The climate fund, which exceeded its original funding goal, aims to support emissions reduction solutions in industries where they are hard to achieve.
Just Climate, the investment business set up by Generation Investment Management, said its debut Climate Assets Fund I has reached close, having raised $1.5bn, well above its original $1bn target.
The fund aims to support companies developing high impact solutions that can reduce or remove emissions from industries where they are hard to abate, while aiming to generate “attractive” financial returns.
Generation is a London-headquartered sustainable investment manager established by former US vice president Al Gore and ex-head of asset management at Goldman Sachs, David Blood.
The fund attracted a range of well-known impact investors and pension funds. Founding investors included Microsoft’s Climate Innovation Fund, IMAS Foundation (set up by IKEA’s late founder Ingvar Kamprad), Ireland Strategic Investment Fund, Harvard Management Company, Goldman Sachs’ Imprint Group and Hall Capital Partners.
They were joined by institutional investors including California State Teachers’ Retirement System (CalSTRS), Canada’s PSP Investments, Swedish national pension funds AP2 and AP4, Australia’s Colonial First State Investments and Builders Asset Management, as well as various pensions, sovereign wealth funds, insurers, financial institutions, endowments, foundations and family offices from around the world.
Just Climate said the fund was part of its industrial climate solutions strategy, under which it would invest in “growth-stage, asset-heavy companies globally which have the potential to deliver transformational climate impact” in high emissions industries, such as energy, mobility, industry and building.
A major rationale for the fund is to make climate-led investing a priority for institutional capital allocation, according to Clara Barby, senior partner at Just Climate.
“We start with climate impact, identify solutions that will make the biggest difference, and then direct and scale institutional capital to those solutions that we believe can generate attractive risk-adjusted returns,” she said. Just Climate has not set a return target.
Barby was previously a partner at Bridges Fund Management, before becoming CEO of the Impact Management Project and then leading the IFRS Foundation’s project to create the International Sustainability Standards Board (ISSB).
Early investments
The fund has invested in three companies to date: Swiss-based electric vehicle charging solutions provider ABB E-mobility, Sweden’s H2 Green Steel, which is working to decarbonise the steel industry, and Meva Energy, a Swedish firm whose technology processes biomass residues from industrial production to create renewable heat and power.
Shaun Kingsbury, chief investment officer at Just Climate, said that radical and urgent change was needed in the financial sector’s approach to decarbonising hard-to-abate industries if net zero targets were to be met, given that they accounted for more than half of the world’s emissions.
“Proven, transformational climate solutions are being developed to decarbonise the industrial sectors. With the right investment support, we believe they can scale rapidly to achieve better gross margins, a lower cost of capital and widespread market adoption,” he said.
Just Climate has built a long-term incentive structure into the fund, under which the performance fee payable is linked, not just to financial returns, but also to the achievement of its greenhouse gas abatement goals.
A Just Climate spokesperson told Impact Investor that the abatement goals would differ from one investment to another but were absolute goals drawn up with a third party, based on a 10-year view of abatement for the investment. The abatement achieved would then be verified every year.
The fund says this approach underscores its belief that climate solutions for industries whose emissions are hard to abate are capable of producing attractive returns and high climate impact at the same time.
