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Green finance seeds sprouting as Generate Capital raises $2B for infrastructure and sustainability

Green financing is booming globally and the latest private company to reap the windfall is Generate Capital.

The green infrastructure development company founded in 2014 is one of the earliest pure play renewable energy development firms based in the U.S. It has already raised at least $1.3 billion through a structure that allows the company to invest independent of the decade-long time horizon of traditional investment vehicles.

With the new $2 billion capital infusion, Generate will be able to tap additional debt financing to give it around $10 billion in firepower for sustainable infrastructure investments.

The timing couldn’t be more critical. The life-threatening implications of climate change are becoming more apparent and the effects of a changed global climate appear to be accelerating.

Around the world, climate scientists are re-assessing their worst case scenarios to adjust for the real-world damage that’s being inflicted on cities around the world.

At Generate, the billions that the company has raised will go to finance renewable energy generation projects, electrification projects, and adaptation projects that can reduce greenhouse gas emissions and help communities adjust to the changing climate.

“Everything we’ve done has been in the more distributed infrastructure markets,” said Generate Capital co-founder and chief executive Scott Jacobs.

Generate’s thesis is that the kind of smaller scale projects at the core of a new, renewables-based economy require a different kind of investment structure than the massive infrastructure projects of the past.

And while the investor has made half of its deals in power generation and transmission infrastructure, Jacobs sees tremendous opportunities in building out the infrastructure for a circular economy — including bio-based chemicals and the material supply chain necessary to support the electrification of modern industry.

“The bio-based chemicals we would describe as part of the waste management or circular economy arena,” Jacobs said. “We are interested in all types of sustainability solutions where there is a compelling economic incentive.”

Generate is already investing in upcycling waste materials to produce power, gas, and fertilizer and other investment opportunities are on the horizon.

“The world isn’t set up to build small scale infrastructure,” Jacobs said. “It’s just a continuation of the inertia that we have supporting central-scale monolithic generation. In electrical transportation the assets are going to be smaller than a large coal plant. They’re one tenth or one-one-hundredth of the capital requirement that a central scale asset would be. The reason Generate was founded was to address these other opportunities that are being ignored.”

Generate’s success is a result of years of work by its co-founders, including the founder and former chief executive of SunEdison, Jigar Shah; Matan Friedman, who worked as an investor at the venture firm Bessemer Venture Partners; and Jacobs, a former Obama administration official and co-founder of the investment firm EFW Partners. Shah, who now serves as the head of the Department of Energy’s loan program, and his partners launched Generate to back these kinds of smaller scale renewable infrastructure projects just as the field was beginning to take off in earnest seven years ago.

Now renewable and sustainable investments have reached a total of $29 trillion (yes, trillion) across Europe and the U.S. in 2020, according to a new report cited by Bloomberg.

The lion’s share of those infrastructure dollars are going to solar and wind projects, but the field of green infrastructure also includes biomass to energy projects (the areas where Jacobs sees increasing opportunities).

Investors in the massive new funding for Generate include AustralianSuper and QIC along with Harbert Management Corp., Aware Super, and CBRE Caledon, an infrastructure investor affiliated with the real estate development giant CBRE.

The company works with more than 40 technology and project development partners to build infrastructure that serves the mission-critical needs of over 1,000 customers, including companies, universities, school districts, cities and non-profits across North America, according to a statement.

Through Generate investors have access to a firm that manages infrastructure assets through a holding company. The structure allows project developers and new technology companies to access an array of different financial structures to build out new infrastructure.

In addition to development capital, Generate also launched its Generate Credit unit dedicated to creating more credit solutions for green projects and companies.

“Generate is a market leader, with an innovative business model that successfully leverages growing global demand for sustainable infrastructure solutions. Investing in Generate provides both an attractive investment return for our members and fosters the development of new sustainability focused technology which is making a real impact on the global transition to clean energy,” said AustralianSuper Head of Infrastructure Nik Kemp.

Generate’s projects create thousands of jobs across communities and the infrastructure assets already on its balance sheet are expected to prevent over 43 million metric tons of CO2e from entering the atmosphere over the course of their operating lives, the company said.

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