Some venture capitalists are demonstrating how philanthropy can scale its impact by investing in climate venture funds
When it comes to tackling climate change, philanthropy and venture capital (VC) have usually operated in separate spheres — one focused on grants that invest in projects with below-market financial returns, the other on long-term profit-driven investments. But what if you could combine the two? A growing number of climate-focused VC funds have been adopting a model that allows investors to take a tax deduction while backing high-impact climate solutions — sometimes even getting their money back with a return.
This approach isn’t just about financial incentives; it’s about multiplying the impact of philanthropy. By channeling charitable dollars into venture-backed climate technologies, donors can move beyond one-time grants and instead repeatedly drive outcomes by reinvesting investment returns into the venture fund. From breakthrough materials to clean energy solutions, this model helps accelerate commercialization and deployment — bridging the gap between promising climate tech and real-world impact.
By channeling charitable dollars into venture-backed climate technologies, donors can move beyond one-time grants and instead repeatedly drive outcomes by reinvesting investment returns into the venture fund.
How it is done
The model is straightforward: climate-focused venture funds are increasingly setting up philanthropic “sidecar” vehicles that let donors make tax-deductible, venture-focused contributions in two ways:
- Traditional charitable donations and grants that can provide tax write-offs but no other return, and that can be made by individuals, donor-advised funds (DAFs) and foundations etc.
- Recoverable grants — charitable contributions with the potential for returns, which can be made by donor-advised funds (DAFs) and foundations etc.
The use of public charity to support for-profit businesses is not new. Universities and hospitals have long maintained philanthropic vehicles to receive charitable donations, while engaging in research-related for-profit activities. Similarly, nonprofit organizations such as ImpactAssets also manage impact investments with philanthropic dollars. Companies often set up or work with nonprofits that pursue similar goals.
The key difference in this new approach, which has been adopted by a number of funds such as Exit Ventures, Malaika Ventures and the Greenlight Climate Technology Fund, is that climate VCs are offering the same investment products to both traditional limited partners (LPs) and philanthropic entities, albeit with different tax impacts.
“For these funds, the investment product remains largely identical,” explained Rick Davis, Co-Founder of LOHAS, an advisory firm focused on enabling the flow of charitable funding to support impact ventures. “However, for donations, returns are either recycled within the funds to sustain future investments (standard grants) or withdrawn and recycled back to the DAFs or foundations (recoverable grants). LOHAS has worked closely with both philanthropic donors and grantors as well as impact fund managers, and company leaders to structure these models in a way that balances financial flexibility with impact goals.”
A venture-philanthropy partnership case study: Exit Ventures
Established in 2023, Exit Ventures is a climate tech venture capital fund that targets late seed, Series A and Series B investments in climate technologies. The fund works with potential strategic buyers to invest in startups. Those investments, in turn, can create a “virtuous circle,” making the startups more likely to be acquired by strategic buyers down the road.
The use of public charity to support for-profit businesses is not new.
Exit Ventures recently led a $4.5 million Series A funding in Solubag, the water-soluble alternative to single-use plastic that achieves price parity with plastic. “We expect Solubag to be a major participant in replacing single-use plastic in the coming years,” said Paul Burgon, an Exit Ventures managing partner who joined the Solubag board of directors.
Exit Ventures operates with a traditional GP/LP structure, but also accepts charitable donations through its partnership with the 1.5°C Impact Fund, a 501c(3) nonprofit that offers investors ways to accelerate the development and commercialization of climate-positive technologies.
“Partnering with the 1.5°C Impact Fund allows us to channel philanthropic capital into climate technology with the same rigor, due diligence, and return potential as our traditional VC investments,” Burgon told me in an interview. “By aligning mission-driven funding with venture-backed innovation, we can accelerate the commercialization of critical climate solutions while unlocking new pools of capital to scale their impact.”
Unlocking private philanthropy for climate VC, and addressing the awareness gap
Private philanthropy is growing in the United States. According to CauseIQ, 149,129 private foundations manage assets worth $1.2 trillion in the United States. That’s up sharply from 99,683 foundations managing $754 billion in 2015. Yet, climate mitigation represents only 2% of total global philanthropic giving, and climate venture capital remains a largely untapped opportunity for philanthropic dollars.
A key reason? Lack of awareness.
Unlike traditional areas of climate philanthropy — such as mitigation, adaptation, and resilience projects — climate VC is more focused on technology and finance.
Many philanthropists, even those eager to fund climate solutions, are simply unaware that their philanthropic dollars can be deployed to scale technological solutions through traditional investment vehicles. As a result, much of this capital remains directed toward conventional grant-making rather than fueling the scalable innovations needed to drive climate action. But that’s beginning to change.
”Largely, it’s an awareness challenge,” Brahm Rhodes of Malaika Ventures told me. “Rather than debating whether foundations and family offices should align their philanthropy with a venture fund, the first step is simply showing them that we have a nonprofit vehicle that accepts charitable dollars. Once they understand that, we can focus on discussing how we provide long-term capital to scale climate innovation and justice.”
Malaika provides $500k+ catalytic capital to pre-seed and seed stage investments targeting built environment, transportation, energy, food & agriculture, manufacturing, and data-driven sustainability.
From charity to capital: the new philanthropic investors
As we look to unlock more philanthropic capital to support meaningful climate technology, we can draw inspiration from organizations already blending philanthropy with investment. Boyd Street Ventures, for example, recently received an anchor investment from OGE Energy Corp. Foundation.
“Investing in Boyd Street Ventures through the Foundation ensures that we are driving innovation and entrepreneurial endeavors right here at home,” Zac Gladhill of OG&E explains. “Supporting entrepreneurs who want to grow businesses and communities in our state will generate real returns that benefit all of us.” Boyd Street Ventures invests in founder-led companies that have the potential to contribute to economic growth in Oklahoma or other Heartland states.
Outside of venture capital, Energea, an investment platform focused on scaling solar projects, is leveraging philanthropic dollars to accelerate the growth of renewable energy solutions. With several nonprofits on its platform, Energea helps align mission-driven capital with impactful investments.
“Nonprofits have a fiduciary responsibility to manage the risk profile of their donor’s assets. When there’s alignment between their mission and a strong risk-adjusted opportunity, it is a logical and impactful choice,” said Mike Silvestrini, Co-Founder of Energea.
Shaping the future of climate philanthropy
These strategies represent a transformative shift in how philanthropy is addressing the climate crisis.
For too long, philanthropic capital has been confined to short-term, incremental solutions, often addressing symptoms rather than systemic change.
As the climate crisis intensifies, it’s clear that traditional models won’t be enough. Philanthropy must evolve—shifting from donor-driven, non-scalable approaches to strategically leveraging capital in high-impact investments that can deliver long-term climate solutions.
This shift is crucial because the scale of the climate challenge demands innovation and speed. By integrating philanthropic capital into venture-backed models, we can create a powerful ecosystem that accelerates the commercialization of critical technologies, increases climate justice, and drives market transformation.
To succeed in addressing climate change, philanthropy can no longer focus on relief; it must take risks, scale breakthroughs, and shape the industries of the future.
If we embrace this mindset, we can unlock the necessary capital to solve the climate crisis and build a sustainable, equitable future.
Featured image: Solubag, a water-soluble alternative to single-use plastic, backed by Exit Ventures and its philanthropic program, the 1.5°C Impact Fund. Credit: Solubag
