The Climate-tech Cavalry are here! … Now it’s time to reform the WTO as global climate hawk.

ArcTern closed Fund 1 back in 2012, just as many of our peers shed their climate-tech affiliation. For a while, the sector was a lonely place — maybe a half dozen funds waved the climate-tech flag. That’s changed — there are now dozens of venture funds seeking to invest in solutions to the climate crisis. More arrive on the scene on a near-weekly basis — in the Valley and across the globe.

And it’s not just venture capital: private equity, hedge funds, corporates, pension funds — all seek ways to deploy capital in the transition to a low-carbon economy. For climate nerds, it feels like the cavalry has arrived!

Interest in climate-tech from across the financial spectrum — from venture to pension funds and private equity — and a focus on ESG from big investors like Blackrock feels like the arrival of the cavalry in the climate fight …

We’ve seen climate-tech exuberance before, of course — notably in the early 2000s — only to see a rush for the exits as returns proved elusive. This time feels different. Why? Two reasons: market pull and a virtuous cycle.

Corporate demand for emission reductions, driven by investors’ ESG requirements, scales the market in a way we haven’t seen before. An electric F-150? Gear up those EV start-ups. Net-zero buildings? Pour money into building-integrated solar, storage and efficiency plays. As transition begins to feels inevitable (if late), more money pours in as late-comers jostle to take a position. That lowers the cost of compliance. Which increases demand. And so on.

But it’s not enough for climate nerds — not even close. Corporates and countries talk a big game. ‘Net-zero by 2050’ is hip like hip-hop. But once the hype dies down and the work begins, it will become clear market forces won’t get us there — no matter the enthusiasm of capital markets.

So what’s next? Policy levers to accelerate the transformation of tough sectors like cement and steel will impose regulatory burden on domestic industries. That will test the limits and assumptions of global trade. Europe is already signalling it will impose carbon tariffs at the border to protect those very industries. Those efforts will go to the WTO, where detractors of climate action will bellow against protectionism.

It’s time for global institutions like the WTO to be re-tooled for the climate fight — to level the playing field between countries to ensure those who take aggressive action aren’t penalized by less ambitious global competitors. The EU will likely be the first to test the WTO’s capacity to endorse carbon tariffs at its borders.

That fight will be the next big test of our global political and corporate resolve. The WTO was designed to protect capital and investments. Countries have handed to it a degree of trans-national sovereignty to resolve disputes — it has teeth enough to over-rule national legislatures who contravene trade rules. Those teeth might now be reworked as the claws of a climate hawk, levelling the playing field of international trade and rewarding those jurisdictions that move most aggressively on climate risk.

ArcTern is just a venture fund. But we seek nothing less than solutions to humanity’s biggest threat — climate risk. It’s time for the biggest, baddest players in global trade to join us in those efforts.