Generation Closes $1B Growth Fund To Focus On Sustainable Investing

Generation Investment Management LLP, a firm co-founded by former Vice President Al Gore, has closed a $1 billion fund dubbed “Generation IM Sustainable Solutions Fund III.” The new fund will focus on “growth-stage companies accelerating the transition to a sustainable economy.”

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Well, what that means could be interpreted in a number of different ways. Historically, some sectors that aim to contribute to a sustainable economy have not performed so well in the way of financial returns. So we talked to Lilly Wollman, partner and co-head of the Growth Equity and Sustainable Solutions Fund, to better understand what types of companies Generation is looking to invest in.

She emphasized the London-based firm’s belief that the world is in the “early stages of a massive technology-led sustainability revolution.” And that revolution doesn’t have to happen at the expense of revenue or profits, according to Generation.

“We’re trying to intertwine sustainability and high financial performance in one fund,” she told Crunchbase News. “We believe you can drive adoption (of sustainable practices and products) through profitable growth of high-growth companies.”

The 15-year-old firm, which is solely focused on sustainability and has an office in San Francisco, has $22 billion of assets under management. This latest fund is its third and largest growth equity fund. Climate Solutions Fund I closed in 2008 with about $680 million  in committed capital and Climate Solutions Fund II closed in 2014 with about $520 million in committed capital. With this new fund, it expects “to make meaningful minority investments of $50 to $150 million in innovative companies with high-growth potential.”

The fund said it will focus on investments in companies with traction in one of three areas, with expected overlap between all three:

•       Planetary health: low carbon solutions transforming mobility, food, energy, and enterprise
•       People health: enabling health outcomes and a lower-cost, accessible healthcare system
•       Financial inclusion: solutions to support financial inclusion and an equitable future of work.

Examples of portfolio companies in these categories are as follows (note that both SOPHia GENETICS and Andela were investments made out of the latest fund):

• Planetary Health – Gogoro is a Taiwan-based provider of electric motor-scooters and network of swappable batteries that aims to enable cleaner urban mobility. Gogoro estimates that its electric scooters have resulted in around a 90 percent reduction in NOx compared to gas scooters. In addition to the environmental benefits, the company claims to be improving urban air quality. The company “has several hundred million in revenue and an 85% share of the Taipei electric scooter market,” according to Generation.
• People Health – SOPHiA GENETICS is a Switzerland-based company working to democratize data-driven medicine. Its platform, SOPHiA AI, is used by more than 850 hospitals across 77 countries and has “supported the diagnosis of over 300,000 patients,” according to Generation. It’s raised a total of $140 million over its lifetime.
• Financial Inclusion – Andela is a  New York-based provider of full-stack engineering services with African software developers, with the goal of addressing the global undersupply of engineering talent by training and developing several thousand software developers in Africa. Since 2014, Andela has hired 1,000 software developers with the average income per Andelan climbing from about $4,000 to $40,000 per year. The company recently raised a $100 million Series D.

“Sustainability is about both what a company does (the products and services it sells) and how a company operates,” noted Lila Preston, partner and co-head of the Growth Equity platform.

Meanwhile, Generation prides itself on a diverse team with a staff that is overall 56 percent female.

“Broadly 36 percent of our investment partners are female and in the case of the growth equity business, the Sustainable Solutions strategy is co-led by two women and 60 percent of the Growth Equity investment team is female. This team of 14 also represents eight nationalities,” Wollman said.

Illustration: Li-Anne Dias