Sovereign wealth funds, public pension funds, and state-backed entities are channeling growing volumes of long-term capital into low-global-warming-potential (low-GWP) HVAC technologies, compressing development timelines and expanding deployment into public-sector buildings - with direct implications for project finance structures across the SHK sector.
Background
The shift toward low-GWP refrigerants in HVAC systems rests on a multi-jurisdictional regulatory framework. The Kigali Amendment to the Montreal Protocol, the EU's F-Gas Regulation targeting an 85% HFC reduction by 2036, and the U.S. AIM Act are driving a worldwide transition to low-GWP refrigerants, including HFOs, hydrocarbons, ammonia, and CO₂. In the United States, the first compliance phase - effective January 1, 2025 - restricts residential and light commercial air conditioning, heat pump systems, and chillers to refrigerants with a GWP below 700 in newly manufactured units.1How can Sovereign Wealth Funds be encouraged to go green? | Green Fiscal Policy Network
Against this regulatory backdrop, the market opportunity has drawn substantial institutional attention. The global low-GWP refrigerant market exceeded USD 11.92 billion in 2025 and is projected to surpass USD 34.46 billion by 2035, reflecting a CAGR above 11.2%. The broader HVAC systems market provides deployment context: estimated at USD 258.96 billion in 2025, it is projected to reach USD 445.73 billion by 2033.
Investment Details
Institutional financing of energy-efficient building technologies has grown materially in recent years. Investment in HVAC systems rose steadily from USD 96 million in 2020 to nearly USD 700 million in 2024. With USD 2.3 billion raised across 241 deals, HVAC represents the largest and most mature segment within heating and cooling technologies for buildings. The composition of that capital has also shifted: debt financing surged in 2024, reaching a record USD 308 million and accounting for a third of total funding - signaling that advanced heat pumps, thermal storage, and smart HVAC systems have reached a level of technical maturity and bankability suitable for non-dilutive financing.
Sovereign wealth funds and public pension funds are entering this space through broader energy-transition mandates. According to PwC analysis, sovereign wealth funds deployed USD 1.14 billion into industrial companies producing clean energy hardware - including heat pumps and carbon capture equipment - in 2023. Given their long investment horizons and ability to de-risk projects, these funds are well positioned to bridge the financing gap for the energy transition. At the 8th One Planet Sovereign Wealth Funds CEO Summit in October 2025, more than 80 institutions representing approximately USD 48 trillion in assets convened to advance a shared agenda linking climate action, financial performance, and technological transition.
Global investment in HVAC systems grew approximately sevenfold from USD 96 million in 2020 to nearly USD 700 million in 2024, according to Net Zero Insights. Major manufacturers are scaling product lines in parallel: Honeywell has pledged more than USD 1 billion to its Solstice HFO refrigerant line, including collaborations with Bosch to deploy low-GWP refrigerants in heat pump platforms. The low-GWP refrigerants market as a whole is expected to grow from roughly USD 31.8 billion in 2024 to an estimated USD 106 billion by 2035, reflecting a compound annual growth rate of 11.5%.
Deployment in institutional buildings - hospitals and schools in particular - serves as a primary channel for this capital. Institutional buyers such as schools and government buildings are increasingly setting sustainability benchmarks, prompting HVAC vendors to accelerate R&D in smart, scalable, and carbon-reducing systems. Hospitals stand to benefit especially, as heat pumps can recover energy from sterilization processes, IT cooling, and food preparation and repurpose it for pre-heating ventilation or domestic water - turning waste heat into a resource and delivering substantial savings even when only a fraction of that energy is captured. In the United Kingdom, Imperial College Healthcare NHS Trust is investing £47.4 million over two years as part of a £120 million decarbonisation programme that began in 2021, targeting a 43% reduction in greenhouse gas emissions from hospital buildings.
Smart controls investment is tracking alongside hardware. Broader investment patterns show that much of the software-oriented capital has flowed into sub-segments such as predictive maintenance, energy analytics, and connected HVAC systems. IoT-based monitoring systems equipped with pressure, temperature, and concentration sensors enable continuous refrigerant tracking, while predictive analytics platforms use historical data to flag maintenance needs before failure occurs.
Outlook
The sharp rise in debt financing in 2024, followed by a surge in late-stage equity in 2025, signals that heating and cooling technologies are advancing from early innovation to large-scale deployment. For HVAC contractors and system designers, the influx of institutional capital is expected to shorten procurement lead times for low-GWP equipment and broaden available project financing structures - including energy-performance contracts and green bonds - particularly for large public-sector clients. The world's largest public pension and sovereign wealth funds remain committed to financing the energy transition despite shifts in U.S. policy, with investment opportunities increasingly emerging in Asia and Europe. Firms that align project proposals with ESG reporting requirements and climate disclosure frameworks stand to access a deepening pool of institutionally structured project finance.
