Climate tech has seen its fair share of ups and downs over the past year. While the latter half of 2022 saw a boom for climate tech following the signing of the Inflation Reduction Act (IRA) in August — defying the downward trend for the broader tech industry — in 2023 so far, venture capital funding for climate tech startups has slowed to its lowest pace in nearly three years. But this doesn’t mean climate tech has reached a bust, either. 

Investors continue to pump money into climate tech startups, laid-off tech workers are flocking to climate tech career opportunities and the seeds of opportunity sowed by the IRA are yet to be reaped. All of this is good news for investors looking for returns, corporations who stand to benefit from climate tech innovations, impact career seekers who have new opportunities — and, of course, the future of our planet. 

Here are three reasons to be optimistic about climate tech in the second half of 2023:

1. Venture capitalists continue to bet on climate solutions

While venture capital funding might be down for climate tech companies, investors continue to make strategic bets on promising startups. In April, Congruent Ventures, one of the first venture capital firms to focus on early-stage climate-oriented startups, raised more than $300 million for a ​"Continuity Fund," which aims to help existing portfolio companies grow their business from early stages into full commercialization. This is double the assets it previously had under management, at $175 million.

"Most of the things that drive climate tech are also good for companies in general," said Joshua Posamentier, managing partner at Congruent Ventures, based in San Francisco. "We're not trying to sell them a new CRM or enterprise SaaS tool, we're selling them the ability to reduce their operational costs."

Congruent invests in four categories of companies addressing the climate crisis: mobility and urbanization; the energy transition; food and agriculture; and sustainable production and consumption.

TeleSense, one of Congruent’s portfolio companies, developed an internet of things and analytics platform for the cereal and grain storage and transportation industry that identifies anomalies, predicts and prevents grain degradation and provides accurate data for market intelligence. TeleSense was acquired by UPL, a global provider of sustainable agricultural solutions, in January 2021 for an undisclosed amount. Avalanche, another Congruent portfolio company, is developing the world’s smallest fusion reactors that produce energy. The company plans to power tough to decarbonize industries such as maritime shipping, long-haul trucking, aviation and distributed power grids.

An added bonus for investing in climate tech is because it often provides a bigger "competitive moat" to the investment, according to Justin Stevens, founder & CEO at Overlap Holdings, based in New York. Stevens was a former senior partner at Apollo Management Group. 

"If you just have some simple, straightforward mousetrap, it's easy for somebody to replicate that and beat you," Stevens said. "Venture investors like ourselves take a different tack in terms of that early stage tech investing, which is: What are the biggest problems facing the world and then what are people coming or their people who are coming up with interesting solutions to fix those problems?"

The types of investments Overlap seeks to make are in companies working in novel technologies that rely heavily on advanced scientific knowledge and engineering, and involve the creation of physical products or hardware. It could be a startup making sustainable chemicals from captured carbon or sorting robots for recycling. The company says that the best way to make money is to invest in companies tackling the world's biggest problems in an efficient manner.

"It takes a lot of time and money to build and scale that first prototype — and that’s why venture capital has become the engine that drives innovation," Stevens said. 

Posamentier added that the focus needs to be on showing that you can make good returns on climate tech: "If you can show good returns here, it's going to attract mo