The climate crisis is upending the finance sector. But, at the risk of sounding overly sanguine, it’s also creating the largest investment opportunity in a generation.
Enter Brookfield Asset Management, one of the world's largest alternative investment management companies with over $725 billion of assets under management.
The firm boasts Mark Carney, United Nations special envoy on climate action and finance, as its vice chair and head of transition investing, and runs the largest impact fund focused on decarbonization to date — the Global Transition Fund, to date the largest private equity fund raised to support the transition to net zero.
Private equity is in a special position to lead on financing the transition to a clean economy given its business model — effective control of its portfolio companies, longer investment time horizons and unique access to information about a company's financial and sustainability performance.
That stature coupled with Brookfield’s strategy of investing in, owning and transforming high-emitting assets as a means of creating change, rather than simply avoiding high-emitting assets, means funds such as Brookfield’s are poised to make a meaningful impact. And, they also stand to generate meaningful returns.
Brookfield Renewable sits in the firm’s renewable power and transition business. It’s taking advantage of the transition opportunity via one of the world’s largest publicly traded, pure-play renewable power portfolios, which has 24 gigawatts of installed renewable capacity and a development pipeline of over 120 GW.
After 16 years with BP, most recently as the oil major’s head of carbon strategy, Kelly Goddard joined Brookfield Renewable just over a year ago as chief sustainability officer, where she leads the development and delivery of their global sustainability strategy.
I spoke with Goddard to learn more about how Brookfield Renewable’s renewables portfolio is delivering on its decarbonization strategy, and how it’s capitalizing on the once-in-a-generation opportunity that is the energy transition.
(This interview has been edited for clarity and length).
Grant Harrison: Your carbon strategy leadership with BP would, I imagine, provide a solid number of career options at the intersection of carbon and commerce. Why Brookfield, and why this role with Brookfield Renewable?
Kelly Goddard: I would say two things. One is that there was a proven track record at Brookfield of owning, investing in and operating renewable development, on a global scale across technologies. So having that deep technical expertise, for me, means that we are credible as a leading investor and partner on decarbonization. We were in renewables before renewables were cool — it has been and is so core to what we're doing. So there was something important to me about being somewhere that was really credible.
The second piece is the Global Transition Fund. That's something really meaningful — being able to raise the capital and deploy that capital with a dual mandate. We have a dual mandate for attractive risk-adjusted returns and measurable environmental impact. And we have to meet both of those for any investments. It’s not something adjacent to our strategy, it’s at the core of our strategy. So, to summarize: Credible and meaningful.
Harrison: Last year, BlackRock CEO Larry Fink was notably saying that the private markets are where dirty assets go to hide, not transition. But, as you shared earlier, you’re going towards the emissions, not away, as a strategy. Share more about that?
Goddard: I would say for us, we have a very clear dual mandate. And really that is the reason our investors have invested in us in the first place. So we have to meet that dual mandate, and to ensure that we are aligned with what we've set out in the fund. It affects our ability to continue to raise future funds and and continue to do what we do.
We have a dual mandate for attractive risk-adjusted returns and measurable environmental impact.
So I don't really see it as a difference between the accountability to our public shareholders, or to our private [limited partners]. We do have a responsibility to deliver what we've set out, and we will report transparently on a quarterly basis to them on the impact targets and greenhouse gas emissions.
Harrison: Folks reading this may be familiar with Brookfield Asset Management. Tell us how Brookfield Renewable fits into the larger firm and to the Global Transition Fund?
Goddard: Within Brookfield Asset Management, we have several key businesses including infrastructure, real estate, private equity, and renewables and transition, where I sit. We are active across many geographies, including North and South America, Europe, India and China, and increasingly in the wider Asia Pacific. We are also active across renewable technologies including hydro, wind, offshore and onshore wind, and solar — both large-scale solar and distributed generation — and increasingly into other technologies such as battery storage.
To date, we have about 24 GWs of installed capacity. And we have a development pipeline of over 120 GWs. So again, we have an increasing focus on the development of renewable energy. In the last year, we have commissioned over 3 GWs of projects. We have a plan to commission 14 GWs in the next three years. So, importantly, we have this development hopper. But we're also installing renewable capacity rapidly, and that's an important point.
As I mentioned, we are looking at investing in technologies that support the energy transition, which includes battery storage. We've just invested in a large battery company in the U.K. called Cambridge Power. We've also made three big investments in [carbon capture, use and storage, or CCUS], and we're looking to continue to build that because we know that in every climate scenario, CCUS is important to get to net zero.
Harrison: In terms of investment opportunities, what is the farthest hanging fruit that you most want to pluck?
Goddard: That's an interesting question. For us, we want to leverage our expertise in infrastructure development, both in wider infrastructure but also in renewable infrastructure. So we really look at proven technologies. And, we want to play to our strengths here. So I would say for us, it's looking out into areas like hydrogen and bringing our renewable expertise to that space, whether that's in supporting or partnering with others that deploy electrolyzers, for example.
We want to be ahead of investing in the leading technologies. But right now, we don't see any of what we're doing as out of reach.
Harrison: Can you describe in lay terms what exactly it means to be a "publicly traded pure play renewable energy platform," and share about how this approach to investing sustainably differs from other approaches folks may have in mind?
Goddard: We are the largest pure play renewable company, and the case in point is that we have 24 GWs of installed capacity. And, we have a strong development pipeline that we continue to develop and turn into installed capacity. That's using our expertise in that development but also in power markets to make sure we are working with global partners that are trying to decarbonize their own organizations and support their own commitments.
That's how we think about our renewable business. I think in the second piece, I hold sustainability and impact slightly differently, but they also have a massive overlap. For us, as I mentioned, when we were designing the fund, we wanted to play to our strengths. So we set a sole target of investing in exclusively decarbonization technologies and businesses. We're really focused on those investments and on accelerating the energy transition.
How we do that is really important. We do look at the wider sustainability aspects of investments as part of our due diligence, and we make sure that as we invest, we don't have any material or significant ESG risks or impacts that we can't avoid or mitigate. And again, we look at that through the life cycle of our investments. But really impact is about setting quantitative, transparent and verifiable targets that are aligned with best practice and scientific pathways.
For each investment, we set quantifiable science-based targets and include them in the underwriting.
Harrison: The energy transition is a once-in-a-generation opportunity. In such a dynamic space, can you share key priorities, hopes or expectations you have for the near future?
Goddard: The first is that we're in action. As you said, we are currently the largest impact fund focused on decarbonization with $15 billion raised. What we're finding is there's a humongous opportunity already and humongous pull for what we're doing. So we've committed about $7 billion of that already. Which really is remarkable, given we launched the fund two years ago, and we just closed on it earlier this year.
One of the key components of our fund is additionality — we want to make a material difference that would have not otherwise not existed had we not been involved.
And the amount of opportunities just grows, but it's important that we are disciplined. That is, that we continue to meet the criteria of the fund across our three investment themes (renewable, sustainable solutions, transformation). One of the key components of our fund is additionality — we want to make a material difference that would have not otherwise not existed had we not been involved.
On sustainable solutions, we are looking at technologies that are adjacent and supportive of the energy transition, like [carbon capture and storage], but also others like electric vehicle charging. And I think what we're seeing now is a real focus across all those themes. And we have that $7 billion we have deployed across all those themes already.
Harrison: Do you see the political mud thrown at ESG as something that could interfere with your goals? That is, in finding opportunities and pursuing them?
Goddard: I would say it's just noise, for a few reasons. One is that countries and companies continue to set net-zero targets and continue to create incentives to support businesses helping to achieve those.
We see that with the Inflation Reduction Act, and we see that with other regulations and incentive programs around the world. So I would say that, while there is a bit of noise, it doesn't change the fact that there are tailwinds and a pool for what we're doing. And so I don't see that changing, really anything.
Harrison: Has anything transpired at COP27 that you think materially affects your work?
Goddard: Coming out of the last COP we saw a lot of big announcements, and this COP was really about implementation — getting back in and tracking progress. I think before going into COP, we saw the report saying that we are a way off from [keeping global warming to] 1.5 degrees [Celsius] of warming.
I think that there will be a call for countries, but also for others, to step up and see what we can do to continue to accelerate action. So I'm not quite sure how that will look. But I think again, it just makes what we're doing even more important.