure capital, or private equity can ultimately provide liquidity,” she says.

Taken together, the current LP environment reflects a broader evolution in how climate and hard tech are understood.

A few years ago, climate investing was often framed primarily as a sustainability imperative. Today, it is increasingly seen as a core economic and industrial transition.

Energy security, supply chain resilience, and geopolitical competition are now shaping capital allocation alongside decarbonisation goals.

“One structural tailwind is Europe's rediscovery of its industrial base. For decades Europe built global leadership in chemistry, agriculture, and materials science. What we are seeing now is the emergence of biology as a new manufacturing platform on top of that foundation,” notes Maximilian.

As climate technologies improve, the underlying economic drivers are also shifting.

He adds: “The other structural shift is that many climate technologies are moving from policy-driven adoption toward economic competitiveness. When a biological production method outperforms a petrochemical or agricultural process on cost and performance, adoption tends to follow within venture timelines. Interest rates and venture cycles will always influence LP behaviour in the short term, but the underlying industrial transition is structural.”

For venture firms operating in climate hard tech, this shift creates both opportunity and pressure. The macro tailwinds are strong, but LPs are asking sharper questions about capital efficiency, scalability, and exit potential.

Ultimately, the technologies required to transform energy systems, agriculture, and industrial production will not emerge overnight. But as governments and corporations rebuild strategic capabilities across critical industries, the demand for climate hard tech solutions is likely to continue growing.

In that sense, the current LP appetite may be less about climate as a theme, more about the recognition that the next era of industrial innovation will be built around it.