The Rules of Climat Investing (ENG)

”I just wanted to make the world a better place” I wouldn’t be surprised if a majority of all climate investors have read Finite and Infinite Games. Yet they play finite games, abiding to game theory rules resulting in traps like the tragedy of the commons. 

That is, individual incentives lead to collective ruin when shared resources are overused. Because of ideas like countries and corporations— abstractions that creates boundaries, where there are none. We are all a whole. We all know that there is no such thing as infinite growth. In the end, the “resources” of our Pale Blue Dot, its life and biodiversity, are limited global commons. As on any other dot, cyclicality is an intrinsic part of the fabric of reality.

Investors in climate-focused ventures exercise a profit-driven mindset, and expect a financial return. This means financial growth ultimately dictates investment rules—even here. If an investor doesn’t prioritize growth, they won’t attract as much capital as other investors—and risk being outcompeted in the end.

Because of the inherent exponentiality, any investor aiming for growth will still extract from the commons in the end as an n:th order effect. In the end it doesn’t matter if you’re optimizing for “green” growth.

If all investors foremost seek growth, the global commons will collapse in the end, and involuntary degrowth happens. Climate investors are in competition to find the best green tech startups. If a project doesn’t offer competitive returns, it might not be interesting from a financial perspective—even if its vital for long-term climate stability. They often follow traditional venture capital or PE models, so they need exit strategies. If a green tech startup isn’t profitable, investors are prone to shift to other opportunities—reinforcing a finite mindset that creates a race to the bottom, where short-term gains outweigh long-term sustainability. What if longer perspectives were possible?

Most of us just want this planet to be livable for our children. Yet we continue to suboptimize for the gain of our made-up entities. As long as each player continue to play as an individual part, the rational move in a growth-oriented market is to avoid looking at us as the Whole we are.

Because why would you invest in that which has the potential to change the financial systems, and loose money, when you can continue ”winning” in the current market? Why would you invest in climate efforts that generates ecological value—but no direct financial profits? VCs will be an integral part of the problem they’re trying to fix. That is, as long as you play that game. Or which Pale Blue Dot do we really care about?

Meanwhile, infinite players continue to challenge the rules, since they know the only purpose of the game is to prevent it from coming to an end, to keep everyone in play.

The image? A cobalt mine in Congo, powering green mobility.