Society & Community Sustainable Development Policies & Frameworks Financing for Sustainability

Generate Capital’s $1 billion raise draws global infrastructure funds to cleantech

Financing for Sustainability

Summary

Generate Capital, the cleantech infrastructure investor, has revealed that it had raised $1 billion in equity and debt finance. Its success holds important lessons for cleantech financing.

Perspectives and insights

  • Generate became an early investor in asset classes that conventional lenders shied away from, including fuel cells, anaerobic digesters, behind-the-meter battery storage, electric buses, microgrids and unconventional solar projects.
  • New energy technologies tend to scare away investors that want to see long track records of performance in the field. Solar panels have earned that trust, so investment decisions on solar projects have largely shifted to assessing the credit-worthiness of the off-taker.
  • The $1 billion fund raise by Generate marks a new degree of involvement in clean energy projects from pension and sovereign wealth funds that are much higher than typical investments from the venture capital sector - investors include AustralianSuper, Queensland Investment Corporation, British fund Railways Pension and Swedish pension fund AP2.

Xoologue - a discussion between Xoo and Moo

Xoo: If pension funds have started investing in cleantech, there must be something afoot!

Moo: Like what? Have cleantech investments finally made it to investment grade?

Xoo: It could be that, or it could be that investments in conventional power have gotten risker. As a result, even if cleantech projects are no less risky than what they were a few years back, their risk profiles might have achieved parity with conventional power in relative terms.

Moo: Well Xoo, categories such as fuel cells still appear far from considered even reasonably safe investments.

Xoo: You speak words of wisdom, Moo. I presume funds such as Generate will have different grades of asset classes - horses for the courses.

Moo: This is still very good news, Xoo.

Xoo: Good news, of course, but very good? Too early to say. A billion dollars might be a heck of lot of money for les miserables like us, but is chump change when compared to total funds available for investments, which runs into tens of trillions of dollars.