TPG to wrap up debut climate fund at $7.2bn, launches $3bn Rise Fund III

TPG's Rise Fund platform, overseeing $14bn in assets, was earning a net IRR of 25% as of December 2021.

TPG is looking to advance its impact brand in the year ahead with the close of a debut climate offering and the unveiling of Rise Fund III.

TPG Rise Climate Fund, launched last year, is expected to hold a final closing in the second quarter at a $7.2 billion hard-cap, CFO Jack Weingart said in the firm’s fourth-quarter 2021 earnings call.

The offering had secured more than $6.7 billion in committed capital at the end of December, TPG fund documents showed. Last July, it surpassed in a first closing the original target of $5 billion.

TPG also recently rolled out the third in a series of more broadly-based impact vehicles, Weingart said. Rise Fund III is targeted to bring in $3 billion.

TPG has built a comparative advantage in the impact investing space, establishing its Rise Fund franchise in 2016 in partnership with rock star Bono and former eBay president Jeff Skoll. Aimed at opportunities that deliver both a social impact and strong performance, Rise Fund I was closed in 2017 at $2.1 billion. A second fund came three years later, collecting nearly $2.2 billion.

In the earnings call, CEO Jon Winkelried expressed pride in the impact platform, now overseeing $14 billion in assets, noting TPG was “a first mover to institutionalize private market impact investing”. Along with generating benefits to society, he said, the strategy has validated “our long-held view that impact investments do not need to have lower returns”.

Winkelried made the point by citing a 25 percent net IRR earned as of December 2021 across the entire Rise Fund platform. The combined gross IRR was 37 percent.

TPG Rise Climate Fund is the next iteration of the strategy, focused exclusively on opportunities in climate change and carbon reduction. It will invest flexibly across assets, geographies and deal types, backing companies operating in clean energy, enabling solutions, decarbonized transport, greening industrials, and agriculture and natural solutions sectors.

Chaired by Hank Paulson, the former US Treasury secretary, the fund is expected to make 20 to 30 investments in companies with revenue of at least $100 million, a 2021 report by New Jersey Division of Investment said. Initial equity investments will be $150 million to $500 million per deal.

The fund has already begun doing deals. Late last year, for example, it and Abu Dhabi’s ADQ invested roughly $1 billion in a newly formed passenger electric mobility unit of Tata Motors, an Indian automaker.

TPG Rise Climate Fund and Rise Fund III are among 11 TPG products in the market, Weingart said in the earnings call. They include the latest flagship vehicle, TPG Partners IX, launched in January. Fund IX, together with an affiliated second healthcare fund, is seeking $18.5 billion.

Affiliate title Buyouts this month reported the flagship alone is targeting $14 billion to $15 billion (registration required).

TPG’s fundraising is experiencing “a bit of a pull forward, relative to our expectations”, Weingart said, because of robust demand from limited partners. This is despite a more uncertain and volatile market spawned by inflation, rate hikes, Russia’s invasion of Ukraine and other factors, which is giving private equity as a whole “some indigestion”, he said.