Dive Brief:
- Morgan Stanley’s alternative investment arm has raised $750 million for its climate solutions-focused private equity fund, 1GT, the bank announced Monday. The fund invests in businesses that aim to collectively avoid or cut one gigaton of carbon dioxide equivalent emissions from the Earth’s atmosphere by 2050.
- The fund, which launched in November 2022, targets North America and Europe based growth and “climate positive” companies from the transportation, power, sustainable food and agriculture and circular economy sectors.
- Morgan Stanley Investment Management roped in equity capital commitments from almost a dozen investors, though it was unable to secure its initial $1 billion fundraising goal, according to a report from the Wall Street Journal.
Dive Insight:
The 1GT fund prioritizes including companies in its portfolio that have systems in place to manage ESG risk, measurement and reporting requirements and those that seek to add value through sustainability partnerships, according to the fund’s website.
The members of the team managing the fund will have half of their financial incentives tied to reaching the one gigaton carbon dioxide avoidance goal by mid-century, according to Morgan Stanley.
Vikram Raju, head of climate private equity investing at Morgan Stanley Investment Management, called 1GT a “highly focused fund” that provided “capital at the critical growth stage to companies whose products and services enable meaningful reduction in the global carbon footprint” in a release.
Raju previously said the traditional model of impact investing in private equity needed to be “radically” altered with a new focus put on climate goals that were “tangible rather than anecdotal and ambitious rather than tangential,” in a release announcing the fund’s launch.
The fund’s prior investments include sustainable nutrition brand Huel, portable power solutions provider Instagrid and supply chain risk management software company Everstream Analytics.
1GT is classified as an Article 9 fund under the Sustainable Financial Disclosure Regulation. The European Union’s SDFR requires asset managers to disclose certain investment-related ESG information; in this case the firm indicates 1GT has distinct ESG objectives, making it subject to enhanced disclosure requirements to provide investors with more transparency and information.
