September 30, 2024

By Gerelyn Terzo, Global AgInvesting Media

Against a challenging private market fundraising backdrop, Morgan Stanley Investment Management (MSIM)’s inaugural 1GT climate fund has reached a final close, albeit a little short of the Wall Street firm’s original finish line. MSIM has achieved the final close of its climate private equity fund — dubbed 1GT — after attracting $750 million in equity capital commitments.

Approximately one dozen institutional investors across Europe, Japan and North America flocked to the fund, including Miami-based PenSam Capital alongside Denmark’s Lærernes Pension and P+ Pensionskassen for Akademikere, according to a report in The Wall Street Journal. Despite the impressive haul, the fundraising missed the firm’s original $1 billion target.

Launched in 2022, the 1GT, or 1 gigaton, fund backs growth-oriented companies whose products or services are dedicated to mitigating climate change across North America and Europe and doing so in a way that’s cheaper, faster or better than others. Through its portfolio companies, the fund’s strategy involves removing or avoiding one gigaton — 1 billion tons — of carbon-dioxide-equivalent emissions from the atmosphere through 2050, a critical year for a Net Zero scenario.

Vikram Raju, who heads up MSIM’s Climate Private Equity Investing and 1GT, explained that the fund strategy is structured in a way that there’s no dichotomy between scaling the businesses in which it invests and scaling their climate impact, adding:

“We are pleased to have arrived at the final close of 1GT, a highly focused fund that is providing capital at the critical growth stage to companies whose products and services enable meaningful reduction in the global carbon footprint. 1GT’s investors saw the unique opportunity to invest in a fund with a tangible, transparent and independently measured climate goal, which directly ties to the team’s incentive compensation.”

MSIM, which oversees a $240 billion alternative investment business, said 50 percent of the 1GT team’s financial incentives will be linked to the fund’s climate goals in the coming decades. In addition to agriculture and sustainable food, the fund will target private companies across other sectors, including mobility, power and the circular economy. The investment firm has committed to partnering with its portfolio companies for earnings growth, multiple expansion and enhanced exit potential, all through a lens of strengthening climate change mitigation and bettering ESG monitoring and reporting.

The 1GT fund has already begun deploying capital and so far has backed sustainable nutrition brand Huel, as well as sustainable supply chain services company Everstream Analytics. Huel, which in October 2023 represented 1GT’s second investment, creates nutritional meals with a carbon footprint that’s 50 percent smaller than the average U.S. meal.

David N. Miller, head of Private Credit & Equity at Morgan Stanley Investment Management, stated, “1GT’s close represents the best of Morgan Stanley’s thinking around delivering fiduciary returns to our clients while providing transparent, transformational climate impact. We are also able to deliver to our growth stage investees the insight, expertise and access that come from being a leading global financial services firm.”

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