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A trio of Canadian clean-tech venture funds are attempting to raise $700-million amid calls for more capital to boost the underfunded sector focused on the environment and climate change.

Toronto-based ArcTern Ventures, Vancouver’s Chrysalix Venture Capital and Montreal’s Cycle Capital are pushing to do something that has proved relatively difficult in Canada: persuade investors to buy into what are called clean technology companies. The three funds, which have set lofty goals and are showing some momentum in their fundraising, are attempting to fund a Canadian sector that has seen “relatively weak” financing compared with global peers as risk-averse corporate customers have been slow to adopt new technologies.

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Murray McCaig, left, and Tom Rand.

The financing push comes amid growing calls for action on climate change, the most recent of which came in a United Nations report on Monday.

ArcTern Ventures said it has raised $60-million of the $150-million target for its second clean-technology fund, including $20-million from Ontario Municipal Employees Retirement System (OMERS) and $4-million from Equinor ASA, the Norwegian energy giant previously known as Statoil. For ArcTern, whose first, $60-million fund was backed by wealthy individuals and families, the institutional backing “puts us on the map, it makes us safe” for other big investors to follow, co-founder Murray McCaig said. “We think the timing is better than ever for clean tech and if you have the right strategy, there’s a ton of money to be made.”

Meanwhile, veteran clean-tech investor Chrysalix Venture Capital has raised more than a third of the minimum $120-million goal for its fourth fund, with a maximum target of $250-million. The fund will back startups that bring new technologies such as artificial intelligence, robotics and advanced sensors to resource-intensive industries such as chemicals, energy, utilities, mining, forestry and automotive. Its new investors include Canadian miner Teck Resources Ltd., Malaysian oil and gas giant Petronas and Japan’s Mistletoe Venture Partners.

“There’s an evolution where every company in every industry needs to become clean and digital,” Chrysalix chief executive Wal van Lierop said. “Clean tech has become the mainstream and, to benefit from that, every company needs to become an IT company.”

They join Cycle Capital, Canada’s most prolific clean-tech venture fund, which secured $50-million from the Quebec government last spring, contingent upon the firm raising $100-million more from investors to anchor its fifth fund, its largest to date. The Cycle fund, intended to range in size from $150-million to $300-million, will invest in startups that specialize in “green chemistry,” biofuels, biomass conversion, renewable energy, energy storage and efficiency and sustainable agriculture. Past Cycle funds have been backed by Canadian investors including Cascades Inc., Brookfield Renewable Energy, Hydro-Québec and the Caisse de dépôt et placement du Québec as well as Rio Tinto PLC.

The new funds are a welcome addition to a sector composed of 850-plus companies with combined revenues of $13.3-billion and $6.7-billion in exports in 2015, according to Ottawa market research firm Analytica Advisors.

However, Canadian clean-tech firms suffer from “relatively weak” private financing options domestically, according to a 2016 study by Cycle Capital and Sustainable Development Technology Canada, a federal clean-tech funding agency. With much of the available capital coming from abroad “we are preparing the podium for someone else outside Canada” to ultimately benefit, Cycle managing partner Andrée-Lise Méthot said.

A recent report by clean-tech-industry experts to Innovation Minister Navdeep Bains said Canadian firms are challenged at home by risk-averse corporate customers who are slow to adopt their technology, low access to capital and a disconnect between government environmental policy targets and regulations. Several clean-tech firms say they have an easier time selling abroad than in Canada.

In addition, industry participants say clean-tech firms have generally had a hard time raising venture capital as their businesses take more time and money to build, are based around complex technology and often rely on government policy to secure sales.

ArcTern was hatched at MaRS Discovery District earlier this decade by Tom Rand, who led the Toronto innovation-boosting agency’s clean-tech practice, and Mr. McCaig, a MaRS advisor, to address the funding challenges for clean-tech startups. Of the 10 firms ArcTern backed with its first fund, all went on to raise additional funding, including compressed air energy storage startup Hydrostor and solar power firm Morgan Solar.

OMERS’ ArcTern investment represents the pension giant’s first foray into dedicated clean-tech investing, said Paul Manias, managing director of OMERS’ Platform Investments arm. “We are in the early stages of a multidecadal global transition to a low-carbon economy [that] will bring enormous opportunity for both profit and positive impact.”

Mr. Rand is hoping Canadian corporations that have been slow to invest in clean tech, particularly in the oil and gas sector, follow suit. “The world is going to de-carbon and those companies that figure out ways to take advantage of that transition face the single biggest market of the 21st century,” he said.

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