New Morgan Stanley Strategy Aims to seeks to invest $1bn in emissions reduction companies

Morgan Stanley has formed a new growth-capital strategy that aims to invest $1bn to back companies that will seek to cut a total of one gigaton worth of carbon-dioxide emissions by 2050 — and the bank is tying the strategy’s performance fees to that goal.

The 1GT team has been investing in companies seeking to mitigate climate change since 2015, having deployed nearly $600mn 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.”

Get the week’s top news delivered directly to your inbox – Sign up for our newsletter

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: Business Wire

Can’t stop reading? Read more