Dealflow | June 12, 2023

Generation clinches $1.5 billion for climate fund with impact incentives

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, June 12 – Just Climate, the climate-dedicated asset manager launched a year and a half ago by Al Gore’s Generation Investment Management, has completed a $1.5 billion fundraise – a third more than initially targeted.

New investors include the California State Teachers’ Retirement System, Canada’s PSP Investments, industrial maintenance company AP4, Colonial First State Investments, Builders Asset Management and Swedish pension fund AP2.

Just Climate is focused on industrial sector climate solutions, as reflected by its first three investments: H2 Green Steel and biogas producer Meva Energy in Sweden, and Swiss EV charging company ABB E-Mobility. “We start with climate impact, identify solutions that will make the biggest difference, and then direct and scale institutional capital to those solutions that we believe can generate attractive risk-adjusted returns,” said Just Climate’s Clara Barby, who formerly led the Impact Management Project

Impact-linked carry

Just Climate employs an integrated performance fee that blends financial performance metrics with climate outcomes. “How much of the performance fee is ultimately available is 100% linked to the delivery of ambitious greenhouse gas abatement goals,” the firm says.

That puts it in rare company: less than a third of impact fund managers use some form of impact-linked compensation, according to BlueMark.

“Well-designed and implemented impact-linked compensation structures could be an effective motivation tool to hold fund managers accountable to their stated impact goals, argues Aunnie Patton-Power, who is spearheading a research initiative to uncover evidence of its effectiveness and potential (for background, see “Why don’t more impact fund managers tie compensation to impact? Let’s find out”).