Standards and Taxonomies for Climate Tech Investments
Several existing standards and classification systems can guide investors in defining and assessing climate tech as an asset class. Key ones include:
U.S. Department of Energy (DOE) Guidelines: The DOE has developed frameworks like Technology Readiness Levels (TRLs) and the new Adoption Readiness Level (ARL) to evaluate clean energy technologies’ maturity and deployment readiness. These help underwriters gauge how far a climate tech is from commercial viability. For instance, TRL 9 means fully commercial – a project at this level can be judged by normal project finance standards – whereas TRL 5 means lab prototype, which would be venture-oriented. The DOE’s Loan Programs Office (LPO) has its own criteria which effectively act as underwriting standards: projects must avoid significant greenhouse gases, use innovative technology, have a high likelihood of repayment under given structures, etc. The Title 17 program criteria (as per the Energy Act) require “significant emissions reduction” and technology innovation, which helps define what “climate project” means in practice. By following DOE’s definitions (for example, what constitutes an “Innovative Energy Project” eligible for a loan guarantee), private investors can align on a common taxonomy of climate tech projects.
SEC Climate Disclosure Rules: In March 2024, the U.S. SEC adopted landmark rules mandating that public companies disclose their climate-related risks, financial impacts, and greenhouse gas emissions in a standardized way. For institutional investors, this is a game changer for data availability. It means any public company involved in climate tech (or any company with climate risks/opportunities) will be providing decision-useful information on how climate factors affect their business. Additionally, the SEC has been refining fund naming and ESG disclosure rules – a fund marketed as “Climate Tech Fund” will likely be required to invest a high percentage in assets that meet a defined climate criteria. These regulations push towards a de facto taxonomy of environmentally sustainable investments in the U.S., akin to the EU’s taxonomy. While the SEC rules don’t explicitly define “climate tech”, they define disclosure categories (physical risk, transition risk, emissions scopes, etc.) that investors can use to assess climate tech companies on apples-to-apples terms. For example, a climate tech firm going public will have to disclose material climate-related opportunities – validating that its technology contributes to mitigating climate risk – or a company in a portfolio might disclose how much of its revenue comes from low-carbon products. Such data helps institutionalize the notion of climate-aligned revenue.
GRESB and Other ESG Performance Standards: GRESB (Global Real Estate Sustainability Benchmark)has extended its scope beyond real estate to infrastructure and could be applied to climate tech assets. GRESB provides a standardized scoring of ESG performance for real asset funds and projects. A renewable energy infrastructure fund or a portfolio of EV charging assets, for instance, can get a GRESB Infrastructure score that investors use to compare it to peers. This is useful for underwriters and allocators to ensure that climate tech investments meet certain sustainability best practices (in governance, stakeholder engagement, etc.). Moreover, as climate tech becomes mainstream, we may see specialized rating systems – e.g. a rating agency might rate green infrastructure bonds factoring in climate impact, or a climate tech project might get certified (similar to how Green Bonds are certified under the Climate Bonds Standard). Investors are also referencing frameworks like the Greenhouse Gas Protocol and forthcoming ISSB (IFRS Sustainability Standards Board)guidelines to categorize investments. Notably, the ISSB’s IFRS S2 Climate-Related Disclosure Standard aligns with TCFD and requires reporting not just on risks but also on climate-related opportunities and metrics. As companies and funds report under these standards, it becomes easier to identify which investments truly qualify as climate solutions.
GIIN and Impact Investing Taxonomies: The Global Impact Investing Network (GIIN) has the IRIS+ taxonomy, which offers standardized definitions for impact themes and metrics. Within IRIS+, Climate is a major impact category, subdivided into Climate Change Mitigation and Climate Resilience and Adaptation. It provides a library of core metrics (like tons of GHG reduced, renewable kWh generated, etc.) that climate tech investors can report. Institutional investors who are impact-oriented (such as foundations or family offices) often require that climate tech investments report through IRIS+ or a similar framework to ensure comparability. Even for more commercial investors, using GIIN’s taxonomy can help define the scope of climate tech: for example, it clarifies that improving energy efficiency, enabling clean energy, sustainable transport, industrial decarbonization, etc., all fall under Climate Change Mitigation theme. GIIN’s work harmonizes with the Sustainable Development Goals (SDG 7 Affordable Clean Energy and SDG 13 Climate Action are directly relevant). Additionally, organizations like the Impact Reporting and Investment Standards and Taskforce on Climate-related Financial Disclosures (TCFD) are converging; many climate tech funds voluntarily produce TCFD-aligned reports to show how their investments align with a 1.5°C scenario. Using these standards, an asset allocator can confidently say “Our climate tech allocation is defined by the GIIN/IRIS+ taxonomy and all underlying managers report on standard climate impact metrics” – giving legitimacy and consistency.
Emerging Taxonomies (EU, etc.): While the question focuses on U.S.-based players, it’s worth noting that the EU Sustainable Finance Taxonomy explicitly defines what counts as a sustainable (including climate-mitigating) economic activity. Many U.S. institutions that operate globally are looking at the EU taxonomy to guide their own definitions. For instance, if an activity (like solar PV manufacturing or building retrofit technology) meets the EU’s criteria for substantial contribution to climate mitigation, a U.S. investor might likewise label it as “climate tech” in their portfolio. Additionally, initiatives like the Climate Bonds Initiative (CBI) provide taxonomy for climate-aligned assets which can be referenced for projects. The U.S. is also seeing state-level and industry-led taxonomies (e.g. the CalSTRS Low-Carbon Portfolio framework or the Ceres roadmap for integrating climate risk). All these standards create a more uniform language. Ultimately, having commonly accepted definitions and metrics lowers due diligence costs – underwriters and investors won’t each have to reinvent criteria for what “good” looks like; they can point to standards from DOE, SEC, IFRS, GIIN, etc. and require that climate tech opportunities furnish information in line with those.
