How Investing in SEIS Climate Tech is Good for Growth
Over the past two decades, climate technology has transformed from a niche sector into a multitrillion-dollar investment opportunity, fuelled by ground-breaking innovation, shifting government policies, and urgent environmental necessity.
The climate tech landscape has radically changed from the Kyoto Protocol's call for emissions reduction to Tesla's introduction of mainstream electric vehicles. Governments worldwide have issued legally binding (and some non-binding) climate commitments, while the release of alarming reports on accelerating climate change has reinforced the need for immediate action.
This momentum is reflected in investment trends. In 2022, climate tech VC investment surpassed $70 billion, partly driven by ESG (Environmental, Social, and Governance) policies. This marks a 40-fold increase in just a decade, with 83 climate tech unicorns emerging as investor interest continues to soar. By late 2024, the number of unicorns in climate tech had reached 225, compared to a global total of 1,434 billion-dollar startups in early 2025, with climate change investment leading the way.
However, the sector is now shifting from being policy-driven to market-led. Advances in battery technology, hydrogen, carbon capture, solar, and wind are making climate tech a more commercially viable industry, attracting record-breaking venture capital investment. While some companies are scaling back their net-zero targets following Donald Trump’s return to office, investor momentum in climate change investment remains strong.
The UK government is also playing a crucial role in sustaining this growth. Recent increases to SEIS investment limits are making it easier for early-stage climate tech startups to secure funding, fueling the next generation of sustainable innovation.
This article explores the key factors driving SEIS climate tech investment, emerging breakthroughs, and what the future holds for the sector.
The SEIS advantage in climate change investment
As an investor, it's important to consider the tax benefits of investing in a company operating in the climate technology sector. However, before we go any further, we will recap the benefits of investing in SEIS.
Firstly, SEIS stands for Seed Enterprise Investment Scheme, which says everything about this government-backed initiative. It is often discussed with Enterprise Investment Schemes (EIS), which also offer tax incentives but are targeted at companies further along the development track.
SEIS funding is designed to help early-stage UK businesses attract investment. Usually, this would be difficult to secure from traditional lending institutions due to the concept nature of many companies and the often high-risk/potentially high-reward structure of the sector.
The framework of SEIS
Before we look at SEIS in more detail, it's helpful to look back at the timeline of when SEIS and EIS were introduced, and changes in recent times.
Launch: Enterprise Investment Scheme (EIS)
The EIS was introduced in 1994, providing 30% tax relief to investors encouraged to invest in high-risk early-stage companies. In summary, the criteria for companies seeking EIS investment are as follows:-
Established and based in the UK
Not trading on a recognised stock exchange (or no immediate plans to do so)
Independent, not controlled by another company
Gross assets must not exceed £15 million
Less than the equivalent 250 full-time employees
Carrying out a qualifying trade
The company must not have a trading history of more than seven years (10 years for knowledge-intensive companies)
Maximum raising through EIS £5 million per year (£10 million for knowledge-intensive companies)
No more than £12 million EIS funding across the company's lifetime (£20 million for knowledge-intensive companies)
This was a highly successful move by the authorities, and EIS became one of the most popular tax-efficient investment schemes for startups and high-growth businesses in the history of the UK.
Launch: Seed Enterprise Investment Scheme (SEIS)
The success of the EIS prompted the government to introduce the SEIS, which is similar in criteria to EIS but specifically focused on early-stage startups, with a greater investment risk. In exchange, investors were given a higher tax relief rate of 50%, and while initially focused on companies with a history of less than two years, this was increased to three years in 2023. The initial maximum fundraising was initially capped at £150,000 and later increased to £250,000 in 2023.
Additional information
When looking at EIS and SEIS funding, there is one overarching criterion: there must be a genuine risk to capital, which means the investment cannot be designed as low risk.
In 2024, there was speculation that the EIS and SEIS schemes were overly generous from a tax standpoint and may be replaced. However, many experts predicted that the two schemes would be extended, and they were, up until April 2035, providing long-term stability for investors and startups.
To put the success of these schemes into perspective, since inception, up to the tax year 2021/22, approaching £30 billion had been raised via SEIS and EIS funds. This has helped more than 53,000 companies that may otherwise have struggled to raise the required funding.
How climate tech startups benefit from SEIS
While the headlines suggest that climate change investment is something of a political football, money talks, and investment in this area is increasing. There are numerous ways in which SEIS funding continues to assist climate tech startups, particularly those in the early stages of development.
Access to capital for R&D-intensive businesses
As with any startup, there can be a significant gap between initial investment and profitability. This is more so with climate tech startups, which often require substantial investment in R&D to develop innovative solutions. While we have seen significant progress in renewable energy, sustainable materials and carbon capture, much of the technology is still in its relative infancy.
Bridging funding gaps in traditional lending
While venture capital trusts often focus on early-stage high-risk/potentially high-reward investments, some still hesitate to invest in climate tech startups. Aside from the initial risk, there is uncertainty about long-term returns, political interference, and extended development timelines. For many companies, SEIS funding will help facilitate proof of concept, which can help secure further financing, and provide welcome tax breaks for venture capital companies and investors.
The OnePlanetCapital SEIS fund
OnePlanetCapital has a strong investment history in early-stage climate technology, as reflected in our earlier EIS fund. Changes in the rules back in 2023 prompted us to review our range of funds, and conscious that climate technology was underrepresented in the SEIS space, we launched our fund.
We were first to market with a climate technology-focused SEIS, which complemented the experience and expertise gathered from managing our EIS climate technology fund.
Please contact us if you would like further details on the structure and make-up of our SEIS Climate Tech fund.
Climate tech: A sector poised for exponential growth?
As we mentioned earlier, when looking to identify actual market trends, follow the money. While this is not the first time the climate change investment sector has been subject to speculation about exponential growth, there seems to be more substance to the recent forecast of significant growth.
Market trends in climate tech
Some of the growth areas in the climate technology sector include:-
Renewable energy
A recent report by the Financial Times highlighted growing investment in renewable energy, with the International Energy Agency forecasting the clean energy sector will nearly triple by 2035. This would mean that the market is worth around $2 trillion, similar to the annual value of the global crude oil market. Many experts believe renewables will account for most of the new power generation capacity by 2030.
Carbon capture
The UK government is heavily involved with the carbon capture sector, with companies now morally (sometimes legally) obliged to address their carbon footprint. This has led to considerable investment in industrial-scale carbon capture and underground storage facilities. This is especially relevant to data centres, which have seen massive growth in recent years, as well as traditional industries looking to offset emissions from fossil fuels.
Smart grids
An article in the Guardian casts a fascinating light on smart grids and the development of new technology in this area. To put this into perspective, it is estimated that the world's electricity use will grow by 4% per annum until 2027, the equivalent of Japan’s annual consumption. In reality, we need to get smarter and more efficient in not only the use of but also the supply of electricity.
Bioplastics
Recycling and using sustainable materials, such as bioplastics, is another area of enormous growth. The bioplastics market is currently estimated at around $15.5 billion but is expected to increase to circa $54 billion by 2033. The main growth drivers in this area are environmental sustainability, regulatory support, technological advancements and corporate initiatives.
The UK’s position as a climate tech leader
As you might expect, AI is prevalent in the climate tech sector, driving many of the innovative solutions emerging today. As the UK is already a leader in AI, it has a significant advantage over competitors in the area of climate tech investment. To put this into perspective, in 2024, UK-based AI-focused climate tech firms attracted just over £1 billion in investment. This was an increase of 128% from the previous year and accounted for 22% of global AI climate tech investment.
Overall, funding for UK-based climate tech companies increased by 24%, totalling £4.5 billion at a time when global investment in this area declined. This was due to higher borrowing costs and economic uncertainty. From a UK standpoint, it's safe to say that the introduction of both EIS and SEIS funding has significantly strengthened the UK's position within the climate tech sector.
Rising investor appetite for sustainable funds
Even though investment in sustainable funds was down in 2023, a report by Morgan Stanley highlights the impressive performance compared to traditional funds. Sustainable funds were almost 50% ahead with annual growth of 12.6%. The short-term performance of sustainable funds, which tend to look at more innovative companies on a longer-term basis, will be influenced to a certain extent by short-term market sentiment.
For example, during difficult times, stock markets tend to focus on short-term profitability and cash flow, while in more buoyant times, the market's investment time horizon tends to extend (as we have seen with the volatile wider technology sector). Greenwashing has also been an issue for some investors, although, in recent months, we have seen significant movement on the regulatory front. The implementation of legal obligations for those releasing ESG data, specifically climate-related claims, is a game-changer.
SEIS is a growth driver for investors
Appreciative of the high risk/potentially high reward nature of investment in early-stage climate tech companies, there are several growth drivers for investors to consider.
Capturing high growth opportunities for early investment
Many funds provide more than just capital when investing, often using their market experience and knowledge to support fledgling companies. The fact that SEIS is designed for very early-stage startups also provides access to companies and subsectors at the beginning of their growth trajectory. Those who survive beyond the early years have a much better chance of significant growth, often creating impressive returns for early-stage investors.
SEIS valuations vs Later-stage investments
While the criteria for SEIS investment mean that the companies cannot be listed on a recognised stock exchange or have plans to do so, this could be an option in the longer term. Consequently, SEIS investment can act as a catalyst for later-stage funding on much higher valuations. It simply boils down to the risk/reward ratio, the higher the risk in the early days the higher the potential reward.
Portfolio diversification with tax-efficient risk mitigation
While there is a degree of correlation between early-stage climate tech investment and the broader investment markets, this is not as strong as you may think. Consequently, early-stage climate change investment can offer an interesting degree of diversification, not just looking at money from a tax angle but also from an investment perspective. It's also important to recognise that the sale of SEIS shares is exempt from capital gains tax if they have been held for at least three years.
Why 2025 could be the right time to invest in SEIS climate tech
Investment markets entered 2025 with a degree of trepidation due to geopolitical uncertainty, strengthening inflation and concerns about the global economy. Typically, these concerns would hold back a relatively new sector, such as climate tech, but numerous factors could turn this argument on its head.
UK’s commitment to net zero and policy initiatives
While not always popular amongst the general public and business community, successive UK governments have made numerous commitments (legally binding) to achieving net zero by 2050. Even though this timescale could slip in the future, there are relatively robust policies in place.
It is no secret that SEIS funding in the area of climate tech startups is critical to long-term success. Therefore, we expect the government to be proactive and assistive with future initiatives.
Growing corporate sustainability mandates
From a business perspective, pressure from consumers, investors and regulators is prompting more companies to issue formal sustainability targets. Ultimately, this will lead to comprehensive disclosures, ensuring transparency and accountability when considering the environment.
While potentially difficult to legislate for, there have been numerous suggestions that government funding could be withdrawn from companies without a formal sustainability strategy.
SEIS’s role in supporting the government’s green economy push
The fact that both EIS and SEIS funding has been extended to 2035 highlights government support for green investments. Substantial tax relief for investors and much-needed funding for companies tend to grab the headlines, but it’s important to appreciate the potential long-term impact on the UK economy.
The current government has entered office with firm and focused policies on sustainability and climate tech/climate change. So far, there's no reason to believe they will stray (too far) from this public line in the future.
Investor momentum
Numerous factors encourage tax-efficient investment in early-stage startups, but there is also interest in later-stage funding and public offerings. Interest in broader sustainable funds has increased the amount of finance available for sustainable and climate-based investment. It's also interesting to see that advisers and investors have started to better appreciate the diversification attractions of EIS and SEIS investments, aside from the obvious tax benefits.
In order for this momentum to continue, investors will demand long-term returns, which are currently supported by long-term government policies. The jigsaw of sustainable investment is almost complete, with just a few additional pieces required to give a clearer, more focused picture.
What does OnePlanetCapital offer investors?
Experience with our climate tech-based EIS fund made the introduction of a SEIS fund relatively simple for the OnePlanetCapital team. Our initiative and forward-thinking approach saw us bring the first SEIS Climate Tech fund to the market. This caused a significant degree of excitement, especially among advisers looking at the alternative investment sector.
We take an open and transparent approach to our investment strategy, obviously aware of the tax benefits, but ultimately, it's up to us to identify investments with the potential to deliver significant returns. Recently, we have seen investors, advisers, and institutions taking a different view of SEIS options, less focused on the simple tax benefits and more on the growth of a relatively new sector in climate change investment.
Due to our connections and experience, we evaluate hundreds of potential investments each year, carrying out in-depth due diligence on those with the potential to be included in our fund portfolios. Our track record opens doors, our expertise identifies potential investments, and our experience will dictate the timing of any investment.
How to identify high-growth SEIS climate tech startups
In theory, there are several prominent factors to consider when identifying potential high-growth SEIS climate tech startups; but experience and expertise are critical. The main two areas are key metrics for evaluating startups and, in this scenario, how SEIS funding can be used to de-risk an investment.
Key metrics for evaluating startups
In the early days of an industry, such as climate technology and startup companies in this area, not all of the required metrics may be available. Broadly speaking, some of the more critical considerations include:-
Scalability and market potential
When evaluating an investment, market size is everything. Even the most groundbreaking technology will struggle to generate strong returns if it’s limited to a niche or slow-growing market. That’s why Total Addressable Market (TAM) is a key metric - investors need to know whether a startup has the potential to scale or if it’s destined to plateau.
Equally important is the Customer Acquisition Cost (CAC) vs. Lifetime Value (LTV) ratio, a powerful indicator of a startup’s financial efficiency. If it costs too much to acquire customers compared to their long-term value, profitability will be an uphill battle.
For startups, predicting revenue growth is challenging. This is where SEIS investments stand out; by offering tax reliefs and risk mitigation, they allow investors to support high-potential startups before valuations potentially skyrocket. While the risks are higher, so are the rewards, making early-stage climate tech one of the most exciting frontiers for SEIS-backed growth.
R&D investment risks against proven technology
Investing in startups means balancing innovation with risk, especially when it comes to R&D-heavy ventures versus proven technology. Many early-stage companies start with a bold concept, but securing funding beyond the initial stages depends on demonstrating proof of concept and a clear path to commercialisation.
The Technology Readiness Level (TRL) is a key indicator - the closer a technology is to market deployment, the lower the risk. Startups still in the R&D phase require significant capital for product development, testing, and regulatory approvals, whereas those with working prototypes and early adoption face less uncertainty.
Another critical factor is Intellectual Property (IP) protection. Investors need confidence that a startup’s technology can’t be easily replicated and that it holds a defensible competitive advantage. However, having a patented product isn’t enough - the company must also prove there’s a real, scalable market demand. Even revolutionary tech can struggle if it fails to change consumer or industry behaviour, making market validation just as crucial as the innovation itself.
Strong founding team and execution capability
A groundbreaking idea is only as strong as the team behind it. Without a dynamic, driven, and adaptable founding team, even the most innovative startup will struggle to succeed.
Investors don’t just bet on ideas, they bet on people. A strong founding team brings industry expertise, strategic vision, and the execution skills needed to turn ambition into reality. But beyond experience, what truly sets great founders apart is resilience and adaptability; the ability to pivot when markets shift, solve problems under pressure, and push forward despite setbacks.
Startups don’t win by playing it safe. They succeed because their leaders know how to turn challenges into opportunities, setbacks into learning moments, and vision into results. That’s why backing the right team is just as important as backing the right technology.
The role of SEIS in de-risking investments
It would be foolish to ignore the obvious risks of investing in early-stage climate technology, but it's also important to appreciate how SEIS investment can help not only de-risk the situation but also bring clarity.
Portfolio diversification
The theory behind portfolio diversification is the same whether looking at established companies or early-stage startups. Putting all of your money into one investment could prove profitable, but it may not be sensible from a diversification and de-risking point of view. Ultimately, nobody can predict the future, which is why the OnePlanetCapital SEIS and EIS funds follow a process of strategic diversification. Spreading the risk, as a means of protecting capital, while also appreciative of focusing on quality investments.
Professional fund management
As we have mentioned several times, you can't buy the experience and expertise our team has in abundance. We use the latest cutting-edge technology to give us a sustainable competitive advantage over our competitors, constantly monitoring our investments, and communicating with management as part of an active role. This ensures we can address any challenges before they become serious issues and assist portfolio companies in day-to-day operations and long-term strategies.
SEIS tax efficient risk mitigation strategies
The ability to claim 50% income tax relief on SEIS investments and the exemption from capital gains on SEIS shares are particularly important. However, while losses are protected on the downside, let's not forget that the ultimate long-term aim is capital growth. Consequently, the skills of our in-house management team and the tax-efficient nature of SEIS funds have created a very interesting and potentially lucrative situation. However, it is our due diligence and decision-making process that will dictate future returns.
How IFAs Can Position SEIS for Clients
SEIS isn’t just a potentially high-growth investment, it’s a powerful tax planning tool for IFAs and wealth advisers managing HNW clients.
Mitigating CGT & IHT: SEIS investments offer income tax benefits, CGT exemptions and can be structured as part of estate planning to reduce inheritance tax (IHT) liabilities.
Diversifying portfolios with high-growth potential: Many traditional investment products are under pressure from market volatility; SEIS provides exposure to cutting-edge climate tech with built-in tax reliefs.
Long-term wealth preservation: SEIS allows clients to invest in future-ready industries, aiming for sustainable growth while maximising tax efficiency.
IFA Case Study Example
"A London-based HNW investor, advised by their IFA, invested £100K in a SEIS climate tech fund. They claimed £50K income tax relief immediately, and when the fund grew 3x over five years, they exited without paying CGT - maximising returns while securing a tax-efficient strategy."
Conclusion: SEIS Climate Tech – A Defining Investment Opportunity
Climate technology has evolved into a multitrillion-dollar sector, driven by urgent environmental challenges, market demand, and breakthrough innovation. The shift from policy-driven to market-led growth is accelerating investment in renewables, carbon capture, and sustainable materials. With the UK government extending SEIS funding until 2035 and reinforcing net-zero commitments, early-stage climate tech investment conditions have never been stronger.
SEIS offers investors a unique advantage: high-growth potential, significant tax relief, and built-in risk mitigation through portfolio diversification. With 50% income tax relief, CGT exemptions, and IHT benefits, it provides a rare opportunity to invest in the next generation of climate innovation while minimising downside risk.
The UK is leading in climate tech investment, attracting £4.5 billion in 2024 alone. As demand for sustainable solutions rises and corporate net-zero mandates strengthen, early investors will be best positioned to capture long-term gains.
OnePlanetCapital’s SEIS Climate Tech Fund was the first dedicated fund of its kind in the UK, leveraging our deep expertise to identify and support high-potential startups. Contact us today to explore how you can be part of this fast-growing sector and make a meaningful investment in the future.
Source:
https://www.grandviewresearch.com/industry-analysis/us-bioplastics-market-report
https://www.fortunebusinessinsights.com/climate-tech-market-109849
https://www.ft.com/content/525e557d-d571-4581-a0da-5db860a33513