By Alastair Marsh
Bloomberg, May 18, 2022
Generation Investment Management, the $36 billion investment firm co-founded by Al Gore, launched a new fund targeting companies that contribute to lower emissions, increased financial inclusion and more accessible healthcare.
The $1.7 billion Sustainable Solutions Fund IV will allow Generation to invest in growing companies that “are shifting industries toward sustainability and responsible innovation at scale,” the fund manager said in a statement Wednesday.
The new fund is Generation’s response to the “sustainability revolution,” which will have “the magnitude of the industrial revolution and the speed of the digital revolution,” Lila Preston, the firm’s head of growth equity, said in an interview. The asset manager has researched “all pockets of the economy” to identify where the disruption will play out and which companies will perform best, she said.
Generation’s latest sustainability fund is opening in the middle of an energy crisis that’s driven fossil-fuel prices higher and left many environmental, social and governance funds underperforming their benchmarks. In the US, ESG funds are down about 15% this year, compared with a roughly 35% increase in the MSCI world index for oil, gas and consumable fuels.
Co-founded in 2004 by former U.S. Vice President Al Gore and and David Blood, a long-time Goldman Sachs Group Inc. executive, Generation has long shunned fossil fuels and warned that the finance industry is running out of time to shift capital away from greenhouse-gas emitters. Gore, whose 2006 documentary, “An Inconvenient Truth,” brought the issue of climate change to the awareness of the general public, has repeatedly warned of a “subprime carbon bubble’’ with investors caught on the wrong side of history facing significant losses.
Preston said Generation’s new fund will target companies with revenues between $30 million and $300 million. All potential portfolio companies are assessed not only on the quality of their business and management, but also on their so-called system-positive contribution “to ensure they are clearly driving the transition to a more sustainable future,” Generation said.
The new fund will target three key areas: planetary health, which focuses on a company’s ability to deliver net-zero carbon solutions in mobility, agriculture, energy and enterprise by cutting waste and emissions and supporting biodiversity; “people health,” which targets companies that help deliver better, cheaper access to health care; and financial inclusion, which looks for companies that aid access to finance, help reduce inequality and support an equitable future of work.
Generation said its analysis measures the “first and second-order effects of a business model on people and planet, including implications of its products, supply chain, organizational culture and broader role in society.”.
In October, the firm announced that it’s teaming up with Goldman Sachs Asset Management, Microsoft Climate Innovation Fund and Harvard Management Co. to create a venture that will make investments pegged to limiting global warming to 1.5 degrees Celsius above pre-industrial levels.