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Generation targets private equity and small caps

After Live Earth, Al Gore’s fund management firm launches a hybrid climate change solutions fund.

Generation Investment Management, the sustainable fund management company set up former US Vice-President, Al Gore, and ex Goldman Sachs Asset Management chief, David Blood, is to make its first private equity style investments with the launch of a hybrid climate change solutions fund that also invests in smaller companies. The fund is the first addition to Generation’s range since it began two and a half years ago investing in large cap equities based on sustainable investment criteria. It is scheduled to launch by the end of the year.

Blood told Responsible Investor: “It will be a hybrid including growth stage private equity investments and small cap equities. We’re not getting into the private equity field per se because we will be selecting companies for investment using our existing investment process. We see a lot of medium-sized and smaller opportunities to address the challenges of climate change.” These, he says, include companies working in the clean energy, carbon capture in sequestration, energy efficiency, and water scarcity fields. Generation’s targeting of smaller companies could give credence to some commentators who argue that there is potentialfor a carbon bubble as institutional investors with an existing large cap bias concentrate greater capital in stocks considered more sustainable and less exposed to reputation risk.

Blood says investment in carbon solutions requires a robust focus on the investment opportunities in the market: “It’s awkward because people could lose a fair amount of money just like they did in the dot.com boom. There is no question the internet has changed our lives and I am sure that the shift to a low carbon world will do the same, at least from a business perspective. We are at the beginning of the process and clearly there will be winners and losers.”

To date, Generation has managed a global large cap equities fund investing in about 50 companies that it considers good value with growth potential as a result of sustainability issues. Its investment team has grown to 14 fund managers. Blood and Gore are the public face of its second preoccupation: advocacy for long-term investment and the incorporation of sustainability into investment decisions.
Al Gore was co-organiser of last weekend’s Live Earth concerts.