Morgan Stanley Raises $500 Million So Far for 1GT Climate Investments

FILE PHOTO: A street sign stands near the Morgan Stanley worldwide headquarters building in New York May 8, 2009. REUTERS/Lucas Jackson/File Photo (REUTERS)
FILE PHOTO: A street sign stands near the Morgan Stanley worldwide headquarters building in New York May 8, 2009. REUTERS/Lucas Jackson/File Photo (REUTERS)


  • The investment bank’s 1GT growth strategy ties its share of profits to the achievement of carbon-reduction targets

Morgan Stanley has rounded up capital to cut back carbon emissions.

The investment bank’s 1GT climate-focused growth strategy has collected $500 million of the $1 billion it is seeking to back companies that together aim to reduce the equivalent of one gigaton of CO2 emissions by 2050.

European institutions, including Danish and British pension funds as well as a German insurer, contributed all the capital raised so far, said Vikram Raju, head of climate private-equity investing at Morgan Stanley Investment Management, the bank’s alternative investment unit. Raju leads the London-based 1GT strategy.

Denmark pension managers PenSam, Lærernes Pension, and P+ Pensionskassen for Akademikere have committed a total of €228.5 million, equivalent to $248.3 million, to the strategy, according to reports in Danish media.

“A lot of our deal flow is in Europe. A lot of our investors are in Europe. Naturally, Europe was our first stopping point," Raju said. “It’s our expectation that we will raise money in the U.S. going forward."

The 1GT strategy backs businesses in areas such as mobility, power, sustainable food and agriculture, as well as the circular economy. In its first deal, the unit last month co-led a $50 million investment in Everstream Analytics, a German provider of artificial-intelligence-based systems that help companies increase the efficiency of their supply chains.

The company is adjusting its software to help customers better track emissions in their supply chains, Raju said. He added that the 1GT team estimated that Everstream can help customers cut emissions equivalent to at least 47 million metric tons of CO2 by 2050. That’s in line with the average contribution that each of the roughly 20 businesses 1GT plans to back will need to make to achieve the strategy’s total goal of cutting one billion tons of CO2 emissions—or the carbon that one tenth of the world’s forests capture in one year, according to Raju.

He added that his team also sees opportunities in businesses that help reduce energy consumption or make food production more sustainable.

“Food and food waste is a very big area for us," he added.

He declined to discuss the steps that some U.S. states have taken to restrict public pensions’ investments in fund strategies based on environmental, social and governance factors. Those states say the funds often are used to advance liberal agendas to the detriment of profits. ESG-focused strategies have also been criticized for greenwashing, or the exaggeration of environmental claims.

The 1GT strategy tried to steer clear of the controversy by concentrating only on carbon emissions and setting a target—the one gigaton cut—that it can measure and its investors can audit, Raju said. The strategy also has tied its performance-linked compensation to that goal.

“There is a lot of noise out there with respect to ESG, sustainability and green funds," Raju said. “When there is noise, you need focus."

Many fund managers in Europe have downgraded the ESG credentials of their strategies for fear of violating the European Union’s Sustainable Finance Disclosure Regulation, the bloc’s stringent anti-greenwashing rules, The Wall Street Journal has reported. In particular, a number of managers have dropped the so-called Article 9 fund designation, which requires that all investments aim for sustainability or reducing emissions.

Raju said that, despite the 1GT strategy’s focus on carbon emissions, Morgan Stanley’s process to ensure it could be labeled an Article 9 fund was “very long and elaborate."

“We have to show what systems were in place to track, measure and report emissions avoidance, which is not insignificant," he said. “And we were doing this process at the time when a lot of funds were retreating from the Article 9 label."

Write to Luis Garcia at

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