Buoyant’s 2025 Outlook

As we face the most destructive and costly climate disaster ever in the US with the LA fires, our hearts are breaking for all the people that have lost their lives and homes. Our own Laura Katzman lives in Brentwood and has been giving us regular updates on what it’s like to live through the constant anxiety of evacuation orders and air quality alerts, and trying to keep in touch with friends and family that have been impacted.  

While 2025 will present significant challenges for climate investors as the Trump administration begins rolling back climate policies and implementing new ones, and as some corporations and financial institutions reactively soften their carbon reduction commitments, Buoyant knows that volatility will be significant this year. We will draw upon our decades of experience in the climate industry to find opportunities amidst the chaos, and know that the climate industry’s work is more important now than ever. One of our mantras is to ground ourselves everyday so that we can be clear-headed and effective at helping our entrepreneurs navigate the volatility and to be able to make sound decision for our investors. We remain committed to our mission of funding and supporting impactful digital solutions for climate change.

Our job as trusted stewards of capital is to spot trends, roadblocks, and try to see around the corner for our investors. Here’s what we’re anticipating for 2025.

1. Insurance industry on the brink means high costs and coverage gaps 🏚️💰

Climate risks will continue to upend the insurance industry, particularly in high-risk areas like Florida and California. Premium prices will increase for everyone as low-risk customers will inevitably subsidize coverage for high-risk customers. The increasing frequency and severity of natural disasters will force insurers to rethink traditional models, leading to systemic challenges for municipalities dependent on affordable coverage. Buoyant will be focusing some of our research this year to better understand where new technologies can succeed in supporting more accurate coverage of risk.

Additionally, insuretech startups are dependent on selling their solutions to big insurers and reinsurers. So the ecosystem overall will be impacted by regulation, financial stress and layoffs.

Here is a great podcast that is a discussion between Kate Gordan and David Roberts: Volts on Climate Change and Insurance

2. Stock market volatility will cause exit activity to fall short of investor expectations 📉📈🌍

Markets will be very turbulent due to geopolitical tensions, domestic political instability, and climate-driven economic disruptions. We have read financial institutional outlooks for the stock markets, bond prices, interest rates, and inflation, and we are not as bullish as most pundits are about how the US economy will perform this year. We hope we are wrong on this prediction.

Despite global volatility, we expect the IPO market to be more active in 2025 than 2024, yet still below historical averages. We also expect M&A to remain active as it will continue to be a buyers’ market. Startups that raised bridge financings in 2023-2024 will run out of cash and either fold or be acquired for low amounts.  

This subdued exit activity will increase pressure on venture funds to provide DPI to their LPs. We will continue to see alternative exit opportunities (such as secondaries) emerging, but this will not make up for the lack of IPO and M&A activity. We will look for pockets of opportunity that we think will be especially buoyant😜amid rough seas.

3. Fossil fuels investment will outpace clean energy to feed the AI beast⛽️🔥🌍

Despite clean energy advances, fossil fuel reliance will grow as global energy demand outpaces renewable energy deployment. Natural gas will be one of the winners for satisfying capacity demands in US energy markets. All types of energy generation will be required to satisfy the load growth predicted by AI and datacenters. JLL predicts that global energy demand for data centers will double by 2030. And contrarily, S&P predicts a surge in clean energy investments globally, to outpace fossil fuels investments. In any case, an “all of the above” strategy will be necessary and will help make room for newer technologies likes batteries and geothermal. But Buoyant predicts corporations will choose energy availability over clean energy. And that fossil fuels will have a banger year.

A potential silver lining of fossil fuel growth is that it will drive needed reform to upgrade the grid as a whole, including permitting reform and interconnection queues.

4. A softer macro climate industry domestically and internationally🪶🌍

Buoyant expects domestic investments in climate technologies to be flat to down over 2025 given the cooling effect of the Trump administration and its executive orders to stymie clean energy development. But there is a limit to how long it will take to implement some of the more aggressive promises to drill on federal and protected lands, and there continues to be Republican support for infrastructure and clean energy investments implemented under Biden.

Political turbulence in Europe will threaten policy support for climate initiatives. This instability will challenge companies reliant on EU regulatory frameworks.

While these regulatory tailwinds shift to headwinds, we expect the climate industry will rely on state and private efforts to fill the void.

Buoyant is proud to be investing with Microsoft and other corporations like Xcel Energy and NiSource who have strong climate commitments. And family offices, foundations, and high net worth investors who have aligned investment with their values are generally playing the long game and looking beyond the next four years. We fully embrace adjusting to market conditions to remain resilient, but we remain committed to our investing for climate mitigation and adaptation benefits which is core to our mission.

5. Data Centers’ explosive growth continues  🖥️⚡📈

The data center boom will continue in 2025, but will focus on projects with secured financing and customer commitments. In addition to the JLL forecast for data center load growth doubling by 2030, the Department of Energy predicts data centers will consume 12% of U.S. electricity by 2028, triple their 2023 demand.

We expect that some of the predicted growth will not materialize as data center customers are in multiple interconnection queues. Still the scale of the infrastructure is accelerating with some of the newly announced data centers projected to be 10x the average of about 100MW today. The cost of a 1GW data center is tens of billions of dollars. Financing requirements will separate the wheat from the chaff. Note the recently announced Stargate project with $500B of funding for AI infrastructure from OpenAI, Oracle, and Softbank in partnership with Trump Administration. We expect several more eye-popping investment partnership announcements in support of data center infrastructure.

Tech leaders are promising more energy efficient chips and training modules. And they are counting on nuclear fusion and fission to help supply power. Buoyant remains skeptical that these newest technologies will mature fast enough to satisfy demand in a cost competitive way. Michael Liebreich has a great explainer about modern data centers and power consumption.

Buoyant is actively looking for new investments that leverage digital technologies to reduce the energy intensity of AI and data centers.

6. Increasing private financing for nature-based solutions 🪨🌱🌍

Buoyant continues to be bearish on the carbon credit offsets, but we expect to see growth in solutions that allow for high quality credits that can address concerns over additionality, permanence and scalability. For example, we can expect to see more investment in enhanced rock weathering (ERW). ERW is the process of spreading pulverized limestone on croplands, which enhances the carbon sequestration capacity of the soil and improving crop productivity. We also expect to see increased attention on biochar and blue carbon.

We also believe there will be an increase in private and blended finance for nature-based solutions that address a broader set of environmental and conservation goals. For example, Builders Vision’s $70M co-guarantee to support The Bahamas Debt Conversion Project for Marine Conservation.

7. AI goes vertical 🤖🏗️🩺

If 2024 was about general-purpose AI, 2025 will focus on industry-specific AI applications in climate, healthcare, logistics, financial services, construction, and other complex industries. These tools will drive efficiency across sectors. Demand from end users of AI will lag behind investment in the sector, which means vertical AI companies will need to stay hyper focused on proving ROI quickly. Buoyant conducted research in 2024 on AI Co-pilots and we see verticalization of AI to continue in 2025. Portfolio company HData is a good example of a vertical AI solutions for regulatory data.

8. Batteries keep moving up and to the right 🔋🚗⚡

Following a record-setting76% increase in installations in 2024, which added over 69 gigawatts (GW) of power and 169 gigawatt-hours (GWh) of capacity, the momentum is expected to continue into 2025. Battery storage will have another strong year in2025, with U.S. installations exceeding 10 GW—ten times the levels of 2020.Falling battery prices will boost adoption in both EVs and grid applications. And we’ll throw in expected continued growth in EVs alongside batteries, despite threats to eliminate EV tax benefits. The global migration to battery powered EVs from internal combustion engines (ICE) is well on its way, and manufacturers may be slowing production but they are not abandoning it. And the cost of lifetime ownership of an EV beats ICE engines.

🔗Source: Generate Capital Report on Battery Storage and BNEF outlook on batteries and Forbes: Nearly half of all EVs are cheaper to own than gas vehicles

9. "Bring Your Own Power" (BYOP) on the rise in the US⚡📈

In 2025, utilities will have trouble keeping up with electricity demand. Energy availability will become a blocker for new data centers and factories, driving more project developers to invest in on-site power: solar arrays, battery storage systems, and natural gas microgrids. Bloom Energy predicts that by 2030, 30% of data centers will use onsite power as a primary energy source (2025 Data Center Power Report).

Additionally, energy strategy will become more important than ever for managers of energy-intensive assets. Managers will rely on tools - like portfolio company Gravity Climate - to manage energy costs.

Closing Thoughts

We’d love to hear your thoughts and discuss these trends further—reach out to team@buoyant.vc

Note: This analysis uses data available as of early 2025. Investors should conduct their own due diligence and monitor evolving market conditions.