Based on results from the first half of 2025, climate tech investment is in wait-and-see mode. 

Grappling with shifting macroeconomic factors, geopolitical tensions and domestic policy changes, investors have shored up cash, waiting for markets to find some semblance of certainty to start re-allocating capital with confidence.

“We found a real slowdown in the first half of the year … people are just not investing in the face of uncertainty,” said Yi Jean, a partner at Clean Energy Ventures, which invests in early stage companies scaling decarbonization solutions. 

First half funding is down 19 percent compared to 2024, according to CTVC. And while “mega deals” (greater than $100 million) are up 31 percent, early-stage climate tech investment has decreased, with seed and Series A investment totals dropping by 26 percent and 12 percent, respectively, 

This deceleration has forced startups to get back to fundamentals. It’s important for founders and investors to recognize the moment we’re in, said Gabriel Kra, co-founder at Prelude Ventures, who’s been investing in climate technologies since 2009: “In today’s climate tech new normal, cash and unit profitability is more important than growth.” In essence, he continued, “you can’t sell an investor on a vision, you have to prove unit economics and profitability, and how you’re not dependent on tax incentives to reach profitability.” 

While uncertainty weighs on both startups and investors, how have the specifics of the Trump administration’s budget and policy bill, the “One Big Beautiful Bill Act,” affected investor sentiment? Does it provide additional certainty or muddy the waters further? 

Less than disastrous

While the bill changes the policy outlook for climate tech, tailwinds from the IRA aren’t fully gone. 

“The sense of disaster has been overhyped,” said Leonardo Banchik, investment director at early-stage venture firm Voyager. “While the IRA could have been stronger, several important provisions remain intact, which makes a real difference for the sector.”

The table below shows which sectors the new law is positive, neutral or negative for. For a comprehensive breakdown of the bill, I recommend exploring reports, including one from Columbia and another from Rhodium Group. 

Startups respond

It’s a mixed bag for startups, dependent on their tech and business models.

The strategy of Ateios Systems, an early-stage battery startup that designs electrodes without toxic chemicals, is focused on unit economics, operating towards profitability without help from policy, said founder and CEO Rajan Kumar. The bill “is helping our business [from the domestic manufacturing perspective] but it’s not the only thing,” he added.  With tax credits for battery manufacturing still in place, Ateios should be able to lower its prices and increase its margins. 

For Harvest Thermal, an early-stage smart HVAC startup, the bill is both boost and drag. With home energy credits expiring at the end of this year, homeowners will no longer be able to claim a 30-percent tax credit on technologies like Harvest Thermal’s. “While the loss of 25D creates headwinds, it has also encouraged us to deepen our partnerships with state and local programs, where we see much of the momentum shifting anyway,” said Jane Melia, the company’s co-founder and CFO.

The state of California, for example, is offering up to $25,000 in combined incentives for systems like Harvest Thermal’s. So while Washington retreats on certain tax credits, some regional players are filling the gap. 

At the same time, other tax credits, such as 48E, provide a 30-50 percent credit for advanced HVAC systems through 2033. 

At the end of the day, said Melia, “policy shifts like this remind us that incentives come and go, but customer value must remain permanent.” 

The case for optimism

Even under the current administration, tailwinds remain for a number of climate technologies. The current environment requires startups to get creative with regional incentives and focus on creating superior products.

Voyager’s Banchik expects the bill to inject certainty into the market and fuel more investment in the rest of the year. “While we invest in companies with strong fundamentals that don’t depend on policy incentives, having these provisions enshrined in law reduces risk and eliminates countless hours of discussions to build confidence,” he said. “We’re already seeing this certainty in the investments we’re making. It’s as simple as: Credits are extended, so let’s move forward.”

Kra of Prelude Ventures referenced James Taylor: He’s seen fire and he’s seen rain. At some point, “markets will come roaring back,“ Kra said, and “companies that meet that moment with unit economics will be poised for growth and tremendous financial success.”

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Mass market T-shirts travel more than most Americans do. The materials in them commonly journey tens of thousands of miles from their cotton field roots to retail racks.

Less than 5 percent of clothes bought in the United States are made here, as 1.5 million jobs in apparel and textiles disappeared between 1979 and 2019.

Those who dream of renewed, home-grown supply chains have grasped for bright spots in the Trump administration’s chaotic storm of tariffs that have made it impossible for companies to conduct business as usual. Some advocates of slow fashion have found hope in the White House’s closure of a duty-free customs loophole that had favored fly-by-night fast fashions like Shein’s.

The secondhand clothing market may be an early beneficiary of such policies, but what about the few companies already making clothes from scratch domestically?

If anyone can answer that question, it’s T-shirt maker Eric Henry. His purpose-driven mission to source close to home has kept his Burlington, North Carolina, business afloat since the late 1970s. In 1994, however, the North American Free Trade Agreement (NAFTA) almost broke his wholesale screen-printing outfit TS Designs, as customers like Nike bailed for cheaper suppliers overseas.

Local farm-to-fashion

Instead of collapsing, Henry drove harder into a sustainability niche, launching a Cotton of the Carolinas project that fosters “mini supply chains.” During the COVID-19 pandemic, he expanded that work into a retail brand, Solid State Clothing, to promote natural fibers and dyes derived from walnuts and marigolds. Scanning a QR code on the garment label opens a website of the faces, locations and contact details for each cotton farmer, fiber spinner and sewing operation. 

“I want to know the farmer,” said Henry (who has separately launched a collective of small farmers), of his new Where Your Clothing website. “I want to know the gin. I want to know specifics, because our industry is so good at greenwashing. It’s a way that we we check ourselves, and the consumer checks us.”

Source: Where Your Clothing / Eric Henry

But decades into his labors to advance “dirt to shirt” production in the Southeast, Henry said hyper-fast fashion has brought the toughest challenges since NAFTA. And the powers-that-be in Washington are stripping away the supports that would help companies to revive U.S. manufacturing, and especially sustainable practices, according to Henry.

“At the end of the day, profits are important,” Henry said. “Making money is important. But I don’t want to do that if I’m hurting people or the planet.”

He has spent the better part of 2025 attempting to make sense of seesawing tariffs in order to afford the Spanish equipment he needs to build “the garment dye house of the future.” Meanwhile, federal funding for farmers’ sustainability and climate-related efforts is highly uncertain, with many programs delayed, canceled or at risk, impacting both Henry’s business and the broader supply chain. 

“It just causes further chaos in the marketplace,” he said. In addition, Henry fears that farmers who already sell cotton abroad at a loss will struggle to attract buyers, due to the tariff “sledgehammer.”

Doubling down

Nonetheless, Henry is doubling down on his purpose. He wants to disrupt apparel brands’ sourcing by growing a manufacturing cluster in the Southeast. He insists that efficient, localized production will justify the price premium of his $60 tees for corporate buyers. 

“Let’s talk about the apparel that you make that you never sell,” he said he will tell brands. “Let’s talk about the apparel that you make that you mark down. Let’s talk about how when something happens in the marketplace it takes you six months to respond. I can respond in a week.”

Local challenges

Henry offers an unusually granular level of transparency, but he isn’t the only maker pushing a U.S. farm-to-fashion model. American Giant of San Francisco sells its “Greatest American T-shirt,” spun from North Carolina cotton, for $65.

Imogene + Willie spent four years bringing to life T-shirts sourced and crafted within 400 miles of Nashville. The $56 white or black shirts are the fruits of its Cotton Project, which involved a seventh-generation farmer in Alabama, a third-generation spinner in North Carolina and a social enterprise garment shop in Tennessee.

And this fall, Renaissance Fiber of Winston-Salem, North Carolina, will start shipping its first-edition $55 hemp shirt, which is farmed in Montana and refined and knitted in the Carolinas.

“Each shirt is a wearable piece of history, a testament to American innovation, and a blueprint for a more resilient, sustainable and American-made future,” the company’s website states. The vision is romantic. In reality, local producers face numerous disadvantages relative to a corporate operation with in-house functions and shock-absorption capacity at scale.

Source: Where Your Clothing / Eric Henry

Consider Henry’s latest year-long cycle to produce a batch of shirts from 1,000 pounds of cotton within 800 miles from home. It begins in spring, with seedlings planted by a farm in the Texas Organic Cotton Cooperative — among the last organic cotton producers in the nation. A nearby ginning operation then removed the seeds. 

Ordinarily, Henry may have turned to the largest cotton spinner in the U.S., but the North Carolina company’s last domestic facility closed in 2024. Fortunately, North Carolina Spinning Mills was able to spin the fiber.

“Then the big fabric finisher, Carolina Cotton Works, in a 30-day notice went out of business last year and knocked a big hole in what we’re trying to do,” Henry said. Conveniently, the nearby knitter Henry chose, Beverly Knits of Gastonia, North Carolina, had snapped up textile finisher Hemingway Apparel in South Carolina.

“Ultimately, we need the brands; they have the retail channels,” said Henry, who is crowdfunding to buy enough Texas organic cotton for a later run of 15,000 shirts. “But we can make apparel manufacturing viable in this country, doing it this different way.”

Can more tight-knit, localized supply chains succeed in the United States? Or are these dirt-to-shirt efforts destined to be boutique brands that will only serve consumers who can afford 10 times the price of a mall or Amazon tee?

A threadbare industry

Margaret Bishop, a professor at the Parsons School of Design, is pessimistic about prospects for a meaningful revival of textile manufacturing in this country.

“Fifteen years ago, I said we could still successfully manufacture in the United States,” she said. “I no longer believe that we can on any significant scale.”

Americans generally don’t want to work in humid dye shops or mills, she said. And in addition to tariffs, the White House’s crackdown on undocumented workers is making even legal immigrants fearful to come to work in apparel jobs, she added. 

Source: Where Your Clothing / Eric Henry

Moreover, providing the variety of yarns and fabrics necessary to keep up with seasonal fashions requires the kind of specialization that no longer exists in the U.S.

“We don’t have the large fiber producers, the large weaving mills, the large knitting mills,” Bishop said. “We’ve outsourced it overseas.”

However, Bishop said, there may be domestic opportunities to produce specific goods such T-shirts, denim and specialized uniforms. 

Regional manufacturing sites

Grey Matter Concepts, for example, is eyeing the Southeastern U.S. to build an AI-enabled factory to churn out socks and eventually T-shirts. The New York-based company sells its basics, including undershirts and boxers, to brands like Wrangler and DKNY.

The plant would offer roles for engineers and technicians with apparel and manufacturing degrees – a far cry from a sweatshop stereotype, according to Robert Antoshak, vice president of global sourcing. “I have this marketing image of people walking around in white lab coats: ‘Look at our socks, look at our underwear, our T-shirts.’”

Expanding some domestic production would bring sustainability benefits, according to Antoshak. For example, domestic cotton is easier to trace. “We can really tell a dirt-to-shirt story that’s U.S.-manufactured and -grown,” he said.

In addition to the momentum behind homegrown, natural fiber shirts, efforts are taking root to create circular manufacturing hubs for polyester. Goodwill Industries International of Rockville, Maryland, is partnering with polyester recycling venture Reju to supply secondhand fashion waste to transform into new textiles.

Said Goodwill CEO Steve Preston: “To the extent that we have these recycling facilities built here, it may not be that big of a step then to develop in that same region people who can spin that into yarn, rather than selling it and sending it to the other side of the world.”

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Food and candy maker Mars set a goal in 2021 to match 100 percent of annual electricity use at its offices and factories — roughly 2 terawatt-hours in 2025  — with contracts for clean energy such as solar and wind power. 

Now it’s committing to do the same on behalf of suppliers and customers through a new initiative dubbed Renewables Acceleration. 

The program, launched in April, will use Mars’ experience in negotiating power purchase agreements to arrange additional contracts that cover the estimated amount of electricity used in the production, distribution and consumption of its goods. Initially, that could be another 6 to 7 terawatt-hours of electricity, three times what Mars is already planning to buy.

The rationale: Many Mars suppliers are too small and inexperienced to procure electricity from solar or wind farms on their own. While many large companies push suppliers to adopt emissions reductions strategies and buy renewables, they aren’t transitioning fast enough at a time when climate experts are calling for a tripling in renewable energy capacity by 2030.

So far, Mars has signed enough clean energy power purchase contracts to cover 58 percent of its own electricity consumption, as of the company’s 2024 environmental update. Extending this idea to the Mars supply chain creates an opportunity to cover electricity related to smaller suppliers it cannot engage directly, said Kevin Rabinovitch, global vice president of sustainability and chief climate officer at Mars. Meanwhile, it will help Mars’ biggest business partners focus resources on investments or process changes to reduce emissions directly. 

“The most exciting thing about this is this lets us do something fast at scale that can help contribute to this sort of broader goal of tripping renewables and taking action now,” he said.

How the concept works

Mars came up with the idea for this approach three years ago, as it contemplated new ways to cut Scope 3 emissions, which reflect upstream activities at suppliers (such as growing raw ingredients) and downstream consumption of its products (such as microwaving a rice pouch).

The sustainability team studied product life cycles to calculate the electricity use tied to each phase. The approach doesn’t contemplate other factors that contribute emissions, such as methane production at dairy farms.

For example, here are ways electricity is used for a Mars rice product:

• Fertilizer production
• Farm equipment, such as irrigation systems
• Ingredient processing and packaging
• Distribution warehouses
• Retail stores and logistics activities
• Consumer usage

Mars calculates the amount of electricity related to these functions and activities using greenhouse gas emissions inventory data it already collects for carbon accounting purposes and publicly available government data, and then extrapolating what portion comes from electricity.

The company figures that about 10 percent of its total carbon footprint can be addressed with the Renewables Acceleration approach. That’s where Mars came up with the 7 terrawatt-hours number it’s seeking to address through this approach.

The calculations weren’t easy because you have to “crack open” the data, Rabinovitch said, but many multinational companies have access to these metrics. “I think everyone will agree that doing activity-based footprinting is better than spend-based forecasting because you get more precision, more accuracy, more insight,” he said. 

Mars plans to apply the renewable energy certificates (RECs) from the clean electricity it buys to cover these activities to its Scope 3 inventory, rather than Scope 2, where calculations related to energy used for Mars’ direct operations are reflected. 

“There’s no functional difference between a manufacturer retiring an [environmental attribute certificate] for a supplier and the manufacturer selling or even simply giving the supplier the REC who then retires it themselves,” Mars said in a white paper explaining Renewables Acceleration. “However there is a huge practical difference in that a manufacturer coordinating REC transfers to thousands of suppliers and customers and millions of customers is incredibly inefficient and adds no climate benefit.”

No precedent  

There’s no established methodology for an approach like Renewables Acceleration under existing Greenhouse Gas Protocol reporting guidance, Rabinovitch said, but there’s also no specific restriction prohibiting the approach. 

“If you’re looking for the answer from a standard that was written long before you had the idea, it becomes a hurdle to innovation,” he said.

Mars still plans to work directly with suppliers to encourage direct investments in clean electricity and other emissions-reduction activities, such as regenerative agriculture practices or manufacturing equipment upgrades.

While important, initiatives of that nature tend to yield progress slowly, which is one reason to assess approaches such as Renewables Acceleration seriously, said Oliver Hurrey, founder of consulting firm Galvanised. “If you look at the process to get suppliers invested in renewables, it is overly complicated. Are we guilty of over-engineering and not getting on with the things we need to do?” he said.

What’s next

Mars hasn’t negotiated a contract using the Renewables Acceleration method yet, but it’s working on the first deals. In addition, Rabinovitch is advocating the initiative with other large multinational companies that have experience negotiating solar and wind power purchase agreements. He’s seeking feedback and hoping to get other companies interested in embracing the approach. 

“It’s probably more the sophisticated buyers, where they already know how to buy renewables,” he said. “They’re comfortable with the rules for that, and they’re comfortable with how to sell [the idea] to their business. The only novelty is you’re now covering a megawatt-hour that’s in Scope 3, as opposed to Scope 2.” 

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Staff at major aviation companies, including Air France, KLM, Airbus and Lufthansa, are among hundreds of industry insiders calling on their leaders to undertake dramatically more ambitious action on climate.

The demands, organized by a pressure group known as Call Aviation to Action (CAA), include several that are at odds with the industry’s position on climate change, such as setting absolute emissions reduction targets. Hitting such targets would likely require limiting service, another strategy at odds with current plans.

“Call Aviation to Action started because we discovered that there are many, many people in the industry who are really concerned about climate change, but also very committed to aviation, and who were not able to speak up,” said Karel Bockstael, an aviation consultant and former vice president of sustainability at KLM who initiated the project with four other aviation professionals.

The industry’s existing net-zero ambition rests in part on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), a 2016 agreement that requires participating airlines to cap emissions at 85 percent of 2019 levels. Any subsequent growth must be offset by purchasing CORSIA-approved carbon credits. 

Around 30 airlines have also committed to near-term goals with the Science Based Targets initiative (SBTi), or had those goals validated by the organization. To align with warming of no more than 1.5 degrees Celsius, the SBTi requires airlines to reduce emissions intensity by 30 percent and 50 percent in 2030 and 2035, respectively.

Fossil fuels ‘until the end of time’

Neither standard is sufficient if the industry is to stay within planetary boundaries, say the 443 people who have signed the CAA’s statement since it was issued in May. 

Bockstael argued that CORSIA is flawed because many offset projects have failed to deliver claimed climate benefits. “It will support the fossil kerosene solution until the end of time,” he said. “If we do that then the growth will go on and at some point the availability of the offsets will not be enough.”

He praised the intent of the SBTi aviation standard, which requires that the industry as a whole stay within a total carbon budget identified as consistent with 1.5 degrees of warming. But CAA says the standard is undermined by overly optimistic assumptions about efficiency improvements and the idea that fossil jet fuel can be eliminated by 2050.

The organization argues instead that airlines should set a carbon budget for the industry — acknowledging a fair distribution of the budget across populations — then bring their goals in line with it. Signatories are also asking companies to lobby for regulation that “takes all players in our industry along in what is needed to respect the boundaries we are currently transgressing,” be more realistic about future technology gains and better manage demand, particularly in regions that have a larger share of historic emissions.

Insider influence

Environmental groups have long made similar demands, but the CAA is notable for its insider approach. Among the signatories are professionals working in supply chain, business development and strategy, as well as several pilots. Likely because of Bockstael’s connections, that includes more than 40 employees of KLM and Air France, Europe’s largest airline group.

“At KLM, we are doing everything we can to make flying cleaner, quieter and more fuel-efficient, step by step,” a company spokesperson told Trellis. “Making aviation more sustainable takes time, and progress isn’t as fast as we would like. But that doesn’t mean we’re standing still.” The airline is investing more than $8 billion in more efficient aircraft, the spokesperson added, and is one of the world’s largest purchasers of sustainable aviation fuel.

“The fact that the calls for change are coming from within the aviation sector and from the employees themselves and even some senior leaders is very promising,” said Deborah McNamara, executive director of ClimateVoice, a non-profit that supports employee-led climate action. “They’re the people who know what it’s like to work in this industry and who shape it.”

The group has continued to consult backers on next steps, which Bockstael said would be announced this fall.

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In a footwear first, a new Allbirds’ sneaker features material that has been recycled from polycotton waste.

The Remix runners, which retail for $140, are made with lyocell recycled by startup Circ from used polycotton T-shirts and other textiles. The midsoles are recycled from manufacturing-scrap foam by partner Blumaka, and the laces are made of recycled polyester.

“We created Remix because it directly aligns with our central commitment: to make better things in a better way,” Allbirds CEO Joe Vernachio said of the 8,000-pair capsule collection. “That commitment demands that we not only look to materials of tomorrow, but also explore how we can make use of materials available today.”

The company has cemented its identity around the use of natural fibers — New Zealand Merino wool, eucalyptus and sugar cane — and unique forays into reducing footwear emissions: In February, Allbirds announced offset-free “net zero” Moonshot shoes that have a tiny carbon dioxide footprint of roughly 1 kilogram. It open-sourced the methodology, inviting copycats.

Until now, though, Allbirds’ circular practices have focused predominantly on a ReRun branded resale program rather than on recycled materials. So the Remix line is a shift for the company. It is the next step for the industry as well.

“This collaboration with Allbirds marks a major milestone in proving that textile-to-textile recycling can scale beyond apparel and into a high-performance category like footwear,” Circ CEO Peter Majeranowski said. “Footwear requires an entirely different level of durability, resilience and performance compared to apparel. Materials need to withstand repeated wear, flex and environmental stress. The challenge was ensuring that our recycled lyocell fibers could be spun, woven and finished into textiles that not only looked and felt premium, but also had the strength and stability required in a shoe upper.”

“Although we — and the footwear industry at large — have a ways to go to address the issue of manufacturing waste, Remix is a step in the right direction, and we’re proud of the progress it represents,” Vernachio said. “While we grapple with some of the complex questions around circularity and end-of-life, we’re sharply focused on keeping products in use.”

A challenging marketplace

Although countless Silicon Valley geeks — not to mention Barack Obama — have sported Allbirds’ understated, logo-less shoes, the brand has struggled with falling sales and stock prices since going public in 2021. At the time it dubbed itself “the first ‘sustainable’ IPO,” a statement it later retracted under SEC pressure.

Tim Brown and Joey Zwillinger founded the certified B Corporation in 2015 as a Kickstarter project with an anti-petroleum bent. One early exception to its otherwise natural-fiber lineup was the “Futurecraft.Footprint” shoe, a collaboration with Adidas that used 30 percent recycled polyester and 70 percent lyocell.

Currently, athletic shoes make up about 40 percent of the market for sustainable footwear, according to Fortune Business Insights.

Increasingly, sneaker designers are working to develop “circular” products from recyclable and biobased materials and with 3D printing. The demand for non-synthetic fibers in footwear — whether virgin or recycled — remains relatively niche. Natural fibers in apparel, footwear and industrial applications combined will expand from $69 billion last year to $95 billion in 2030, according to Grand View Research.

That’s dwarfed by the global market for recycled polyester sneakers, which is expected to expand from $465 million in 2023 to $958 million in 2034, according to Transparency Market Research.

North Carolina recycler Unifi dominates this space, providing its Repreve recycled polyester to Nike and numerous other footwear and fashion brands. However, Repreve derives from bottles, a controversial practice among advocates of closed-loop recycling. Unifi also recycles used polyester textiles into new material called Repreve Takeback, which features in Teva sandals.

“Giving brands more options for sustainable materials is a step towards overall sustainability,” said Cynthia Power, co-host of the Untangling Circularity podcast and a fashion industry consultant. “If they can plug these materials into their supply chains without raising costs significantly and continue to make their customers happy, we should expect to see more sustainable circular materials in footwear.”

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