Catalytic Capital: Investing for Performance, Purpose, and Planet | Asia Summit 2024

Market Context & Climate Economics:

• Public market investments in the energy transition face headwinds from tariffs and protectionist measures, while many private projects remain uninvestable.
• One estimate projects climate-related damages will cost at least $38 trillion annually by 2050.
• The global annual climate finance requirement is estimated at $4.5 trillion by the mid-2030s, compared to approximately $1.5 billion in philanthropic finance available by end-2022, creating a significant funding gap.
• The World Economic Forum co-published research estimating $5–11 trillion in incremental value-add investment opportunities in known decarbonization technologies by 2030.

Investment Philosophy & Return Expectations:

• Capricorn Investment Group (100% sustainability focus) invests in early-stage deep tech (e.g., Tesla, QuantumScape, battery storage) aiming for high returns, noting that large pension funds often seek single-digit returns with guaranteed cash flow, which stifles opportunities in higher-risk sectors.
• The GIC (Singapore) operates on a 20-year horizon, prioritizing real-world decarbonization over portfolio-level net zero targets, and believes companies managing sustainability factors well perform better long-term.
• Yusko Mizuno (ex-GPIF CIO, now MSCI advisor) states there is "absolutely no evidence" of a trade-off between ESG integration and financial performance, urging asset owners to shift capital toward businesses likely to succeed due to positive societal/planet impacts.
• Robert Schultz (Capricorn) declines to invest in standard renewable projects (e.g., German solar, US wind) where returns are too low (4–8%) for their model, arguing such infrastructure roles belong to foundations or large infrastructure players.

Catalytic Capital & Philanthropic Strategy:

• Rockefeller Foundation committed $1 billion over five years to climate issues, utilizing a mix of debt, equity, and grant-making to leverage private capital.
• Through the Global Energy Alliance for People and Planet, three foundations contributed $1.5 billion (including $500 million each from partners), successfully leveraging an additional $9 billion from development finance institutions.
• Specific leverage examples include:
  • A $30 million contribution by 12 philanthropic institutions leveraged $300 million in the "Sustainable Access" health sector initiative.
  • A $30 million joint fund with MacArthur Foundation leveraged $1.2 billion via the "Zero Gap Fund."
• The foundation addresses private sector needs in emerging markets by providing debt financing, policy framework advocacy, and revenue guarantee mechanisms to de-risk investments in mini-grids and renewable energy for poor communities.

GIC's "Green Assets Program" & Bridge Capital:

• GIC launched a "Green Assets Program" to address the "valley of death" where technologies have moved past VC stages but require capital larger than private equity can provide yet carry more tech risk than traditional infrastructure.
• A key investment example is H2 Green Steel (now Stregga), targeting scalable, low-emission steel production by replacing coal with hydrogen.
• GIC has established dedicated portfolios including a Climate Opportunities Fund (pure-play solutions), Climate Transition Fund (transition-ready companies), and a Sustainable Solutions Fund for private equity.

Geopolitical Risks & Regulatory Landscape:

• Robert Schultz warns against business models relying heavily on government incentives like the US Inflation Reduction Act, stating success must be sustainable long-term independent of policy.
• Yusko Mizuno identifies the US-China relationship and the expansion of "national security" concepts to green technology supply chains (EVs, batteries) as the primary 2025 risk, noting that decoupling China threatens green infrastructure development.
• Mizuno highlights that many large asset owners use benchmarks (e.g., S&P 500) that do not align with their sustainability strategies, creating a governance gap that requires trustee-level intervention to change.
• Deepali Khanna notes that while mitigation finance exists, adaptation finance remains critically underfunded.

Risk Management & Adaptation:

• GIC has deployed climate scenario analysis, carbon transitional risk valuation tools, and physical risk tools for real assets to identify stranded assets and opportunities in adaptation (e.g., HVAC, cooling roofs, sea walls).
• Rockefeller Foundation is developing climate risk tools with the Coalition for Disaster Resilient Infrastructure to help public sector entities (e.g., Reserve Bank of India) better allocate public finances.
• The panel emphasizes that capacity building in the public sector is as critical as capital injection to ensure effective policy sequencing.

Forward-Looking Opportunities & Innovations:

• Robert Schultz identifies nuclear fusion and the voluntary carbon market (VCM) as critical for achieving net zero, despite market volatility.
• Emily Qu (GIC) points to grid modernization, critical mineral supply chains, and energy/water-efficient data centers as immediate investment priorities.
• Yusko Mizuno predicts a paradigm shift in demand for electric vehicles, citing the visibility of electric motorcycles at the Paris Olympics as a signal of consumer acceptance.
• Deepali Khanna advocates for scalable public-private-philanthropic dialogue and partnerships as the necessary financial innovation to address the climate crisis at speed.