Investment in climate fintech startups outperformed overall venture funding last year, raising $2.7 billion (£2.1bn), 17% more than in 2023, according to a new report from CommerzVentures.

The independent venture capital firm’s 2025 Climate Fintech Report found that, despite just 3% growth in VC funding and cautious investors, climate-focused fintech startups secured significant first-time backing, with over 50% of their funding coming at Pre-Seed and Seed stage.

The data shows that there is growing interest among private investors in firms innovating at the intersection of climate, finance, and digital technology, with a report from PwC last year finding that 10% of VC and private equity investment now flows into climate technology, up from just 3% in 2016.

By analysing data from more than 640 climate fintech startups, CommerzVentures’ study found that fintech firms focused on the energy sector have attracted the most interest, receiving $870 million (£688m) in funding last year, considerably more than those next on the list which includes startups working in carbon markets, which raised $460 million (£364m), and climate risk, at $404 million (£319m).

Startups working in ESG reporting did not do so well, winning just $268 million (£212m) in private funding, despite the increasingly complex regulatory landscape surrounding the climate and environmental impact of businesses, particularly across Europe.

Climate fintech investment also seems to buck ongoing trends found elsewhere in the sector.

Despite KPMG’s most recent Pulse of Fintech report finding that the US still dominates in terms of overall fintech investment – accounting for $50.7 billion (£40.2bn), not to mention over half of the top ten deals of 2024 – European climate fintech startups raised two and half times more than their US counterparts last year, raising $1.9 billion (£1.5bn) to American firm’s $765 million (£605m).

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Last year, German-based climate fintechs raised the most funding in Europe, with $832 million (£658m), vastly outstripping UK firms, which although ranking second saw just $276 million (£218m) in funding.

The acceleration of climate fintech investments in Germany, considered by many as Europe’s financial powerhouse, goes hand in hand with the new regulations firms, including the EU’s Corporate Sustainability Reporting Directive, which is driving demand for environmental services that can help companies adapt to new requirements.

In just the last two years, that demand has seen German climate fintechs such as Bees & Bears – which last month landed €500 million (£414m) to fund 25,000 renewable energy installations – to secure more than three times more funding than UK companies, which until now have dominated the market.