Climate VCs Are Cautiously Optimistic About Trump’s Second Term—Here’s Why

President-elect Donald Trump made no secret of the fact that he believes the United States should not take an aggressive stance on climate change during his election campaign. From chanting “storm, baby, drill” to frequently criticizing everything from wind turbines to electric vehicles, he appears poised to cast a shadow over the climate tech sector for the next four years.

Or will he?

As with many of Trump’s positions, it is difficult to determine his exact stance on climate change and the technologies that serve to mitigate or adapt to it. Moreover, some of his proposed policies could benefit climate technology overall, even as they support oil and gas.

“If you deregulate and ‘drill, baby, drill,’ you can get more natural gas and oil. You can also get heat, such as geothermal. You could potentially get geological hydrogen,” Leonardo Banczyk, investment director at Voyager Ventures, told TechCrunch.

Banchik and other climate tech investors are cautiously optimistic that the policy changes being considered by the second Trump administration will not harm climate tech across the board.

“Most of the climate technology wave began during the Trump administration,” Banczyk said. “No matter what administration is in power, these technologies will continue to move down the cost curve.”

Sophie Bakalar, a partner at Collab Fund, agreed and added that she wouldn’t be surprised if a second Trump administration also inspired more entrepreneurs to start building in the sector. “Climate doesn’t operate on a four-year cycle, these are very long-term trends and issues,” she added.

Much of investor optimism stems from lessons learned from the cleantech cycle, which collapsed more than a decade ago. Many companies then grew too quickly, building huge factories and supply chains before demand had fully materialized. They have also become overly dependent on government subsidies, whether in the form of grants, loan guarantees or otherwise.

“We don’t invest in companies that rely on federal subsidies or really bold ESG claims from corporations. We only invest in companies that deliver concrete, climate-neutral value to their customers,” Bakalar said.

Joshua Posamentier, managing partner at Congruent Ventures, echoed that sentiment. “We don’t invest in anything that we think would require subsidies forever to have any kind of unit economics.”

Not all clear skies

However, some companies will have a hard time. Anything that relies on consumer tax breaks will be vulnerable, several investors told TechCrunch. Some expect wind power and related industries to suffer, given Trump’s open distaste for renewable energy. One investor predicted the Environmental Protection Agency could also see budget cuts.

The lack of federal support may push some companies that were close to the brink to the brink. “It will be a distillation, a thinning of the herd,” Posamentier said. “I think they were probably already at death’s door.”

Startups that survive could benefit from some clarity in communicating with potential customers, said Sean Abrahamson, managing partner at Third Sphere. “The really difficult thing, at least over the last four years, has been the gap between what (companies) say publicly or what they think they have to say and what happens when you end up you come across the financial director. You’ll get a cleaner signal.”

A less climate-friendly administration could also harm climate VCs themselves. Bakalar said that while we’ll likely see climate startups change their messaging and branding to avoid association with the sector, if it does fall out of favor, venture capital firms won’t really be able to do that, and venture capitalists. climate-focused ones may see less interest in LPs over the next four years.

Silver lining

But there are many sectors that could get a boost. As Banczyk mentioned earlier, everything related to drilling, including geothermal and geological hydrogen, will likely be influenced by policies that favor oil and gas production. Network-related startups are likely to benefit from the proposed permitting revisions, Posamentier and Banczyk said.

Electricity companies will also benefit. Growing investments in artificial intelligence have pushed companies to rapidly expand their infrastructure. The breakneck pace has left electric utilities and independent power producers overburdened to the point that just under half of all new AI data centers could be not powerful enough by 2027.

Nuclear startups building small modular reactors (SMRs) and geothermal companies are likely to be among the beneficiaries, Banczyk said. SMR startups Kairos And X-Energy have already ridden the wave of artificial intelligence by signing agreements with Google and Amazon, respectively. Geothermal startups are playing this game too. Fervo Energy partnership with Google and Sage Geosystems working with Meta to power its data centers.

Both technologies have a potential ally in Chris Wright, whom Trump has appointed as his energy secretary. Wright sits on the board of directors of Oklo, an SMR startup, and his company Liberty Energy has invested in Fervo.

“He works in oil and gas all day, but he’s a smart guy,” said Posamentier, who spent time with Wright in the field. There, Wright explained to Posamentier that he electrified his company’s fracking equipment because it was the best technology. “This guy gets criticized for being anti-climate. He is not anti- or pro-climate. He’s just like, “Do the economic stuff.”

Investors and their portfolio companies will have to wait and see which predictions actually pan out under the new administration and which ones don’t.

“The only constant is change and instability in the next four years,” Posamentier said.