Fundraising efforts for climate initiatives encountering obstacles: General Atlantic encountering challenges
In the realm of climate investments, General Atlantic, a prominent private equity giant, is encountering significant headwinds in raising its second climate-focused fund. The primary reason for this difficulty lies in the anti-ESG (Environmental, Social, and Governance) rhetoric prevalent in the United States, according to Gabriel Caillaux, the firm's global head of climate.
This anti-ESG sentiment poses a greater challenge than even geopolitical tensions or trade concerns, Caillaux highlighted in a recent interview. When General Atlantic raised its initial $3.5 billion BeyondNetZero fund in 2022, investor enthusiasm was nearly unanimous, with a hit rate probably 100%. However, the current fundraising environment is more complicated due to what Caillaux described as an "overlay of noise"—a climate of skepticism and pushback around ESG investing that is distracting and somewhat deterring investors.
The underlying opportunity in climate investments and decarbonization sectors remains robust and essential for decades to come. However, the anti-ESG rhetoric creates a "focus lull" that limits investor appetite and slows momentum for new climate capital fundraising. This political and cultural resistance in the US markets is now a more pressing obstacle for climate funds like General Atlantic's than market fundamentals or portfolio performance.
The challenge is not unique to General Atlantic. Many US pensions believe they need to do something for climate investing but are nervous about the potential perception in red or blue states. Other climate-focused investors are less upbeat about meeting their targets, with Earth Foundry, an early-stage fund, halving its initial fundraising goal of $100 million.
Despite these challenges, Caillaux expressed confidence that the firm would succeed in raising the new fund. The fund's strategy focuses on decarbonization, energy efficiency, and emissions management. Caillaux believes that the need to continue climate investing will exist for 30 years. In light of this, General Atlantic is considering raising another fund with a similar strategy of targeting sectors of the green economy.
The Financial Times reported in September that clean-tech startups that raised money from big-name investors face challenges in securing fresh funds. Backers of clean-tech startups are worried about interest rates and delays in the reception of federal tax credits. However, the current climate of skepticism around ESG investing seems to be a more pressing concern.
In essence, while the opportunity in climate investments remains robust, the anti-ESG rhetoric is creating a barrier that could potentially slow down the momentum of climate finance. This dynamic illustrates how political discourse and ideological opposition can materially impact capital flows into critical sectors like climate finance, even when the economic rationale for investment remains strong.
- The anti-ESG rhetoric, a challenging obstacle in the current fundraising environment for climate funds such as General Atlantic's, is causing a "focus lull" that limits investor appetite and slows momentum for new climate capital.
- Despite the challenges faced by General Atlantic and other climate-focused investors, the firm remains optimistic about raising the new fund, with a strategy concentrating on decarbonization, energy efficiency, and emissions management.
- The Financial Times reported that clean-tech startups face challenges in securing fresh funds, but the current climate of skepticism around ESG investing appears to be a more pressing concern, illustrating how political discourse and ideological opposition can materially impact capital flows into critical sectors like climate finance.
