CPP backs early-stage climate fund ArcTern Ventures III

Investing in venture-stage technologies 'that will assist the energy evolution' are part of the pension's plan to meet its net-zero 2050 target.

Canadian Pension Plan Investments is the latest pension fund to embrace early-stage risk for climate impact. Climate-focused VC ArcTern Ventures has just closed its third fund on $335 million, and among its LP base are CPP, which has made a $25 million commitment, and the US’s Church Pension Group.

For CPP, investing in venture-stage technologies “that will assist the energy evolution” are part of its plan to meet its net-zero 2050 target, then-chief sustainability officer Deborah Orida told New Private Markets two years ago.

“For our whole portfolio by 2050, we think the economy can reduce carbon emissions significantly with the advancement of technology, including carbon capture and sequestration, and regulations, carbon markets and reporting,” Orida said. Supporting these technologies to scale, therefore, would help put the economy, including CPP’s own assets, in a position to reach net zero by 2050, Orida explained. CPP established a $1 billion venture capital programme in 2019, which sits within its private equity programme, affiliate title Venture Capital Journal reported in 2020.

A number of pensions have been committing to venture funds in the climate and impact space. AP1 has committed to Norwegian VC Sandwater’s debut fund, which invests in seed to Series B for climate and healthcare impact; LACERA committed $20 million to Cibus Capital’s second venture fund for decarbonising the food sector in 2022; and the UK’s South YorkshireWest YorkshireGreater Manchester and Merseyside pensions are LPs in Northern Gritstone’s debut evergreen fund, which focuses on seed investments for local impact in the north of England.

And about ArcTern…

ArcTern III invests in Series A and B deals, writing cheques of between $5 million and $10 million to climate change mitigation companies, Reuters reported yesterday. Sectors include circular economy, mobility, food and agriculture and industrial decarbonisation. Launched in 2022, the fund initially had a $400 million target. Other investors include Norwegian bank Laerdal Invest, TD Bank, UBS Asset Management and Norwegian sovereign-backed fund Nysnø Climate Investments.