McKinsey: How Capital is Maturing for the Cleantech Era

The clean technology sector is entering a phase of disciplined, large-scale deployment, and financiers are backing it, new research from McKinsey shows.

The firm analysed more than 11,000 cleantech companies globally, with its findings highlighting that the market is increasingly rewarding commercial discipline over growth-at-all-costs.

Between 2023 and 2025, annual clean-tech funding has stabilised at US$70bn, nearly four times the pre-2020 average. 

The key shift, however, goes beyond the amount of capital being raised, but the sustainable way it is structured.

The bankability breakthrough

Cleantech finance is shifting from speculative venture capital to institutional debt. 

Debt, the most risk-averse and lowest-cost capital, now makes up about 25% of post-boom funding, up from 10% in previous periods, according to McKinsey’s data. 

This increase shows that lenders have greater confidence in the maturity of technology. Of the US$80bn in debt deployed since 2015, two-thirds was raised in the past three years.

As technology models mature, financing is shifting to support companies ready for large-scale deployment. 

However, regional differences are emerging. In Europe, start-ups rely heavily on public funding, which accounts for 30% of venture capital, compared with 4% in the US. 

This reliance leaves European firms more vulnerable to changes in public policy and security priorities, which have recently reduced funding for sustainability, according to McKinsey.

"Our research suggests that Europe’s challenge is now less about innovation and more about scaling,” says Anna Granskog, Partner at McKinsey. 

“To compete globally, European scale-ups will likely need to combine public funding with greater access to private growth capital and strategic partnerships. 

“While capital deployment today is still skewed toward the US, the funds being raised are increasingly concentrated in Europe, which suggests there is investor appetite and the potential for greater clean-tech investment and deployment in the region.”

The path to scale requires meeting the rigorous standards of project finance and debt markets, rather than relying on ongoing equity rounds.

McKinsey found that 90% of the largest equity raisers since 2015 remain operational, and almost all have matured from the lab into significant revenue-generating companies. 

Collectively, these companies have raised approximately US$166bn in equity, representing 45% of all cleantech equity raised since 2015 by more than 11,000 companies considered in the analysis.

The death of the green premium

The period of depending on ideological buyers or premium pricing for environmental benefits has ended, according to McKinsey’s research. 

In today’s market, the most successful firms offer solutions that are fundamentally less expensive than conventional alternatives.

Investors now focus on companies with a clear value proposition that goes beyond climate impact. 

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“Our research suggests that funding growth to date has been strongest in technology areas where clean solutions are already becoming competitive with conventional alternatives,” says Anna. 

“As the ‘green premium’ declines or disappears, adoption can accelerate because customers increasingly do not have to choose between sustainability and economics. As a result, we would expect to see continued strong funding for companies whose solutions are not dependent on earning a green premium. 

“At the same time, funding is unlikely to grow evenly across all climate technologies, as investors are becoming more selective and prioritising companies with a credible path to profitability, rapid scaling and strong demand.”

Funding is now twice as high in areas where clean technologies have reached cost parity or better, such as light EVs, solar power and sustainable fertilisers. 

Companies succeed by offering a “green” product while using scale and vertical integration to reduce upfront costs, McKinsey’s research adds.

Successful models, such as solar-as-a-service or battery-swapping subscriptions, are moving cleantech from large capital purchases to more affordable service models.

The scaling pitfall

A common pitfall is when capital growth outpaces operational readiness. McKinsey cites the collapse of battery manufacturer Northvolt to illustrate this risk. 

Although the company raised about US$1bn between 2017 and 2019, its operations did not keep pace. 

Production delays led to cancelled customer orders, and the funding gap and production instability resulted in bankruptcy in 2025. 

Effective leadership now requires balancing capital growth with steady technical progress to ensure the business model matches the strength of the underlying science.