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Generate Capital raises $2 billion for sustainable infrastructure investments

Generate Capital raises $2 billion for sustainable infrastructure investments

19 Jul 2021

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Green infrastructure investment firm Generate Capital said Monday that it has raised $2 billion in fresh funding amid a boom in clean-energy projects and interest from Wall Street in emissions-reducing investments.

The new capital, which follows a $1 billion raise in February 2020, brings the San Francisco-based company’s balance sheet to around $10 billion. Backers include pension funds from Australia, Sweden and the U.K. 

Founded in 2014, Generate sits at the intersection of two hot investing trends — clean energy and infrastructure. The firm brings both capital and operational knowledge to the more than 2,000 assets it owns around the world, handling everything from financing to building to day-to-day management. Clients include cities, companies and schools.

CEO Scott Jacbos said that what sets Generate apart is its willingness to fund projects that others might not, including small-scale deals as well as backing early-stage technologies that some might deem too risky. Additionally, Generate’s capital has no time restrictions, meaning the firm isn’t incentivized to make decisions with short-term goals in mind.

Jacobs said returns are competitive, and pointed to every funding round being oversubscribed — some by as much as seven times — as evidence that sustainable investing does not have to come at the expense of performance. 

“We have had great success attracting institutional investors because this is a very compelling investment return profile relative to the risk undertaken,” he said.

A variety of clients

Potential customers come to the firm with a variety of goals, including infrastructure resilience, a net-zero mandate, or just saving money. Jacobs noted that much of the infrastructure built over the last century has been government driven, large and centrally planned, rather than catering to the needs of local communities.

“The infrastructure that customers want and communities need is very different. We call it the four Ds: distributed, decarbonized, digitized and democratized. And that is, in fact, what offers the most compelling value proposition to these customers and communities,” he said.

Examples of projects include a partnership with Starbucks to develop community solar projects in New York to supply local Starbucks’ and the areas around the stores with solar power. Generate also worked with the public school system of Hillsborough County in Tampa, Florida, which wanted to reduce its energy needs, carbon footprint and energy bill. 

Generate’s involvement meant the district didn’t have to shell out any cash up front as the buildings were overhauled. Better HVAC and building management systems were installed, and lights were replaced with energy-efficient bulbs.

The company also worked with Chinese battery company BYD, which Warren Buffett’s Berkshire Hathaway owns a stake in, to provide electric buses for customers including Stanford University and Facebook.

Jacobs said the $2 billion capital raise is only the beginning in terms of the investment needed to update and overhaul infrastructure in the U.S., much of which is ageing and vulnerable to extreme weather fueled by climate change.

And while all of the firm’s funding rounds have been oversubscribed, Jacobs is intentional about balancing the rate of growth with ability to execute. Interest from Wall Street also means the firm can choose to take capital from investors who align with the company’s long-term vision. 

“Raising capital is just raising capital and it’s not that much to celebrate. But it says though that the model is working — that customers are benefitting, that the world is seeing great advantages from these sustainability solutions that we’ve been putting in place for seven years now,” he said.

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