Like covid-19, climate has no borders, and the climate crisis we face affects everyone. Concerted and coordinated efforts will be required to find and implement lasting climate solutions.
Early investments by governments and seed-stage venture capital have helped establish the foundation for a climate transformation, but much like the digital revolution of 40 years ago, the engine of private capital will need to be deployed at scale in order to accelerate the shift to a new climate economy.
When the UN Sustainable Development Goals were formally launched in 2016, it was clear that vast financial resources and business expertise would be required to help meet such ambitious targets for a better world. We at TPG shared that vision, accepted the challenge and launched The Rise Fund – our dedicated impact investment platform – to raise and deploy capital at scale to help address this massive funding shortfall. Five years and more than 30 investments later, Rise is the largest platform of its kind in the world, driving measurable social and environmental impact across a global portfolio of mission-driven companies.
While the work needed to meet the UN’s goals is in many ways just beginning, Rise is a successful model of the immense role private capital can play. The private equity industry has the power to attract and deploy transformational sums of institutional capital with a purpose, driving positive and sustainable impact alongside competitive financial returns. Awareness of commercial funding’s incredible potential to tackle some of the world’s big challenges has been brought into stark relief by the covid-19 pandemic. For many, it has provided an important wake-up call and reminder of the high connectivity and interdependence we all have on our planet. Encouragingly, it has also demonstrated that when we focus on a singular cause, our collective action can do amazing things.
“The private equity industry has the power to attract and deploy transformational sums of institutional capital with a purpose, driving positive and sustainable impact alongside competitive financial returns”
When it comes to climate change, governments, NGOs and philanthropists alone are not able to fund the vast scale of what needs to be done, particularly given the disastrous impact that covid-19 has had on global economies and public finances. Institutional investors will need to step in and fill that void, but the vehicles to do so do not exist. Current climate investing strategies tend to be siloed with, for example, cleantech venture capital funds and infrastructure funds focusing on particular areas in isolation, like solar or wind.
Climate change is so multi-faceted that, in order to meet the challenge, we need to leverage the success of our sector-based professionals to create a wide aperture climate investing vehicle that is broad enough to identify new opportunities and share learnings across a wide variety of climate sub-sectors. TPG has historically worked like this through its different platforms, investing into new technologies, infrastructure projects and companies that are all working in tandem on different areas of the climate challenge. We know there is more we can do to better utilise our experience, sector knowledge and resources to step up and tackle the climate crisis – and in light of both the societal urgency and extraordinary opportunity of the moment, we are doing that not soon, but now. Nowhere does the need to “build back better” resonate more powerfully than against the theme of “climate wiring” our global economy.
As we manage through the pandemic, the need for a more sustainable future has never been clearer. Having demonstrated the power of institutional capital in solving global issues through The Rise Fund, we are launching a new, differentiated and substantial climate strategy that we hope others in private equity will join, to seize the generational opportunity in front of us, and commit to helping us meet the climate emergency.
Mike Stone is chief investment officer of The Rise Fund and co-managing partner of TPG Growth.