ImpactAlpha, July 19 – Project finance is in hot demand as corporations, governments and other organizations scramble to green their operations. That’s fueling the growth of sustainable infrastructure firms like Generate Capital, which develops, owns and operates projects on behalf of corporations and public sector customers. The San Francisco-based firm has raised a fresh $2 billion to develop microgrids, carbon-free fleets, waste-to-fuel systems and other green projects – double the size of its fundraising haul just a year and a half ago.
A measure of investor interest: It completed the fundraise in two months, without the aid of bankers, advisors or airplanes, Generate’s Scott Jacobs told ImpactAlpha.
The balance sheet funding will enable Generate to seek out new sectors, such as agriculture, water and smart cities, and pursue infrastructure-as-a-service projects outside of North America. AustralianSuper and QIC led the fundraising round with new investment from Harbert Management Corporation, Aware Super, and CBRE Caledon, as well as three U.S.-based pension funds.
The fundraise comes as U.S. lawmakers hash out a $1.2 trillion infrastructure plan and Democrats look to push through a clean energy standard and other decarbonization priorities in a separate spending measure. Leaders across the globe are rolling out green recovery plans ahead of the COP26 climate summit in November.
An estimated $6.9 trillion per year will be required through 2030 to meet global sustainable infrastructure demand needs.
The amped up investor interest, however, has more to do with market forces than political ones, said Jacobs. “The strongest tailwind is that people have proven (sustainable infrastructure) makes money,” he said.
Investors are piling in. Last week, infrastructure and alternative asset investor StonePeak raised $2.7 billion for a renewable energy fund, and Segue Sustainable Infrastructure launched a sustainable energy infrastructure fund with an initial $100 million.
Earlier this month, Equilibrium Capital closed on a second greenhouse agriculture fund and BlackRock announced a $250 million first close for its Climate Finance Partnership emerging market infrastructure fund. In April, BlackRock Real Assets closed on a $4.8 billion green energy fund.
“If we care about solving climate change in the time frame that is given us, we have to deploy, deploy, deploy the solutions we have today,” said Jacobs. That includes hydrogen-powered forklift fleets for customers such as Walmart, energy efficient lighting and HVAC systems for a Florida school system, and community solar to power homes and businesses in upstate New York.
Even with $10 billion of balance sheet capital on hand, the sustainable infrastructure opportunity “is way bigger than we can address,” adds Jacobs.
The firm expects to have as many as 140 employees by late summer, a nearly three-fold increase from pre-pandemic levels. Generate cofounder Jigar Shah joined the Biden administration earlier this year to oversee a $40 billion Department of Energy loan program.
If Generate’s mantra is deploy, deploy, deploy, others are looking to fund innovative climate tech that will be necessary to tackle hard-to-mitigate carbon sources such as air and sea transportation and heavy industry. General Atlantic is targeting $4 billion for its “BeyondNetZero” climate fund. The growth equity fund, led by former BP CEO John Browne, will focus on decarbonization, energy efficiency, resource conservation and emissions management.
TPG Rise is also going all-in. The firm has been schmoozing pension funds and other investors with the aim of raising a $5 billion climate fund, led by former U.S. Treasury Secretary Henry Paulson.