“Once in a generation chance”: Australian institutions backing $50m climate-tech VC fund
CEFC and Australian Ethical have invested $15m each in the fund managed by Climate Tech Partners
Venture capitalists and institutional investors typically occupy different positions on the financing ladder. They are after all, driven by vastly different appetites for risk, return and patience. This is also true in the world of climate technology. The average climate tech entrepreneur seeks venture backing early on while institutional players await on the other side of commercial maturity.
On occasion however, the two interact when institutional investors are drawn to the niche opportunity of early stage climate tech. This interaction is now playing out in Australia.
The government-backed Clean Energy Finance Corporation (CEFC) and Australian Ethical, an asset owner with over $13bn across managed funds and superannuation have collectively invested $30m in Climate Tech Partners’ Fund I – a climate tech venture capital fund.
The fund
Commitments from Australian Ethical and CEFC lend institutional support to the fund, which has now reached first close. Other backers include Qantas and Airbus - in separate vehicle commitments targeting climate tech in aviation – and the BESEN family office.
So far $50m has been raised across the fund and the aviation investment vehicle. CTP says the fund will target series A opportunities across grid technology, low carbon fuels and climate adaptation.
“We’re seeing a wave of breakthrough climate tech – electrification, sustainable fuels, next-gen grids -gaining real traction”, says Patrick Sieb, CTP’s co-founder.
The opportunity
Two factors seem to be drawing in institutional interest for early stage climate tech down under. The first, has to do with timing. The fund’s close is set in the context of the recent Australian election outcome and the expectations of climate policy certainty that it brought along.
Despite headwinds from the US, CTP reckons early stage climate tech is an idea whose time has come.
“The Australian government is committed to long-term climate ambition, which sends a powerful signal to innovators and investors alike”, says CTP’s other co-founder Tom Kline.
“This is a once-in-a-generation chance for Australia to lead in climate solutions - and we’re proud to be driving it, backed by family offices, super funds, and government with corporate partners to derisk and accelerate our investments”, he adds.
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CEFC’s head of growth capital, Malcolm Thorton holds a similar view. “The climate tech space in Australia is vibrant, and this is an important time to back innovative companies making breakthroughs in critical technologies”, he commented.
The model
The second factor has to do with the CTP model for venture finance. The fund deploys capital in collaboration with corporates – who are intended to be the end consumers of the technology being financed. So far, 11 corporate partners have signed on. The model offers a degree of de-risking through what CTP refers to as ‘demand validation’, that institutional clients could find comforting.
“We are thrilled to support Climate Tech Partners and their model, which is driven by industry demand,” said Ian Learmonth, CEFC’s chief executive.
Demand-driven risk adjustments pave the way for return expectations to drive investor confidence
“This fund allows us to feed capital to the emerging companies in energy and climate tech that will shape a net-zero tomorrow. We’re confident in the growth opportunity this represents and are committed to climate and tech as a source of competitive returns for our investors’, says Ludovic Theau, chief investment officer at Australian Ethical.
Additionally, return expectations from institutional investors are also linked to the team at CTP. In their previous roles Sieb and Kline co-headed climate tech investments for Investible – an early-stage venture capital firm.
“The team at Climate Tech Partners has a strong background in venture capital and tech investments and is well-placed to identify the next wave of technologies that will drive emissions reduction across key sectors. We are confident this team will deliver both environmental and commercial outcomes”, notes CEFC’s Learmonth.
