Q&A: Just Climate's Climate Assets Fund I
Insights below are from ImpactAssets Capital Partners PB LLC, a wholly-owned subsidiary of ImpactAssets that is a registered investment advisor. ImpactAssets Capital Partners advises ImpactAssets regarding the ImpactAssets Investment Platform. These insights should only be relied upon for donor advised fund decisions and not any personal investment decisions.
Q: Why did ImpactAssets select Just Climate for the ImpactAssets Investment Platform?
To stabilize the climate and limit global warming to 1.5 degrees Celsius — the level called for by the global scientific community — greenhouse gas emissions must decline by over 50% by the end of the decade. Our goal is to provide our community with access to investment opportunities addressing this critical issue.
Founded with this challenge in mind, Just Climate, a multi-asset class fund, is dedicated to investing in scaleable solutions with the ability to deliver the highest positive climate impact per dollar invested. For impact investors focused on climate change and systemic global warming solutions, this opportunity falls right in the center of the bullseye and represents an authentic, climate-first offering from a well-respected institutional manager: Generation Investment Management.
Since its founding in 2004 by Al Gore and David Blood, Generation Investment Management has acquired extensive experience investing in sustainability and has built a well-respected 15+ year track record of delivering above-market financial returns for institutional investors. This fund is Generation's most concerted effort on climate change and its strategy places climate impact front and center of its investment process.
The fund offers the potential to deliver appropriate market-rate financial returns while managing risk for investors, in part due to its unique approach of investing in both private equity and project finance. Unlike a pure-play private equity strategy, many of the investments are secured by physical assets that generate regular cash flows and limit the risk of principal loss.
Q: What's exciting to you about the Just Climate's impact thesis?
This fund has a flexible, uncommon approach to investing in climate, and intentionally focuses on hard-to-tackle underinvested sectors and climate solutions.
The fund's four focus sectors — energy, mobility, industry and buildings — are responsible for approximately three-quarters of global greenhouse gas emissions. While high-impact climate solutions exist in each sector (such as green steel, carbon-neutral concrete, or mass transit infrastructure), the vast majority are scaling at a fraction of the pace required to achieve global climate targets. One of the major barriers to scale has been the fact that the financing vehicles for these solutions don't fit neatly into traditional asset allocation definitions. They are often too capital-intensive for venture capital, too asset-heavy for growth capital and too early commercially for infrastructure investors — and these investments often struggle to attract meaningful funding simply because some institutional investors have rigidly organized themselves around those traditional definitions.
Additionally, this creative and sophisticated multi-asset class approach enables the fund to invest directly in companies as well as in project deployments. This enables the fund to provide "the right kind of capital at the right time" to help companies working on these intractable problems prove their viability and reach scale.
Q: What key insights did you see resulting from the due diligence process?
One insight is that this fund is the only institutional fund we have identified at this scale that bakes climate impact into the fund manager's compensation, which tells us the intent to address climate change is serious and authentic.
The fund has specific carbon mitigation targets:
- 240 megatons of CO2-equivalent per $1B invested in companies
- 80 megatons of CO2-equivalent per $1B invested in projects
The manager's incentive compensation is directly tied to progress towards these impact goals. Results will be vetted by third parties and calculated on an ongoing basis. The fund must also clear a financial hurdle prior to receiving incentive compensation. Overall, the fund's fee structure shows that Just Climate is serious about supporting its two-pronged goals of delivering both impact and financial returns.
Q: Who is this strategy appropriate for?
Just Climate is a compelling fit for investors interested in large scale systemic climate change solutions. Led by a sophisticated and well-respected manager, the fund is holding itself accountable to bold, measurable climate and financial goals attracting anchor institutional investors, including Microsoft Climate Innovation Fund and the Harvard Management Company.
An investor's time horizon must accommodate the fund's 15-year term. This longer than average term is important because it enables the fund to support companies as they progress through commercialization and reach scale. This long-term approach has historically been missing for asset-heavy climate businesses and Just Climate's approach will help ensure they fulfill their impact and financial potential.
LEGAL AND PROGRAM DISCLAIMER: This is not a solicitation to buy or sell securities to any person, which may only be made pursuant to a private placement memorandum or other disclosure document issued to qualified investors. Any securities mentioned herein have not been approved or disapproved by the Securities and Exchange Commission and may be subject to restrictions on the manner in which they may be offered and to whom they may be offered. This may include limiting purchasers of such securities to “accredited investors,” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, who are (in the case of securities issued by certain pooled investment vehicles) “qualified clients,” as defined in Rule 205-3 of the Investment Advisers Act of 1940, as amended, as well as other restrictions. This publication is an informational description of a charitably oriented, social purpose investment option that has been approved by ImpactAssets for the donor advised funds that it administers and not for any other purpose. It may only be used by ImpactAssets' donors to allocate funds in their donor advised fund accounts and may not be used for any other purpose, including personal investments. Any allocation to private debt and equity investments may result in losses and illiquidity that will be borne solely by each donor advised fund account that makes such investments. Such allocations may be subject to program fees paid to ImpactAssets that reduce the net returns that donor advised fund accounts receive. Investment minimums may apply. Grant making from a donor advised fund account's principal value will not be possible until distributions are returned from an investment. There is no guarantee of any recovery of capital and no assurance can be given that investment objectives or targets/projected returns will be achieved. The issuer of any securities described herein and, if applicable, any related fund manager have not approved the information contained in this profile, including any assignment of risk ratings contained herein.