Artificial intelligence has emerged as a major force behind growth in the UK’s climate technology sector, with AI-linked start-ups attracting record levels of funding even as overall investment in climate tech slows, according to new research by Sustainable Ventures.
The report, titled Advancing AI’s Potential for Climate Innovation, analyses data from 3,345 high-growth UK climate tech start-ups compiled by Beauhurst, alongside insights from founders, investors, and academics. It reveals that AI is transforming innovation within the sector, though its adoption remains uneven — with software-led start-ups capturing the bulk of investor interest.
According to the study, 9.7% of UK climate tech start-ups now incorporate AI, more than double the national average for high-growth start-ups (4.6%) and ahead of sectors such as financial services (6.9%). The number of AI-enabled climate ventures has grown by an average of 17% annually over the past five years, highlighting AI’s expanding role in driving the UK’s net-zero transition.
In 2024, AI-related firms received 40% of all climate tech investment in the UK, up from 20% in 2022. In contrast, funding for non-AI climate ventures stagnated, increasing by just 0.5%, with early data from 2025 showing signs of a sharper decline.
Software-focused companies dominated the market, attracting £2.19 billion in 2024 — equivalent to 64% of total UK climate tech funding and £1.3 billion of AI-related capital, double their 2022 share. Meanwhile, hardware-led start-ups saw their funding fall 22% from £1.61 billion in 2022 to £1.25 billion in 2024, accounting for just 4% of AI-related investment (£90 million). Their share of total UK climate tech funding has dropped from 60% in 2021 to 37% last year.
Sustainable Ventures warned that this imbalance poses risks to achieving net-zero targets, as 80% of global emissions stem from hardware-intensive sectors like energy, manufacturing, construction, and agriculture.
The energy and mobility industries led AI-driven investment, accounting for 88% of AI-related climate tech funding in 2024 (£1.2 billion of £1.4 billion) and now representing nearly two-thirds of total UK climate tech investment. These sectors are advancing through hybrid models that combine AI-powered software optimisation with large-scale hardware deployment, particularly in electric vehicles, batteries, and smart grids.
Andrew Wordsworth, founder of Sustainable Ventures, said AI is becoming a key indicator of scalability and competitiveness for investors but cautioned against overreliance on software innovation. “AI clearly has a fundamental role in accelerating the growth of climate tech start-ups and helping the UK realise the commercial benefits of the net-zero transition,” he said. “But the climate crisis is at its root a hardware problem. There’s a risk AI becomes a ‘shiny object’, drawing focus away from harder-to-transform industries such as manufacturing, construction, and agriculture.”
Wordsworth called for a national strategy to enhance AI readiness in hardware-driven sectors.
Julien Vaissières, founder and CEO of Batch.Works, added that AI is revolutionising how physical products are designed and manufactured but said more collaboration is needed. “Technology isn’t the bottleneck — the ecosystem is. We need shared infrastructure for investment, specialised knowledge, and hands-on skills to unlock the next wave of innovation,” he said.
