Artificial intelligence has been called the technology shift of a lifetime. For Generation Investment Management, it could also be the sustainability shift of, well, a generation.
Call it the inconvenient truth about artificial intelligence. Amid the rush of frontier models and data center construction, questions of sustainability are rising to the top of investors’ diligence and estimations.
Generation’s Al Gore, who two decades ago brought climate change into the mainstream with “An Inconvenient Truth,” is urging investors to likewise take on the sustainability of the AI transformation, including not only energy and water impacts, but governance and equity.
At the SuperReturn conference in Berlin last month, Gore told investors, “We really have to face up to the fact that this technology is advancing so quickly that it is going to challenge not only business models but societal models, civilization models, cultural models.”
Generation, the $33 billion asset manager Gore started with David Blood and others in 2004, is treating AI like climate: a cross-cutting systems-level shift that brings both risks and investment opportunities. It is among the biggest investment firms to make responsible and sustainable AI a cornerstone of its investment strategy and its institutional fundraising.
“You’re going to have to have sustainable foundations — like technology stacks, governance of information and private data, safe, secure and protected private foundations — behind these products and services that are solving problems,” Generation’s Lila Preston told ImpactAlpha.
The impact of AI on jobs is a “massive question,” Preston said, along with concerns about governance and oversight of data, and control and management of the foundational layers of what will be the new economic architecture. “The most progressive of our LPs are with us in those conversations,” she says.
Preston, who co-heads Generation’s growth equity strategy from New York, joined Gore onstage in Berlin to make the investor case for sustainable AI. “The words sustainability and AI aren’t being put together a lot on main stages around the world at conferences with LPs and GPs, which is why we thought it was so important to do that,” she said.
“We feel deeply that this is a time where we can actually lend our 20-plus years experience to one of the biggest system problems we’ve ever encountered.”
Optimized for well-being
For Generation, sustainable AI means technologies and business models that reduce carbon intensity, improve system resilience, broaden access, and embed strong governance, data integrity and security safeguards.
“AI’s net impact will depend on governance, incentives and capital allocation decisions made now,” Generation’s growth equity team writes in its just-released sustainability and impact report. “We aim to allocate capital to ensure it advances human and planetary well-being rather than undermining it.”
AI could be harnessed to fulfill the sustainability goals that Gore and Generation have been charting for years. A recent study by the Grantham Research Institute on Climate Change and the Environment and Systemiq found that if AI is effectively applied to sectors such as energy, transportation and food systems, it would “outweigh increases from global power consumption of data centers and AI.” The opportunity is to give AI a purpose.
The AI thesis is played out across Generation’s entire portfolio, including its public market investments, private equity and growth funds, and its climate-focused strategy, Just Climate. The firm’s public equities team has invested in companies designing more efficient computer chips and data storage, for example. And this week, Just Climate co-led an investment in Twenty Four Seven Data Centers, a Brazilian sustainable data center developer (see, dealflow).
Last week, Generation’s private equity team, which backs sustainability leaders that want to stay private longer, raised $1 billion for its second Sustainable Private Equity Fund. The fund will have a longer-than-usual 12-year term to give portfolio companies – which include Octopus Energy, Kraken Technologies and IFS, which makes software for manufacturing and other asset-heavy industries — time to transform industries.
The growth team, says Preston, is “sitting at the pointy end of the spear on these market shifts.”
The team is currently investing out of its Sustainable Solutions Fund IV, which raised $1.7 billion in 2022 for equity investments in companies improving the health of people and the planet, and financial inclusion. It has backed 13 companies as of the end of 2025.
Portfolio company Weka makes software to help optimize data storage for cloud and AI workloads, cutting down on energy intensity and emissions. Redis, an open-source database for realtime data, can efficiently hold frequently used data in memory, saving energy by cutting down on repetitive computations.
OneTrust is used by Fortune 500 companies to manage AI and data governance, including monitoring risks and regulatory compliance. Its latest model also assesses corporate AI systems and monitors them for drift and bias.
Foundational pillars
Generation’s AI thesis has evolved over more than a decade. As far back as 2011, the London and San Francisco-based firm was looking at decoupling energy intensity from computing and data storage. That led to a “green data roadmap” in 2020, which looked at energy costs and water usage and mapped out opportunities to invest in companies helping to reduce energy intensity.
From there, the firm began examining second order effects, such as the effects of digital technology — smart phones, social media and, now AI — on mental health. Generation’s growth fund, for example, led a $100 million round in 2024 for Spring Health, a New York-based company that works with companies to provide mental health support for employees and their families.
“We got really excited about how AI could solve problems,” says Preston. “We were looking at the upside.” But it became clear, she said, that AI-enabled apps, no matter how impactful, were not enough. For example, the best widget for health care professionals will fail without data security and patient privacy.
“If we don’t equally focus on these foundational enablers, we may have great applications, but they fall flat because they haven’t managed to build the right guardrails, or they haven’t secured the license to operate, or they haven’t managed data in a way that’s durable,” she says. “Those are going to be really important pillars to a sustainable future.”
Agency and sovereignty, as antidotes to concentration and displacement, are emerging as powerful investment themes. Gore pointed to the fact that the Global South receives just 2% of AI investment. AI models are largely trained on Western data and languages, leading to “an exotic form of colonialism,” he said.
Impact investors have been organizing to get out ahead of some of the challenges emerging from the breakneck rollout of AI, from inclusion and equity to safety and governance guardrails. Some have been going deep and investing in the tech stack and orchestration layers that underlie AI systems. And a few have even managed to invest in foundational AI companies like Anthropic to get a seat at the table.
“We have been practicing this muscle of addressing thorny topics, interconnected sustainability issues, whether it’s water, energy, jobs, social externalities, government — that’s what we do best,” Preston said. “I believe this is a muscle that is underappreciated in the market right now, but has never been more important.”
The proof, she said, will come from demonstrated returns from impact funds and the great companies that they build.
As Preston told the SuperReturn crowd: “The sustainability transition is underway. AI is an accelerant. And investors who take a systems lens to understand the intersection of the two will be in the best position.”
