After a year of political tumult and economic headwinds, investors in the Canadian sustainability sector say companies backed by solid fundamentals and a strong business case will prevail going into 2026.

The year 2025 saw new leadership in Canada and the U.S. reverse or soften many of the environmental policies of their predecessors, uncertainty over trade policies and interest rates, and investors pouring money into artificial intelligence (AI) and data centres over cleantech.

Some companies have also shown less appetite to trumpet their sustainability credentials, highlighted by major Canadian and U.S. banks withdrawing from the Net-Zero Banking Alliance and leading to the organization's demise.

Exits from companies and investor interest in private equity have notably declined this year according to Nate Lowbeer-Lewis, a principal at Boston and Montreal-based sustainability investment firm Spring Lane Capital, in an interview with Sustainable Biz Canada.

But that does not mean opportunities have vanished. “More than ever, (in) this environment where capital is no longer ‘cheap,’ you need to find structured solutions and get to a lower cost of capital as quickly as possible,” he advised.

For Vancouver-based Active Impact Investments, climate tech firms that are “delivering a product that’s clean, better, faster, cheaper than the incumbents” remain in demand because of their superior economics, vice-president of operations Elyse Crowston said in a separate interview.

Energy independence, efficiency are keys

In the current economic and policy environment, Spring Lane is looking for companies that do not lead to a green premium, Lowbeer-Lewis said. An example is CleanFiber, a Buffalo, N.Y.-based company that is making insulation from recycled cardboard.

“We’re not marketing the company for the environmental attributes per se . . . you’re providing customers a better product, similar price and environmental attributes,” he said.

Crowston pointed to Vancouver-based Jetson Home as a standout in its portfolio for similar reasons. A company that produces heat pumps, it took “a software approach to a hardware problem,” she said, removing some of the friction around transitioning homes from natural gas to electricity.

Investors and companies in the sustainability sector have shied away from overtly climate-focused language, she added, leaning into energy independence and efficiency. It reflects a pivot in branding, not mission, Crowston said.

“Sustainability is just efficiency by another name.”

Increasing energy demand driven by AI and data centres will present opportunities for companies providing sustainable energy and energy efficiency solutions, Lowbeer-Lewis said.

AltCrest Energy, a Toronto-based energy developer, aims to capitalize with a $100-million fund it launched alongside Spring Lane and U.S.-based Development Engine Partners.

Crowston does not anticipate Active Impact making drastic changes to its investing in 2026. She expects its interest will be in companies providing distributed and renewable energy to data centres, and businesses upgrading electrical grids for enhanced accessibility and efficiency.

Data from BloombergNEF for H1 2025 found global investment in renewable energy increased by 10 per cent year-over-year, despite a heavy blow in the U.S. Energy-hungry data centres were driving global demand for green technologies, Bloomberg reported.

The Associated Press found high demand for low-carbon energy such as solar, energy storage, nuclear and geothermal in the U.S. despite a federal government opposed to climate action.

What to expect in 2026

Lowbeer-Lewis is optimistic investment into sustainability will pick up in 2026. Companies that survived their testing years “will be stronger and ready to succeed.”

He foresees the best Canadian investment opportunities in energy generation and efficiency, green hydrogen, waste valorization and electric vehicles (EVs). Despite a punishing year for the sector, Lowbeer-Lewis sees a smoother path ahead because he anticipates EV prices will decrease.

At a moment with longer gaps between financing rounds, Active Impact is telling its portfolio companies to “become default alive rather than default dead,” Crowston said. For 2026, she recommends businesses prioritize capital efficiency, unit economics and reaching profitability as quickly as possible.

Though private equity has slowed overall, billions of dollars in energy transition infrastructure funds remain available, Lowbeer-Lewis said, repeating a point he raised at MaRS Climate Impact 2025. Later-stage de-risked projects are particularly in demand, he said, noting Houston-based geothermal company Fervo Energy which raised US$462 million earlier this month.

Canada has a “healthy ecosystem” for investing in early- to middle-stage companies, Lowbeer-Lewis said, with the Canada Infrastructure Bank and the Canada Growth Fund. As a result, he expects some U.S. cleantech and climate tech companies to take an interest in Canada. A few already have, such as CarbonCapture and Mantel Capture.

Crowston said 2026 will present an opportunity for Canada to attract world-class talent and market itself as a compelling location to build sustainable companies.

While capital efficiency will remain king, Crowston said transparency and authenticity should also be in the conversation.

“There’s just so much AI slop, that people are really attracted to what’s authentic and real and vulnerable.”

Top Sustainable Biz Canada stories of 2025

Sustainable Biz Canada has ranked our Top-20 stories of the year. Here are the top five:

1. La Caisse acquiring Quebec-based Innergex Renewable Energy Inc. in a deal valuing Innergex at $10 billion, arguably the transaction of the year in the Canadian sustainability sector.
2. Co-operators raising its commitment for climate action to US$3 billion by 2030.
3. RBC exiting its goal to facilitate $500 billion in sustainable finance by 2025, after it and its Canadian peers exited the Net-Zero Banking Alliance.
4. The global sustainability sector rethinking its planning after the re-election of U.S. President Donald Trump.
5. Canadian EV projects continuing to be developed, despite a barrage of bad news such as factories being cancelled and delayed.