Climate tech venture firm ArcTern raises $335 million for third fund

By Peter Henderson and Simon Jessop

(Reuters) -Toronto-based ArcTern Ventures said on Monday it has raised $335 million from TD Bank and other institutions for a climate technology fund aiming to back renewable energy, clean transport and other industries addressing climate change.

Other investors to back the fund - ArcTern's third - alongside the Canadian lender include the Church Pension and Swiss lender Credit Suisse, now part of UBS, it added.

Climate tech, which includes companies creating new ways to reduce greenhouse gases, saw demand to invest fall 40% in the 12 months to September, consultants PwC calculated, although this was better than the broader venture capital industry, which was down 50%.

Despite the tough backdrop, ArcTern Managing Partner Murray McCaig said he expected large institutions with substantial cash on hand to move into climate tech over the next few years as public opinion on the need for climate action spikes.

The new fund will focus on early-stage companies that can grow quickly and have an impact soon, he said, in light of the need to cut climate-damaging emissions within the next decade if the world is to meet its climate goals.

ArcTern focuses on software and other industries that are relatively quick to scale and capital light, to avoid projects that would depend on major capital for success.

"It's really tough to make those investments and rely on someone downstream writing a half billion dollar check for a new project that's highly risky," McCaig said.

"I wish I could tell you we're investing in the hottest new sector like space-based solar or something, but the reality is, you know, the things that get us really excited are things like the mobility world," and the global roll-out of electric vehicles, he said.

Other areas of focus for the firm include the circular economy, sustainable food, agriculture and industrial decarbonization, with a geographic focus on the United States and Europe, he said.

(Reporting by Peter Henderson and Simon Jessop; editing by Jason Neely)