Just Climate, the “flexible capital” investment business of Al Gore’s Generation Investment Management, has closed its debut fund on $1.5 billion – 50 percent above target. In February, affiliate title New Private Markets exclusively reported that Just Climate had secured commitments close to its $1 billion target.
Just Climate was established in 2021 as a multi-asset-class, “climate-led” funds business under Generation IM’s umbrella. The first fund, Climate Assets I, is a growth equity and infrastructure strategy focused on industrial decarbonisation themes, chief investment officer Shaun Kingsbury told NPM this week. 100 percent of the fund’s carried interest will be contingent on meeting impact targets.
Its LP list includes many of impact investing’s biggest cheque-writers: California State Teachers’ Retirement System, PSP Investments, AP2, AP4, Harvard Management Company and the IMAS Foundation are all on the list. Microsoft’s Climate Innovation Fund anchored the fund; other investors include Colonial First State Investments, Builders Asset Management, Ireland Strategic Investment Fund, Goldman Sachs’ Imprint Group, Hall Capital Partners and other pension funds, sovereign wealth funds, insurance companies, foundations and investment and wealth funds, according to an emailed statement from the firm.
Just Climate’s strategy begins with developing roadmaps for the real-world decarbonisation of these sectors, and then finding investable opportunities that contribute to these roadmaps, said Kingsbury. The firm provides “flexible capital” that “will start off as growth capital and migrate towards infrastructure [type investments]”, Kingsbury continued. “These assets are typically too big for venture capital, too asset-heavy for growth capital and too early for most infrastructure capital, so they fall into a valley of death. Most of this money, probably all of it, will be a form of equity. There won’t be any sort of debt or credit investments from this fund – that’s very unlikely,” Kingsbury added.
Multi-asset-class strategies can be challenging to pitch to institutional investors that have separate teams and investment criteria for different asset classes. Last year, Just Climate senior partner Clara Barby called on investors “not to get too caught up in whether the target IRRs are high enough for private equity or mature enough for infrastructure. Let go of the asset allocation buckets that have become so rigid”.
Some of Just Climate’s LPs have invested from their private equity buckets while others have invested from real assets buckets, Kingsbury told NPM this week. “Some of our investors have a defined climate bucket where those lines are blurred and they can invest across the spectrum. As long as we make the appropriate risk-adjusted return for the investment we’re making, our LPs have been very gracious in giving us the flexibility to choose that as we see the need for that capital.”
Kingsbury declined to comment on returns or performance targets, but a source familiar with the fund told NPM that Just Climate has not given LPs a returns or performance target because of the mix of investment types in the fund.
The fund has so far made three investments: in electric vehicle charging company ABB E-mobility; H2 Green Steel, which is plotting a green hydrogen-powered steel manufacturing plant; and Meva Energy, a biogas energy producer.