Even amid the truly serious money flowing into climate tech and sustainable infrastructure, the $2 billion infusion disclosed by Generate Capital earlier this week is truly stratospheric. Especially considering that over the past seven years, it raised a total of $1.4 billion in equity.
The new money will go toward sustainable infrastructure projects, particularly those addressing systemic investments related to energy, waste, water and transportation — although agriculture and smart cities are a growing area of interest, Generate CEO and co-founder Scott Jacobs told me earlier this week.
"We will not get to the scale that we need, given the scale of the problem, if we rely on government funding or altruism," he said.
Generate — co-founded by Jigar Shah, now director of the Department of Energy loan program — touts an "infrastructure as a service" approach, under which it helps corporations and communities invest in climate tech over time, decreasing the capital expenditures typically associated with these projects. So, for example, a company seeking to invest in on-site clean energy might work with Generate to deploy community solar projects or a city might work with the firm to address its wastewater processing needs.
It offers a variety of financial models, from debt to equity, which differentiates it from other investment firms in the climate tech space, according to Jacobs.
We will not get to the scale that we need, given the scale of the problem, if we rely on government funding or altruism.
"In infrastructure, stakeholder alignment is extremely challenging when you consider all of the various needs customers, communities, investors, regulators, suppliers and developers have," said Helena Olin, head of infrastructure and real assets at Swedish national pension fund AP2, one of Generate’s investors.
The new equity round was led by the San Francisco-based firm’s existing institutional investors AustralianSuper and QIC but also included new money from Harbert Management Corporation, Aware Super and CBRE Caledon. Generate’s backers hail from Australia, Canada, Europe and the U.S.
Over its lifetime, Generate has built a portfolio of sustainable infrastructure assets that are worth more than $2 billion, and it officially counts more than 1,000 corporate, municipal, academic and nonprofit customers. (Unofficially, it has way more than that.) Existing projects such as the 23 community solar projects it’s building with Starbucks or the zero-emissions forklifts it’s deploying for Walmart or the organic waste management systems it’s building with Storm Fisher could prevent more than 43 million metric tons of CO2 emissions from entering the atmosphere, according to Generate’s press release about the funding.
While energy accounts for about half of Generate’s existing asset base (followed by transport and water/waste), water will be a particularly important area of focus in the future, Jacobs acknowledged. The difficulty is that few market-based mechanisms for pricing water exist today, Jacobs said, making it challenging to make the financial case for some projects.
"In general, climate change is certainly having an effect on the way that water comes down to the earth and gets collected," he noted. "... There is quite a bit of opportunity."
Speaking of big funding aspirations, you should also keep your eyes on growth equity firm General Atlantic, which last week formed a venture called BeyondNetZero to focus on climate tech for a range of applications including energy efficiency, resource conservation, emissions management and decarbonization of industrial processes and supply chains. The company is raising $4 billion to address these segments, according to a report by Axios.