Source page: McKinsey & Company
Commentary
VC sees green shoots on the horizon
Investing | Sustainability | Technology
May 13, 2025 – Venture capitalists are increasingly investing in climate-focused technology businesses. A significant investment shift is evident across various technology sectors, with a notable rise in capital for horizon three technologies, note Senior Partner Rajat Gupta and coauthors. Among strategic horizons for climate technology, horizon one includes core businesses (usually fossil fuel–based) that currently generate cash flow. Horizon two includes growth businesses now that are expected scale to generate profit. Horizon three businesses are the growth options for the future, such as research projects or pilot programs. Although horizon three businesses represent a small proportion of climate tech businesses, spending has increased on those that are approaching the horizon two boundary.
To read the report, see “How incumbents can succeed in climate-driven growth investments,” April 1, 2025.
customizer here
Visual form
Two-panel stacked bar chart. The chart compares climate-driven investment portfolios for incumbents on the left and venture capital on the right.
Layout / body structure
The page is laid out as a side-by-side comparison of two bar groups, each running from 2019 to 2023. Reader moves left to right within each panel and then compares the color mix across the two panels.
What is being compared
The chart compares the share of climate-driven investments allocated to horizon 2, the horizon 2 boundary, and horizon 3 technology businesses. It contrasts that mix between incumbent investors and venture capital investors and also tracks how the mix changes over time.
Measurement system
The bars are measured as percentage share. Color separates the three horizon categories, and the values printed inside the stacked segments show how much of each year’s portfolio belongs to each horizon.
Visible structure inside the graphic
Each year is shown as a vertical stacked column, with a large dark base for horizon 2, a middle turquoise band for the horizon 2 boundary, and a brighter blue top for horizon 3. The two panels use the same structure, so the eye can compare how much more of the bar shifts upward into horizon 3 on the venture capital side.
Main takeaway from the visual
The visible takeaway is that venture capital has shifted much more aggressively toward horizon 3 climate technology than incumbents have. Incumbent portfolios still remain heavily concentrated in horizon 2, while the venture capital stacks show a much larger top segment by 2023.
Key standout values or extremes
For incumbents, horizon 2 still accounts for 82 percent in 2023 and horizon 3 reaches only 3 percent. For venture capital, the 2023 mix shifts to 43 percent horizon 2, 16 percent at the boundary, and 41 percent horizon 3, up from only 5 percent in horizon 3 in 2019 and 27 percent in 2021.
Controls / sequence, when applicable
This is a static chart image with no in-chart controls to operate.
Companion media, when applicable
There is no separate companion audio or video; the chart image is the full visual on this page.