(Bloomberg) — Amid a lull in cleantech funding, a venture capital firm managed to raise $200 million to back investments at the intersection of climate and artificial intelligence.

Blue Bear Capital has raised a $160 million Fund III and an additional $40 million in follow-on vehicles to fund startups applying AI in the energy, infrastructure and climate sectors.

Funding for climate technologies is on track to fall by about 50% this year, according to BloombergNEF data. Many venture capitalists have been surprised by another, more popular sector: artificial intelligence. Investments in AI have increased since the third quarter of 2023, according to Pitchbook data.

The rise of AI has fueled demand for data centers, strained power grids and extended the lifespan of fossil fuel power plants. But a growing number of investors like Blue Bear also see it as a powerful tool to help improve the performance of power grids and clean energy assets such as electric vehicle charging stations.

When Blue Bear launched in 2016, most institutional investors associated climate investing with risky, capital-intensive hardware, said partner Ernst Sack. Perceived timelines for getting a return on investment were long and fundraising was a challenge, he said.

“We’re not in that category,” Sack said in an interview. “We want shorter cycles, higher returns with less capital intensity, but driven by innovation and AI. »

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