Sustainable infrastructure investor Generate Capital extended a $200 million secured loan to Pacific Steel Group to construct the first green steel mill in California. PSG’s mill, being built on the western edge of the Mojave desert, will use a renewable energy-powered electric arc furnace and locally sourced metal scrap to produce low-carbon, high quality rebar, a key component of steel.
Those practices, along with carbon capture and storage, are expected to cut emissions by 85% compared to traditional methods. Steel is critical for building and infrastructure, but is responsible for 7% of global emissions and almost 30% of industrial emissions.
Co-investment
The California State Teachers’ Retirement System, or CalSTRS, and Australian pension fund HESTA — both investors in Generate — also co-invested alongside Generate Capital’s strategic credit initiative. The deal showcases a growing trend for such co-investment strategies and so-called “GP stakes,” when LPs take direct stakes in funds.
“We’re seeing private institutional capital increasingly coalesce to meet insatiable demand for climate investments amid global macro tailwinds,” Generate’s Bill Sonneborn told ImpactAlpha. Such institutional investors have faced barriers to entry relating to risk and check sizes, he said.
“As an early investor and operator of sustainable infrastructure, Generate brings the knowledge and expertise to unlock the value that institutional investors have traditionally struggled to realize in clean infrastructure.”
