How growth equity can accelerate investment in climate solutions

Climate technologies are entering a critical phase in their development cycle. Early-stage innovation has created promising solutions, but scaling these technologies to meaningful commercial deployment remains both a significant challenge and an opportunity for private equity general partners (GPs).

Growth equity investors are stepping into this crucial gap, providing not just capital but essential operational and scaling expertise to transform climate innovations into industry-leading platforms. This targeted approach is proving vital for accelerating the pace of decarbonization while delivering attractive returns for investors who understand the unique dynamics of scaling sustainable businesses.

Growth equity investors who are at the leading edge of investing in climate solutions and the energy transition have identified crucial funding gaps, and have been deploying capital to capture value. While venture capital excels at funding innovation, growth equity is essential for scaling proven technologies and business models.

Rhea Hamilton, Managing Director with General Atlantic's BeyondNetZero, has over two decades of climate investing experience and has observed the evolution of the sector firsthand. She underscored this critical need in the climate ecosystem:

"Venture capital is great at developing technologies, but how do we get those to scale? Growth equity plays a crucial role in bridging that gap, providing capital and company-building capabilities to take a company from a few customers to large-scale adoption."

This perspective aligns with what other leading investors are seeing. According to the World Economic Forum's 2024 white paper Bridging the Divide: Private Markets and New Drivers of Value Creation, the private equity firm Ardian has also progressed beyond traditional sustainability approaches towards a more holistic strategy linked to portfolio company operational excellence. The firm has strengthened its capabilities by hiring investors and operators with industrial backgrounds and enhancing its data science capabilities to support portfolio companies as they simultaneously drive decarbonization and digitalization.

Growth equity's hands-on approach is particularly valuable for climate-focused companies that need to optimize their go-to-market strategies and pricing models. Hamilton said that while many climate-focused businesses have strong product-market fit, they often underutilize sustainability and carbon-related data as a commercial lever:

"Many companies haven't thought about how their products impact emissions or regulatory needs. By helping them see the value of their data – from an emissions reduction and regulatory standpoint – we can unlock new commercial opportunities."

For example, one General Atlantic portfolio company was repositioned from an efficiency-focused business to align with sustainability-driven market trends; this expanded its customer base and allowed it to command a sustainability premium in the market, a strategy that exemplifies how climate-focused investors can drive both commercial success and positive environmental impact.

Institutional investors increasingly seek quantifiable impact alongside financial returns. Hamilton explained how this focus is integrated into the due diligence process at General Atlantic:

"We don't just assess companies on financial metrics; we look at their ability to reduce emissions at scale. That means evaluating sector-level opportunities, conducting deep due diligence on carbon impact, and ensuring sustainability is a core part of the business model."

PAI Partners demonstrates a similar commitment to measurable outcomes. According to the Forum’s white paper, PAI has embedded sustainability directly into its operational excellence approach, using advanced tools and data-collection capabilities to understand the implications of environmental factors on its portfolio. The firm has developed an internal carbon pricing mechanism that quantifies the impact investments will have on emissions and supports assessment of future value based on successful decarbonization.

This focus on quantifiable outcomes is becoming standard practice across the industry, as investors recognize that rigorous measurement is essential for communicating value to limited partners and potential future investors of their portfolio companies.

Hamilton identified three key climate-focused sectors poised for significant private capital deployment:

Similarly, in the agriculture sector, Paine Schwartz Partners has focused on productivity and sustainability themes, leveraging their two decades of experience to identify historically underinvested areas throughout the food supply chain. Their approach demonstrates how sector specialization can enhance both financial returns and sustainability outcomes at the same time.

As the climate investing landscape matures, private equity investors are playing an essential role in scaling commercial-ready solutions. Hamilton emphasized that the market has evolved beyond speculative technologies:

"We are now in a well-identified ecosystem that needs capital. Technologies that were once speculative are now scaling, but they need experienced investors who can provide both funding and operational support to help them become tomorrow's leading businesses."

By aligning capital with commercial and operational capabilities, investors are shaping the next generation of climate-focused market leaders, ensuring that decarbonization solutions are not just viable but tremendously successful commercially.

The climate technology sector now stands at the critical inflection point between innovation and industry dominance. Technologies that have proven their product and service market fit at smaller scales must now be scaled rapidly across global markets to achieve meaningful “commercial and” climate impact. Growth equity investors are uniquely positioned to drive this transition and company growth, combining strategic capital with operational expertise to transform promising climate solutions into market-leading champions.

For climate technology senior management teams, choosing the right growth equity partner is perhaps one of the most consequential decisions they will make. The ideal investor brings not just capital, but domain expertise, customer relationships, operational playbooks, and strategic vision that can accelerate market penetration, reposition business models, and drive competitive differentiation. Those who partner with experienced growth investors now will likely emerge as the dominant players in their respective sectors over the next decade.

For asset allocators, the message is equally clear: the window for participating in the scale-up phase of climate solutions is open, but it won't remain so indefinitely. Early movers who commit capital to experienced GPs with proven climate expertise will gain exposure to what may be one of the defining investment opportunities of the coming decades.

The climate and decarbonization challenge demands rapid deployment of proven solutions at unprecedented scale. Growth equity stands ready to convert companies leading on climate innovation into strong and profitable climate champions, creating substantial value for investors. The race to scale is on, and those who move decisively now will help shape the sustainability and energy transition industries of tomorrow.