11.22.2022

MSIM’s 1GT to Invest in Firms Mitigating Climate Change

11.22.2022
MSIM’s 1GT to Invest in Firms Mitigating Climate Change
  • The 1GT growth-oriented private equity platform (1GT or the Platform) is focused on making investments in companies seeking to mitigate climate change
  • 1GT is seeking to invest in companies that will collectively avoid or remove one gigaton of CO2-equivalent emissions from the Earth’s atmosphere from the date of the Platform’s investment through 2050, the date by which the United Nations has mandated “Net Zero” must be achieved
  • The 1GT team, led by Vikram Raju, MSIM’s Head of Climate Investing, has been making investments in companies seeking to mitigate climate change since 2015 through and alongside several impact-oriented investment vehicles
  • The team’s financial incentives for 1GT will be tied to achieving not only financial returns for 1GT, but also the Platform’s climate objectives

Morgan Stanley Investment Management (MSIM) announced that it has launched the 1GT growth-oriented private equity platform (1GT or the Platform) focused on investments in companies that will collectively avoid or remove one gigaton of carbon dioxide-equivalent (CO2e) emissions from the Earth’s atmosphere from the date of the Platform’s investment through 2050, the date by which the United Nations has mandated “Net Zero” must be achieved. Part of MSIM’s $200 billion alternative investments business, 1GT is targeting investments in private companies based primarily in North America and Europe whose products or services enable meaningful improvement in their respective clients’ carbon footprint. The 1GT team has been investing in companies seeking to mitigate climate change since 2015, having deployed nearly $600 million of capital to date through and alongside several impact-oriented investment vehicles. For 1GT, the team will tie half of its incentive compensation (commonly known as carried interest) to the underlying investments collectively catalyzing one gigaton avoidance/reduction in CO2e emissions from the date of 1GT’s investment through 2050.

Vikram Raju, MSIM’s Head of Climate Investing and the 1GT Platform, commented: “As COP27 concludes, it is clear now more than ever that we need to radically alter the traditional model of private equity impact investing in three ways. First, we need to seek climate goals that are tangible rather than anecdotal and ambitious rather than tangential. Second, we believe that in order to catalyze meaningful progress in climate solutions, a significant portion of financial incentives should be linked to such climate goals. Third, the measurement of those goals should be transparent to limited partners. With our 1GT goal and 50 percent carry link, we have endeavored to do just that.”

1GT is targeting investments in private companies that will deliver a meaningful financial return and measurable positive environmental impact across the mobility, power, sustainable food and agriculture, and circular economy themes. The Platform intends to leverage Morgan Stanley’s considerable resources to partner with portfolio companies to help monitor ESG risks, increase climate change mitigation, improve ESG monitoring and reporting, and pursue earnings growth, multiple expansion and enhanced exit potential.

Navindu Katugampola, MSIM’s Global Head of Sustainability, commented: “1GT is a further example of MSIM’s commitment to providing innovative solutions and market-leading products that help our clients address time-critical sustainability issues while meeting fiduciary obligations to their investors.”

Source: Morgan Stanley Investment Management

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