When Bono helped recruit Henry M. Paulson Jr., the former Treasury secretary and Goldman Sachs chief, to join TPG’s impact investing initiative, part of the pitch from the musician-activist-investor was that a private equity fund focused on fighting climate change could be big. He was right.
The TPG Rise Climate fund announced on Tuesday that it has raised $5.4 billion, which would make it the largest climate-focused fund in the world. The fund, which counts a TPG co-founder, Jim Coulter, as its managing partner, would rank as the 25th-largest private equity fund out of more than 1,200 raised this year, according to PitchBook. It has a cap of $7 billion, so it could get bigger by the time it closes in the fourth quarter of the year.
Unusually, Rise Climate’s investors aren’t simply the big pension funds. Investors include Apple, General Motors, Nike, FedEx, Honeywell and roughly three dozen other large corporations, which collectively are contributing about $1 billion. Corporations rarely invest in private equity funds, so their participation underscores the demand by both investors and companies to find climate solutions.
The companies that invested in the fund are likely to have access to many of the businesses that TPG invests in, helping them grow, and potentially validating them. TPG said Rise Climate would be focused on companies that can “enable carbon aversion in a measurable way.”
Earlier this year, Mr. Paulson told DealBook that for a fund focused on sustainability to sustain itself, it had to produce returns that were competitive with other private equity investments. “The market will not scale for concessionary or subsidized returns,” he said. He will have to prove the returns, but so far scale does not seem to be a challenge.