Just ahead of Earth Day, Cycle Capital and Demeter announced the first close for a new €150 million ($244.5 million CAD) Circular Innovation Fund (CIF).
CIF plans to invest in circular, sustainable, and profitable growth-stage solutions from North America, Europe, and Asia.
The fund is particularly interested in solutions that contribute to climate change mitigation and circular use of resources across various sectors, including new materials, packaging, recycling and waste, logistics, eco-efficient processes, and design.
Cycle Capital is a well-known cleantech venture capital firm based in Montréal with $600 million CAD under management. Demeter is a European investment platform dedicated to ecological transition. It has over €1 billion ($1.6 billion CAD) under management and carried out 200 investments since 2005.
Anchor investor L’Oréal is contributing €50 million ($81.6 million CAD) through its L’Oréal for the Future sustainability program. Other investors include Axens, family offices including Haltra and Claridge, as well as private investors and the managers.
CIF investor Axens is involved in the development of advanced processes and solutions for the circular economy of goods and materials, including plastics.
The first close of the fund took place on April 21. Cycle Capital did not disclose how much has been raised to date. CIF is set to run for 10 years with extensions.
Even as Cycle Capital and Demeter announced the close, the two firms said the fund has made indirect investments in two early-stage funds focused on circular innovation. CIF invested more than $50 million USD ($62.4 million CAD) into Closed Loop Venture Fund II, a New York-based investment firm focused on building the circular economy.
CIF said it also invested €300 million ($489.5 million CAD) into the European Circular Bioeconomy Fund (ECBF). The latter claims it is the first venture fund exclusively dedicated to investing in growth-stage companies in the European bioeconomy, including the circular bioeconomy.
In recent years, interest in cleantech investments has grown. Natural Products Canada (NPC) and Active Impact Investments launched early-stage cleantech venture funds in 2020, while in 2019 Vancouver-based Renewal Funds, a venture capital firm investing in environmental technology and sustainable consumer products, closed $145 million in its fourth fund, Renewal4.
Renewal and Cycle Capital were also two of three funds the Government of Canada chose in 2019 to receive portions of the newest stream of the Venture Capital Catalyst Initiative. Along with Renewal and Cycle Capital Management, ArcTern Ventures was given responsibility for distributing the $50 million allotted for the Clean Technology Stream.
CIF is an impact innovation fund classified as Article 9 under the EU’s Sustainable Finance Disclosure Regulation. The Sustainable Finance Disclosure Regulation is a European regulation introduced to improve transparency in the market for sustainable investment products, prevent greenwashing, and increase transparency around sustainability claims made by financial market participants.
CIF claims its impact measurement methodology integrates due diligence and continuous monitoring of critical non-financial key performance indicators, including greenhouse gas emissions reductions, resource use, and diversity over the investment horizons of portfolio companies. The fund managers’ compensation is also aligned with achieving a selection of pre-determined impact goals.
Senior partner Benoit Forcier from Cycle Capital and partner Mathieu Goudot from Demeter, lead the fund with the support of Cycle Capital analyst Maya Hassa and Demeter investment director Adeline Kempf, as well as the firms’ back offices.
Founded in 2009, Cycle Capital seeks investments in early-stage companies and sectors like biofuels, biomass transformation, smart grid, renewable energy, agriculture technologies, and smart cities. Cycle Capital closed $145 million CAD for its cleantech fund, Cycle Capital IV in 2020 for that fund’s final close, and announced Export Development Canada as a new limited partner.