The Ultimate Guide to Investing in SEIS Climate Tech

15 Apr

The world is at a turning point; climate change is no longer a distant threat but an immediate challenge. Consequently, climate tech has emerged as one of the fastest-growing investment sectors, driven by urgent environmental needs, policy shifts, and technological breakthroughs. As investors increasingly recognise that sustainability and profitability can go hand in hand, we have seen a significant increase in investment in this area.

Global climate tech investment peaked at $70 billion in 2022, nearly doubling from $37 billion in 2021. However, 2023 saw a contraction to $32 billion, reflecting broader economic trends and the general drop in Venture Capitals. Looking further ahead, the positive long-term upward trend is expected to continue despite short-term financial challenges.

Furthermore, the UK is at the forefront of climate tech, with London being seen as one of the top global hubs for climate tech start-ups. The government’s EIS and SEIS schemes, accompanied by various investor tax breaks, have helped start-ups access critical early-stage funding which may otherwise have been impossible to secure.

In this article, we will demystify SEIS for investors looking to support climate tech start-ups. We will also outline how SEIS works, the financial and tax benefits, and the risks and opportunities available in this dynamic and growing market.

But why now? The UK government is committed to Net Zero by 2050, and SEIS is well positioned as a key mechanism to channel private investment into sustainable innovation.

Understanding SEIS

While many investors will have heard of EIS and SEIS, it is essential to understand and appreciate the finer details, whether or not you are considering an investment.

What is SEIS, and how does it work?

Sometimes referred to as the Seed Enterprise Investment Scheme, SEIS was introduced in 2012 by the UK government to encourage investment in high-risk, early-stage, and high-growth start-ups. The scheme was initially set to expire in April 2025, but this "sunset clause" was recently extended to 2035, with some changes to the scheme particulars.

Eligibility

To be eligible for SEIS funding, companies must abide by the following criteria:-

Based in the UK
Trading for less than three years
Gross assets under £350,000 (an increase from the earlier £200,000 level)

In addition, companies seeking SEIS funding must have fewer than 25 employees and not be listed (or plan to be listed) on a stock exchange. The basic premise of SEIS investments is that there must be a genuine risk to capital, which is partially offset by the generous tax breaks.

The business must also carry out a qualifying trade which excludes activities such as:-

Property development
Financial services
Professional services

There are also investment restrictions as follows:-

Qualifying companies can raise up to £250,000 of SEIS funding in their lifetime
Individual investors can invest up to £200,000 per tax year
Investors must hold SEIS shares for at least three years to benefit from tax relief

In many ways, SEIS is a potential feeder for EIS because companies may be eligible for EIS investment as they expand and outgrow the SEIS criteria. Introducing SEIS has filled the funding gap between start-ups and EIS and is now seen as much more than just a tax break.

The key differences between SEIS and EIS

While SEIS and EIS dovetail together to create funding opportunities for start-ups and early-stage companies, it’s crucial to appreciate the key differences.

Feature

SEIS

EIS

Target Stage

Pre-seed, early-stage

Growth stage start-ups

Company Age

Less Than 3 Years

Less Than 7 or 10 years, depending on the type of business

Investment Cap For Each Company

£250,000

£12 Million

Annual Investor Limit

£200,000

£1 Million or £2 million, depending on the type of business

Tax Relief

50%

30%

Capital Gains Exemption

Yes

Loss Relief

Yes

Minimum Holding Period

3 years

SEIS tax benefits for investors

For many years, SEIS and EIS have been viewed as a means of accessing tax relief rather than potentially lucrative investments. However, recent growth in the climate tech start-up sector has prompted significant funding and a political and economic climate conducive to long-term growth.

The best way to demonstrate the benefits of a SEIS investment is a theoretical case study as follows:-

Initial investment: £50,000 into a SEIS-eligible start-up

Income tax refund: £25,000 (provided you have this level of taxable income)

Provided that the SEIS investment is held for at least three years, any gain from selling company shares is free of capital gains. Alternatively, if the SEIS investment were to fail, then, in the above case, there would be additional loss relief at your marginal rate. For additional rate taxpayers paying income tax at 45%, this equates to £11,250 on the net £25,000 investment.

The net benefit of a successful investment would be income tax relief and gains free of capital gains tax. Where the investment failed, as a consequence of income tax and loss relief, the £50,000 investment would equate to a net loss of £13,750 (an effective risk reduction of 72.5%).

Reasons that SEIS climate tech could be a smart investment

While it’s important to appreciate that any innovative start-up is likely to be high risk/potentially high return, the SEIS landscape today is very different from that of a decade ago. The introduction of AI and cutting-edge technology has given many, still high-risk start-ups a faster, more efficient way to maximise their full potential.

Why climate tech is a high-growth sector

We often see the climate tech sector considered one market when, in reality, there are many significant subsectors. However, looking at this as one market, climate tech is one of the fastest-growing investment sectors, with a CAGR of more than 20% over the last decade, and venture capital trusts are showing growing interest.

It’s also helpful to identify the individual pieces of the climate tech sector that have the potential to drive significant growth in the short, medium, and long term. These include:-

Renewable energy
Energy storage and smart grids
Carbon capture and sequestration
Sustainable materials and circular economy
Electric vehicles and green transport

When you consider that the UK government has committed £12 billion to green energy and net zero projects, together with significant SEIS-funded backing, it's not difficult to see where the drivers come from. Then, we have tax incentives, grants, and R&D credits for companies operating in the climate tech sector and potential institutional investment and funding through the British Business Bank. There is a lot going on in the industry.

Global investment

While nothing is ever "too big to fail", as we saw during the banking crisis, a lot of money is targeted towards climate tech with strong government and institutional support. Even though there is some concern about political meddling within the "ethical investment" arena, this mainly concerns investment in defence as the global political landscape changes.

As we have seen in the past, investment trends can come and go regularly, but this one seems a little different. Global climate targets are also shaping investment trends, including:-

The Paris Agreement and COP26 commitments
Corporate net zero pledges from the likes of Amazon, Microsoft, etc
An expansion of carbon credit markets
Institutional and pension fund appreciation of ESG

Recently, in light of President Trump's comments, we have seen some companies, such as BP, roll back on their previous net zero pledges. Whether others will follow in great numbers is debatable, but it’s essential to recognise that the road to successful climate technology solutions may experience a few bumps along the way.

How SEIS maximises returns on climate tech investments

As we will see later, diversification is the key to a successful SEIS climate tech investment strategy. However, SEIS allows investors to access start-ups at their earliest growth stage before valuations potentially skyrocket. It is also important to recognise that SEIS-funded companies have already brought game-changing climate tech solutions to the market, and some have gone on to be very successful. While forecasts vary widely, the broader global market is expected to be worth anywhere up to $1 trillion worldwide by 2030, demonstrating a significant long-term upside.

Investment tools

It's difficult to say with confidence how many up-and-coming climate tech companies have fallen by the wayside due to a lack of funding. However, we know that SEIS funding continues to grow, promoting investment within a de-risked environment (an effective risk reduction of 72.5%) with the opportunity for significant diversification.

The fact that the UK government extended the life of SEIS by a decade should not be overlooked. This reflects a strong and growing commitment to tackling climate change. As the sector grows, we see SEIS funds emerging focused on climate technology solutions. Consequently, investors can now invest in these funds in the knowledge that their exposure to the climate tech sector will be spread across several well-researched businesses.

This type of investment is also supported by a growing ESG-conscious community committed to holding corporate and government entities accountable. Institutional support for climate start-ups means that follow-on funding opportunities are often plentiful, providing either additional investment or an exit route.

Some SEIS tech-based investment funds have relatively low capital requirements, with the opportunity to invest as little as £10,000 in some instances. This compares very favourably to institutional VC funds with much higher subscription levels!

How to identify promising SEIS climate tech start-ups

In a perfect world, it should be relatively easy to identify the next "big thing" in the climate tech start-up space. In reality, the success of even the most innovative solutions will depend on criteria such as timing, investment and opportunities.

This is why investors looking for exposure through SEIS are more likely to choose larger funds with a diversified investment base than individual stand-alone start-ups.

Key criteria when evaluating start-ups

While it is reckless from an investment point of view to put all of your eggs into one basket, there are numerous common criteria for successful start-ups:-

Scalability and market potential

There is a need to find a balance between innovative solutions and the total addressable market; is it large enough to support significant long-term growth? Scalability is key - does the business model allow for easy expansion into existing and new markets? Also, while some may see existing competitors as a negative, in many ways, this can identify growing markets. If a new climate tech start-up can differentiate itself, there may be enhanced potential to deliver on investment.

Strong management teams with a proven track record

Founder expertise and experience are more critical with a start-up than an established business, as much will depend on their ability to deliver. It is also essential to recognise that start-ups operating in the climate tech area will require a varied skill set compared to those operating in, for example, the property sector. A clear vision of the business model and a means of execution are also critical to raising capital in the start-up stage and when the business becomes more established. You can’t buy experience! (well, you can, but it will be expensive)

Regulatory compliance in climate-related industries

For a climate tech start-up to succeed, it must start on a sound regulatory footing, whether needing to comply with the UK, EU or US environmental regulations. There may be expensive licences to acquire, technology to protect and even official certificates required to be able to operate. For example, some high-growth climate tech sectors may require regulatory approval, including:-

Carbon capture and storage
Renewable energy projects
Sustainable agriculture solutions

In summary, as an investor, you should focus on product/service potential, financials, funding strategy, exit options, and the company's competitive edge. Some common mistakes include sustainable investing based on hype, neglecting due diligence, overlooking exit strategies, and not diversifying risk across a range of investments.

Why investors should consider OnePlanetCapital for SEIS climate tech investment

As you would expect from a sector that ticks many political and environmental boxes, the number of SEIS-based climate tech funds is growing. However, after setting up and managing our own EIS fund based on climate tech several years ago, it seemed natural to bring the first SEIS climate tech fund to market, which is precisely what we did.

Using a unique blend of entrepreneurial experience, sector expertise and forward-thinking structured investment strategies, we have helped many early-stage climate start-ups grow and fulfil their potential.

SEIS and EIS investment specialisation

Using experience from our EIS climate tech fund, we set up an SEIS equivalent focused on start-ups. We knew from day one that diversification across multiple high-growth early-stage businesses was critical to the fund's long-term success, as was our ability to structure investments to maximise SEIS tax relief benefits for investors.

In-depth industry knowledge

Using our deep-seated knowledge of various subsectors of the climate tech market, we have been able to identify investments in numerous areas such as:-

Renewable energy
Carbon capture
Energy storage
Grid optimisation
Sustainable materials

Our reputation has opened doors to cutting-edge start-ups emerging from leading incubators and research institutions in an industry where success breeds success. This ensures a strong flow of potential investments, but only those that align with our strict criteria will move on to the investment consideration stage.

Strong founder and start-up network

The key differentiator in the SEIS space is entrepreneurs who have successfully built businesses and arranged lucrative exits. We work very closely with founders with deep sector experience in climate tech, providing hands-on mentorship and operational guidance where required. In many ways, this allows founders and innovators to focus on the everyday business (and more innovation) while we can assist with long-term strategy and operational efficiencies.

Due diligence and our investment selection process

A rigorous due diligence framework is critical to any investment process, especially for start-ups in sectors such as climate technology. Scalability and commercial viability are vital, as is the ability to align the company with regulations and government policies. Combined with data-driven investment decisions, leveraging industry insights and sector trends, we leave no stone unturned.

Active portfolio management

Over the years, we have helped many start-ups secure follow-on funding beyond SEIS and implemented strategic introductions to industry partners, government bodies, and corporate investors. We are very comfortable taking on an active role with those in our investment portfolio, advising on go-to-market strategies, revenue models, and the commercialisation of innovative technology.

Track Record

While past performance is by no means a guarantee of future performance, a successful track record is priceless in the investment world. OnePlanetCapital has a proven ability to identify potential high-growth companies of tomorrow. Coupled with our expertise in the broader climate technology sector, this puts us in a great position with our SEIS climate tech start-up fund.

Feel free to contact us for more information or to discuss the potential of climate technology start-ups within the broader SEIS investment sector.

Future trends in SEIS climate tech investing

There is an obvious skill in identifying trends relatively early, but it is also as much about implementing an investment strategy. At this moment in time, there are several emerging opportunities in the SEIS climate tech space, which include:-

Hydrogen energy

The UK government introduced a hydrogen strategy, which has created solid foundations for start-up funding. The growth of green hydrogen production and storage and advances in hydrogen fuel cell technology for transportation and industry are attracting significant interest from investors.

Sustainable AI and smart climate tech

We have already seen significant developments and a noticeable impact on the environment and society in this area. AI-driven energy-efficient solutions are revolutionising building management and smart grids. Advanced carbon tracking and ESG reporting tools are also critical for businesses and the broader investment community. Recently, we’ve seen developments in areas such as precision agriculture, optimising the use of water and land to maximise productivity while protecting the environment.

Circular economy start-up

Product-as-a-service models, promoting reuse over single-use consumption, are influencing businesses and the way we think as a society. Innovative recycling technologies, including plastic waste, electronic waste, and battery recycling, are complemented by upcycled materials and biodegradable alternatives, which are disrupting traditional manufacturing.

Regulatory environment

As mentioned earlier, while some companies appear to be taking advantage of President Trump's alternative views on climate change, the long-term trend remains intact. There is a global movement towards net zero, a greater focus on carbon pricing and emissions, and a determination to enhance investment via tax relief and tax breaks.

Supportive government grants and R&D incentives have supported the growing influx of investment funds from institutions, venture capital trusts, and the broader investment public. Demonstrating that tackling climate change and investment gains are not necessarily at different ends of the spectrum has certainly encouraged the flow of investment. Will governments and global institutions continue to be as supportive going forward?

Conclusion

The climate tech sector is booming, and SEIS funding is playing a critical role in shaping its future. Beyond the 50% income tax relief, CGT exemption, and loss relief, SEIS offers a unique opportunity to invest in high-impact, early-stage businesses with strong growth potential. The landscape is shifting, with investors and advisers now looking beyond just tax incentives to focus on the individual investment opportunities that can drive real change and generate strong returns.

With the broad climate tech market projected to reach $1 trillion by 2030, institutional investors and venture capitalists are pouring funds into the sector, ensuring a robust pipeline for follow-on funding and exits. While some governments waver on their net-zero commitments, the UK remains steadfast in its climate policies, providing a fertile ground for start-ups and investors. This is creating an unprecedented opportunity for early-stage investors to back businesses at the forefront of innovation, from hydrogen energy and carbon capture to sustainable AI and circular economy solutions.

At OnePlanetCapital, we don’t just invest, we build. With hands-on experience in climate tech, start-up growth, and SEIS/EIS sustainable investing, we are uniquely positioned to identify, support, and scale the next generation of climate tech pioneers. Our track record in EIS-backed climate tech funds has provided us with deep industry insights, allowing us to curate high-potential SEIS investment opportunities for our network of investors.

In summary, 2025 is shaping to be a pivotal year, with policy-driven growth, increasing commercialisation, and more SEIS-backed start-ups moving from R&D to real-world impact. The window of opportunity is open now.

Are you ready to invest in the future of climate tech?

Contact OnePlanetCapital today to explore how SEIS investments can work for you. Let’s build a greener, more profitable future together.

matt Jellicoe