A week of economic turmoil has highlighted a fundamental disconnect between the enormity of the financing required to decarbonize the global economy and the importance of a strong risk-adjusted return on that capital. There is a perception that ample funding is available for all the climate infrastructure and early-stage investment required and that climate investment is somehow immune from the traditional rules of capital allocation. The shockwave moving through the venture capital industry may have been highlighted over the last ten days by the demise of SVB, but the value destruction that is permeated through early-stage investments has its roots in the US Federal Reserve tightening cycle that ended the era of loose money 12 months ago. For all the government support, moral imperative, and economic tailwinds in venture capital, private equity, and infrastructure climate investment, allocations to climate funds will not be shielded from the monetary pressures facing every asset class, from public equities to real estate.

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