Artificial intelligence is emerging as a key driver of growth in the UK’s climate tech start-up ecosystem, with AI-related ventures attracting record levels of funding even as broader climate investment stalls, according to new research by Sustainable Ventures.

The study, titled “Advancing AI’s Potential for Climate Innovation”, draws on data from 3,345 high-growth UK climate tech start-ups compiled by Beauhurst and includes qualitative insights from founders, investors and academics. It concludes that while AI is transforming innovation in the sector, adoption remains uneven — with software-led start-ups attracting the lion’s share of investment.

Sustainable Ventures found that 9.7% of UK climate tech start-ups are now AI-related — more than double the national high-growth start-up average of 4.6%, and higher than the financial services sector (6.9%). The proportion of AI-enabled climate ventures has risen by an average of 17% per year over the past five years, underscoring AI’s expanding role in the UK’s net zero transition.

In 2024, 40% of all UK climate tech investment went to AI-related companies, up from 20% in 2022. By contrast, non-AI funding has stagnated, growing by just 0.5%, with early data from 2025 pointing to a sharper decline.

Software-focused start-ups attracted £2.19 billion of investment in 2024, accounting for 64% of all UK climate tech funding and £1.3 billion of AI-related capital — double their 2022 share.

Hardware-led ventures, by comparison, saw funding fall 22% from £1.61 billion in 2022 to £1.25 billion in 2024 and captured just 4% of AI-related investment (£90 million). Their share of overall UK climate tech investment has dropped from 60% in 2021 to just 37% last year.

Sustainable Ventures warns that this imbalance threatens progress on net zero, as 80% of global emissions originate from hardware-intensive sectors such as energy, manufacturing, buildings and agriculture.

The energy and mobility sectors accounted for 88% of AI-related climate tech funding in 2024 (£1.2 billion of £1.4 billion) and now represent 64% of total UK climate tech investment. These industries are benefiting from “hybrid” models that combine AI-driven software optimisation with large-scale hardware deployment, particularly in electric vehicles, batteries and smart grids.

Other sectors such as agriculture and the built environment are beginning to adopt similar approaches but require greater support to develop the digital infrastructure needed for scalable AI integration.

“AI has a fundamental role – but we mustn’t neglect hardware,” says Sustainable Ventures founder

Andrew Wordsworth, founder of Sustainable Ventures, said the data shows investors increasingly view AI integration as a key indicator of scalability and competitive advantage:

“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.
But the climate crisis is at its root a hardware problem. There’s a growing risk that AI becomes a ‘shiny object’, drawing focus to easily digitised sectors while leaving behind harder-to-transform industries such as heavy manufacturing, construction and agriculture.”

Wordsworth called for a national strategy to boost AI readiness among hardware-led companies, integrating software-driven optimisation into the physical industries that can deliver the deepest emissions cuts.

Julien Vaissières, founder and CEO of Batch.Works, said AI is already reshaping how physical products are designed and manufactured:

“AI is fundamentally changing how we work with the physical world. But in capital-intensive areas like ours, 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.”