Climate capital cools: H1 funding recap

Hey there,

Today we’re sharing our mid-year recap on Canadian climate tech funding. It’s a chance to take stock of where the industry stands and what’s on the horizon.

Climate companies raised more than $475 million in the first half of 2026, a 38% drop over last year. Deal activity is slowing, but settling into a new normal.

We’ll unpack where capital is flowing, how Canada stacks up to the world, and share a few takeaways on what this means for founders.

Elsewhere in climate tech:

Air Canada and Airbus back Canadian SAF
NxLite scales up energy efficient window coatings
Rodatherm gets ready to deploy geothermal in Utah

p.s. If you’re an early-stage venture raising (or getting ready to), we’d love to talk.

Fewer deals split between seed and growth as climate investment cools

At a glance

Canadian climate tech startups raised almost $475 million across 28 deals in the first half of 2026. That's a 38% drop from 2025's $766 million.

Deal volume and size is stabilizing, but at levels significantly below the highs of 2021-22.

A tale of two stages

Early stage investment was strong despite overall market challenges. Over 50% of all deals were at the Seed stage or earlier.

Despite this focus on early-stage deals, 60% of capital went to Series C and late-stage investments, as investors continue to double-down on de-risked winners.

At Series A and B, however, the scale-up gap persists. Just a handful of companies graduated from Seed to A or A to B, reflecting a higher bar and potentially longer commercialization timelines.

While deal volume is slowing slightly, the average deal size is stabilizing - albeit around 50% lower than 2022 highs.

Where capital is flowing

Industry was the strongest sector, capturing the most deals (8) and capital - $251M. Notable rounds include Mangrove Lithium’s $118M financing, Cyclic Materials’ $103M Series C, and a cluster of deals in efficient compute like Soma Energy and JetScale AI.

Food & Land Use also had a strong showing with 7 deals and almost $95M, including Solugen’s $50M growth round, NS/TX’s $10.5M Series A, and Miraterra’s $16M raise.

Mitigation continues to capture 93% of funding. Removal and pure play adaptation barely moved.

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Adaptation is moving up the priority list as disasters and climate impacts are having real physical and economic impacts. Carbon removal is largely in "prove it" mode - not raising, but signing offtakes and deploying.

BC companies made up almost 40% of deal activity and over 56% of capital raised ($270M), followed by Ontario and Quebec.

The big picture

How does the Canadian market stack up to wider climate VC investment?

Globally, VC investment is up 55% but capital is concentrating around AI and low-carbon data centres - 34% of all deals.
Deal count hit a five-year low, and the 10 biggest deals captured 42% of all funding.
Meanwhile, Canadian VC is down 6% in 2025, activity down 12%. Pre- and Seed stages are active, with AI claiming ~50% of all dollars invested.

The drop in Canadian climate funding reflects both wider challenges in the Canadian VC ecosystem as well as less exposure to the data centre / energy demand lift in the US.

The bottom line

We're now squarely in a new normal: fewer and smaller deals, with an active seed stage and capital concentrating at later stages. This pattern has been settling in over the past year, as investors continue to make new, early stage bets and back the select few winners.

Takeaways:

Fundraising is hard - and will likely be harder. Fewer deals, smaller cheques, and a thin Series A funnel mean founders need to build runway assumptions around longer, more difficult raises.
Moats and defensibility have never mattered more. If you're building software or software-enabled hardware, the bar is higher than ever. Ask: What makes this hard to replicate in 12 months?
Performance > Green premiums. Relying on incentives isn’t enough, and investors will write them to zero to see if the investment still works. Climate impact matters, but investors (and their LPs) need to see the market problem. Ask: Do you have line of sight to cost parity? Are the problem you solve and performance gains front and centre?
Beware side quests. Uncertainty in software is leading more investors to hardtech, but not everyone is prepared for longer timeline for returns. Federal dollars also make dual-use attractive, but it can become a major time sink and distraction. Tools like ITBs can be a better route. Ask: Does this investor know hardtech? Is selling to defence a core part of my business?

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Your take: I want to hear your take. Does the data line up with what you’re seeing? Are there sectors or topics you’re watching closely? Hit reply to let me know!

A quick note on the data: Data is based on our own tracking of publicly announced venture capital and growth equity rounds. Some rounds go unreported and won't appear here. It’s also a small data set, and including or excluding one data point can have large effects, particularly in averages. You may notice past year numbers change as we update and refine how we track.

NxLite (Toronto, ON) closed $13.1 million in Series A funding and a $3.5 million debt facility to scale up production of its energy efficient glass coatings.

Phytokana Ingredients (Calgary, AB) secured $25 million to build its fava bean protein facility in Alberta to meet several hundreds of millions in offtake agreements.

Replenish Nutrients (Okotoks, AB) landed a $15 million strategic investment with SRC Agrominerals to support near-term growth for its regenerative fertilizers.

The Initiative for Sustainable Aviation Technology (INSAT) announced $16.4 million in funding for sustainable aviation, including a hybrid-electric demonstration program from Pratt & Whitney Canada and a mixed alcohol-to-jet solution from Mississauga’s Greenfield Global.

Brookfield acquired Aypa Power (formerly NRStor), North America's largest standalone battery storage developer, expanding Brookfield's battery storage portfolio.

Air Canada and Airbus launched a co-investment platform for Sustainable Aviation Fuel in Canada, investing up to US$10M to catalyze the Canadian SAF ecosystem.

Electrovaya announced a commercial partnership with Amazon, giving Amazon the option to buy up to 20% of the battery maker if it buys $280M over the next 10 years.

GridS2 and Enova Power are piloting a local, distribution level electricity market in Kitchener, ON to coordinate distributed energy resources.

Rodatherm Energy signed an MOU with Fulcrum Point to develop geothermal projects in Utah, starting with a 200 MW project.

PolArctic Canada and Mila are using AI to measure and forecast sea ice levels in the Arctic.

Electric bus maker Letenda secured its first Canadian public transit purchase, delivering two buses to York Region.

Cyclic Materials partnered with ERI's e-waste collection network, creating one of the largest rare earth recycling operations in the US.

Tariffs back on the menu: Trump announced new 50% tariffs on all Canadian imports, hitting everything from cement to wine. Energy, potash and critical minerals are among those spared.

BC Premier Eby argued that Canada should restrict access to critical minerals in response

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Why it matters: Broad tariffs would raise prices for consumers and infrastructure projects. Some Canadian companies are starting up manufacturing operations in the US to hedge against tariff impacts

East Coast wind: The Premiers of NB, NS and PEI agreed to advance a regional grid, including a potential joint system operator, to strengthen the grid and improve affordability.

EV growth: BC will nearly quadruple its EV charging network with a $700M investment, expanding to 3,500 stations by 2035. Used EVs are also becoming the fastest-selling vehicles in Canada according to Clutch, as gas prices climb.

Green shipping: Spain joined Canada's Green Shipping Corridor with Germany to decarbonize the marine sector.

What is sustainable finance?: Canada's draft Sustainable Finance Taxonomy is open for public comment, a voluntary tool to identify opportunities for climate-aligned investment.

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