In brief: Impact-linked carry rises in the US with The Drawdown’s debut

A new climate growth vehicle, The Drawdown Fund, is putting 50% of its carry on the line as it nears a $100m first close.

The Drawdown Fund – a climate-focused growth vehicle – is the newest member of the impact-linked carry crew’s North American chapter. Drawdown is tying 50 percent of its carried interest to decarbonisation targets as it nears a first close at $100 million for its debut fund.

Linking carried interest to impact or ESG KPIs is much more prevalent in Europe – EQT, Apax, Tikehau and Meridiam are notable examples – but Utah-based Drawdown is one of only a handful of US-headquartered firms to do so. Others in the US include infrastructure firm EIG and food-focused Paine Schwartz.

Drawdown is targeting $250 million for the fund, which will invest along three environmental themes: energy, food and agriculture, and urban decarbonisation. The fund operates on a two-and-20 model for management fees and carry. It will set targets for avoided or sequestered emissions for each portfolio company upon acquisition, and half of the eligible carry will be paid as determined by the portfolio company’s progress against these targets. Drawdown has pledged to donate the balance to philanthropic climate projects to achieve the full intended impact.

Drawdown was founded in 2018 by Erik Snyder, the fund’s chief executive, and Paul Hawken, author of an impact investing book that has been classified as a New York Times best-seller: Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming.