The Transition Infrastructure Opportunity: Jim Coulter and Scott Lebovitz on the Next Era of Climate Investing

For this issue, Jim Coulter and Scott Lebovitz share their perspectives on the critical role that the infrastructure market will play in the climate sector over the next decade. They discuss the opportunity for scaled climate solutions, the importance of?real assets, and our approach to raising a Transition Infrastructure fund. ?

The Next Era of Climate Investing: Defining Transition Infrastructure

Jim Coulter: "For decades, we've been talking about the need for climate investing – the need for our society to transition to a cleaner set of energy sources and materials. I think we're at a moment where we're moving from talking about how climate change would happen, to actually activating that change.

The thing that is fundamentally different and important about climate investing is that we must scale on a physical basis. That physical basis requires a slightly different approach to the market. When we've scaled things historically as a society, they've actually happened across the intersection of companies and infrastructure. Think how the energy or transportation businesses came together – airlines in private equity, airports in infrastructure. That concept of physical investing is very front and center in the climate revolution. We believe the great themes of climate investing are going to cascade starting in private equity and moving down into infrastructure. So the right approach to be a market leader is actually to live at the intersection between those two areas. Our efforts in TPG Rise Climate Transition Infrastructure is an expression of the need to live in both of those segments of the market."

Scott Lebovitz: "The infrastructure market is going to play a huge role in in the climate sector over the next decade. And the reason for that is as we think about scaling climate solutions and the successful technologies, it's all about building real assets. I think we're going to see a broadening of investment in infrastructure. It's not just going to be about investing in the power space, but you're going to be creating climate solutions for industrial customers, for hyper-scalers, or in the datacenter space for auto businesses, for airline companies. And that is going to create more complexity in the investing environment."

Bifurcation of Climate Investing: Highlighting the Need to Scale

Jim Coulter: "I believe the spending on energy transition as defined by consultants is about $2 trillion a year. But what's fascinating about that market is there's almost universal agreement that it will triple over the coming years. Our job at TPG Rise Climate is to find the most interesting pockets of opportunity within that spending. So it's about capital acceleration, but it's also about capital of choice."

Scott Lebovitz: "If you think about the capital needs required for the scaling of climate investing, the early years have focused on creating technologies and engineered solutions. So you've seen a lot of investment from early stage, almost venture capital-like investing. And over the last few years, we're starting to see business-building across the private equity space. As we look forward, we're going to have to figure out a way to scale these engineered solutions and technologies, and that is going to require infrastructure capital. This is about building real assets. We're going to have to to be thinking about scaling at the rate of potentially $6.5 trillion a year over the next 30 years."

Why TPG Rise Climate Transition Infrastructure?

Jim Coulter: "This is the right product for the right moment. In the early days of the climate investing market, it was actually around the two edges – venture capital ideas that were not yet ready to scale, and on the other side, projects knowing that you can't project your way to scale. What's critical is right now the ideas are maturing to a point that you can scale them, and the projects we now understand have to be turned into companies. And so that moment, combined with a set of cost curves that make it the most inexpensive energy around the world, means that we now need to scale, and that's what Transition Infrastructure is about."

Scott Lebovitz: "As I think about raising a Transition Infrastructure fund, I don't think there's a better place to do it than at TPG. First and foremost, I believe the Rise brand resonates in the market, starting with the decade-long experience that we have investing in the space. Second, it's the ecosystem that exists within climate, which gives us a running start in infrastructure because we're able to learn from all of the investments that have been made over the last decade in the broader climate space. And third is the team. We look at investing in climate as a sector – we are investing in climate, and climate only. And so that builds deep expertise and thematic focus, and helps in sourcing new transactions. And I think that will be a huge benefit as we look to scale our Transition Infrastructure platform."?

In Other News & Views...

As usual, we also want to "circle back" to share other recent insights from our ecosystem, senior leaders, and investing professionals that you might have missed.

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