Inst’l Demand Grows for A Variety of Sustainable Investment Strategies

The flow of institutional dollars gushing into sustainability and cleantech funds and projects — from venture capital to more established companies — is showing no sign of slowing. If anything, it’s only accelerating, quarter-billion-dollar funds or larger becoming commonplace.

This month alone has seen Generate Capital raising $2 billion in equity and Ecosystem Integrity Fund closing its fourth sustainability vehicle with $250 million, both of which are seeing significant backing from major institutional investors of all stripes. Meanwhile, General Atlantic has launched a new climate investment team and intends to raise $4 billion for the team to manage.

Of the two new fundraises, Generate Capital said last week it has raised $2 billion in corporate equity funding, led by Australian infrastructure investor QIC and joined by several other institutions. The San Francisco-based company finances, builds, operates and owns sustainability infrastructure projects.

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Generate’s recent deals include providing funding for StormFisher’s $20 million expansion of its food waste recycling facility in Ontario, announced earlier this month.

Generate also participated in a $600 million equity and debt financing for Intersect Power in January, as San Francisco-based Intersect transitions to become a scalable provider of clean energy to utilities and other large users.

The latest fundraising by Generate is said to be one of one of the largest raising of private capital by a sustainable infrastructure platform in recent years and comes about 19 months after the company raised $1 billion.

Besides QIC, backers include AustralianSuper, which co-led the round, as well as Harbert Management Corp., Aware Super and CBRE Caledon, and pensions and other institutions from the US, Europe and Australia. Generate also took money from existing investors like Sweden’s AP2, the UK’s Railways Pension, and the Wellcome Trust, a $33 billion UK-based foundation focused on health research.

Also earlier this month, Ecosystem Integrity Fund announced it has closed its fourth fund with $250 million, above its $200 million target. Backers include a range of pensions, foundations and family offices, and include the University of Vermont, the Doris Duke Charitable Foundation, Haniel, TVA Asset Retirement Trust and Spring Point Partners.

The company invests in early growth stage companies that focus on environmental sustainability, in sectors like renewable energy and energy efficiency, transportation, agriculture and water.

EIF has made six investments out of the new fund so far, backing companies ranging from solar community grid developer Energicity to digital manufacturer ThinkIQ to hydrogen-electric aircraft developer ZeroAvia. That wide variety of targets is by design, says partner Geoffrey Eisenberg.

“We don’t go find cool technologies and wait for a market opportunity; we study systems and industries, try to determine where there’s a business problem that overlaps with a sustainability problem,” Eisenberg says. “When those two things collide, you get really fast adoption of sustainability solutions. That’s what we’re looking for.”

There’s every indication that money will continue to flow into the space. To that end, private equity investor General Atlantic this month announced the formation of a new climate investment team, called BeyondNetZero, to be chaired by John Browne, who was CEO of BP from 1995 through 2007. The firm will look to raise $3 billion from investors for the new team to manage, and will also allocate $1 billion from existing capital at the firm, according to Axios.

BeyondNetZero will invest in growth equity stage companies working in areas like decarbonization, energy efficiency, emissions management and resource conservation. Its investment professionals include veterans of Element Partners, OGCI Climate Investments, Schneider Electric and Virgo Investment Group.

The new investment team will have plenty of company. According to a report from Pitchbook, investors worldwide have closed as many climate-focused funds so far this year as they have in the past five years combined.

All of those new funds have led to strong growth in investments, with venture-stage climate tech companies having raised more than $14 billion so far this year worldwide, almost equaling the $16 billion raised across all of last year, and in excess of the $12 billion logged in 2019, according to Pitchbook.

Those numbers are just for venture capital; there’s also plenty of investor dollars set to flow into later-stage companies and projects. Indeed, it’s quite “noteworthy” to see dollars flowing into such a broad range of sustainability asset classes, including growth equity, credit, infrastructure, private equity and venture capital, says Adam Bergman, managing director of EcoTech Capital, in a recent post.

“The amount of capital out there in search of sustainable investments is unprecedented,” he says, adding that it’s especially reassuring to see the “experienced sustainability corporate leaders and investors” that are behind these newest funds and investments.

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