Fund focus: Al Gore's Generation Investment Management

TL;DR

• Al Gore has an impressive environmental track record, both within and outside of politics. As a Congressman, Senator, and Vice President of the US, he led spearheaded initiatives to combat the climate crisis. He has also been awarded the Nobel Peace Prize and two Oscars for his documentary film, An Inconvenient Truth.  

• He is also the co-founder of Generation Investment Management, a pure-play sustainable investment firm that hopes to demonstrate long-term financial returns can come from companies that prioritise system positive operations.  

• Its portfolio includes tech platforms and sustainable retailers such as Asana, Gusto, Back Market, and Vestiaire Collective.  

• Results so far are promising; the portfolio has seen a 98% decrease in carbon emissions year-on-year and 54% of companies the fund invests in have adopted AI best practices.  

• Generation Investment Management has also recently launched a firm – Just Climate – focused on investing in companies tackling carbon emissions in agriculture and become the owner of 13% of the Octopus Energy Group.  

The detail

Vice President, Nobel Prize winner, bestselling author, Oscar winner – Al Gore is a man of many talents.  

The Tennessee native has been a leading figure in US politics since he was first elected to Congress in 1976 and has been one of the most prominent environmental voices for more than 40 years. A gifted communicator, Gore has been praised for his ability to inspire people from every sector of society to unite against climate change.  

The former Vice President first became interested in climate change as an undergraduate at Harvard University. It was a class by Roger Revelle – a climate scientist who Gore describes as a “genius, a legend” – that provided the turning point, and Gore credits this masterful teacher for igniting his lifelong passion for all things environmental.  

Gore had an illustrious career in politics. After serving two terms in Congress, he joined the Senate in 1984 before becoming the 42^nd Vice President alongside President Bill Clinton in 1993. Throughout his time in office, he sought opportunities to speak out about the climate crisis and champion potential solutions. For instance, Gore organised the first hearing on man-made global warming in 1981, led the US Senate delegation to the Earth Summit (the United Nations Conference on Environment and Development) in 1992, and played a part in establishing the UN Framework Convention on Climate Change.  

Bringing the climate crisis to the Capitol  

During those eight years as Vice President, Gore also spearheaded several US government climate-related initiatives.  

He encouraged the development of low-carbon technologies through the Climate Change Initiative, introduced the Partnership for a New Generation of Vehicles to find replacements for the internal combustion engine, and established the GLOBE programme, which continues to promote environment awareness among school children across America.   

Gore also found ways to illuminate the climate agenda through the arts. In 2007, he co-founded Live Earth, a series of concerts featuring 150 world famous acts who performed across seven continents to reach over two billion people in 20 different countries. The author of two New York Times best-selling books – An Inconvenient Truth and The Assault on Reason – Gore then became an Oscar winner when the documentary inspired by the former won two Academy Awards in 2006.  

However, arguably the pinnacle of his environmental activism was when he won the Nobel Peace Prize in 2007. This accolade recognised Gore for his tireless campaigning to put the climate crisis on the political agenda, how he built up and disseminated knowledge about man-made climate change, and how he laid the foundations for the measures that are needed to counteract such forces.  

Environmental education and investment 

Since leaving politics, Gore has founded two organisations; one dedicated to promoting climate crisis education and another that invests in sustainable solutions.  

In 2005, he became the founder and chairman of The Climate Reality Project, a non-profit dedicated to raising awareness of the climate crisis through grassroots leadership training, global media events, digital communications and campaigns.  

It is a cause close to Gore’s heart: “The greatest need is for more grassroots advocates because the most persuasive advocates are those in your own community,” he said in an interview with USA TODAY. Trainees involved in the project include individuals like Taylor Francis, who undertook his training in 2006 at aged 13 and now heads up Watershed, a platform designed to help companies measure, report, and reduce their carbon emissions.  

Gore is also the founding partner and chairman of Generation Investment Management (Generation IM). Established by Gore and co-founder David Blood in 2004, Generation IM now has offices in both London and San Francisco and boasts a 90-person team that represents more than 20 countries and manages $27 billion in public and private equity. A pure-play sustainable investment management firm, Generation IM invests in growth-stage, private companies with proven technology and commercial traction that are committed to generating a positive impact.  

Investing in a sustainable future 

Generation IM’s overall aim is to deliver long-term, attractive, risk-adjusted investment returns that contribute to creating a sustainable world – whereby prosperity is shared broadly, and society achieves wellbeing for all, protects nature and preserves a habitable climate. The organisation acts as active minority investors in companies on the right side of the structural social and economic changes already underway, a trait that Gore calls, “system positive”.  

It's not simply about driving change directly through Generation IM. By moving away from magnates who are “better at capturing politicians than they are at capturing emissions”, the company hopes to advocate for the adoption of sustainable investing by the wider market.  

For instance, it is committed to aligning the investment portfolios it manages with net-zero emissions by 2040, does not invest in fossil fuel companies or fossil fuel-fired power, and tailors its operations to minimise its carbon footprint and use of environmental resources through informed sourcing decisions and carbon offset, as well as behavioural strategies.  

Generation IM has also worked with its peers and partners to help establish the Net Zero Asset Managers initiative and is a founding member of Finance Sector Deforestation Action (DSFA). By setting a strong example within the investment community, it hopes to demonstrate that the interest of shareholders will be best served by companies that strategically manage their economic, social and environmental performance in unison.  

A portfolio for positive change 

Generation IM has invested in the likes of DocuSign, Ocado, Nest and Proterra in past, with its current investments ranging from Asana and Back Market to Gusto and Vestiaire Collective. Each of these enterprises is managed by mission-driven founders who are seeking to operate in a system positive way.  

Asana is a project management tool that is aiming to change how global businesses collaborate and is leading the market in the field of collaborative work management. Generation IM was part of a $50 million Series E investment round in November 2018 that valued Asana at $1.5 billion.  

Gusto is a similar tech platform that raised $200 million to help small business owners and operators to onboard their employees, pay them, provide health insurance and support their teams via one integration solution. Generation IM sees this platform as one that “has the potential to balance the disparity in benefits access and sets a new industry model for what total compensation can look like for employees of companies of all sizes.”  

While Asana and Gusto look to improve employment, Back Market and Vestiaire Collective are aiming to enhance sustainability in the tech and fashion industries.  

Back Market is the world’s leading dedicated refurbished electronics marketplace and has five million customers globally. Generation IM was part of its $335 million Series D funding round in May 2021, putting its value at $3.2 billion. With 1,500 sellers using the platform, Back Market is committed to making it easier, safer, and more affordable to buy refurbished goods and reduce the 50 million tonnes of electronic waste generated each year.   

Vestiaire Collective, meanwhile, engaged Generation IM in its September 2021 funding round of $210 million, value the business at $1.7 billion. A certified B Corp, Vestiaire Collective specialises in pre-loved fashion and aims to steer the luxury end of the market towards a more sustainable future by moving consumers towards higher quality, longer lasting pre-loved fashion. The total greenhouse gas emissions generated by textiles production exceeds emissions from all international flights and maritime ships combined – it’s a stark statistic, but one which Vestiaire Collective is hoping to reverse. Between 2020 and 2021, the company’s orderbook grew by 90%.  

A notable legacy 

As it approaches its 20^th anniversary, Generation IM’s investments have delivered impressive environmental and social results to date.  

Overall, the portfolio emitted just over 206k CO2 in 2023, down from 604k in 2022. Back Market avoided 22% more CO2 in 2023 than 2022 and has increased the amount of environmental waste avoided from 1.29k to 1.51k. Vestiaire Collective has also cut its CO2 by 10% year-on-year and 79% of customers substituted items with pre-loved pieces that they would’ve purchased brand new otherwise.  

In terms of health and wellbeing, Generation IM’s investment in Elation Health has reduced users’ levels of stress and burnout by 45%, 46% of individuals using the Andela software engineering recruitment platform have reported higher earnings, and 98% of those using Gusto have reported that it has had a positive impact on their business. Generation IM has also reacted to emerging trends in technology by introducing a pioneering set of Responsible AI Commitments – already, 54% of its portfolio already has policies or processes in place to ensure AI is used appropriately.  

Looking ahead, Generation IM - and Al Gore personally - will continue to be proactive and invest in companies that are aligned with their mission.  

In September 2023, the company founded Just Climate, a climate-focused investor looking to scale companies which address carbon emissions avoidance and carbon sequestration in agriculture. It focuses its efforts on the highest climate impact solutions including companies promoting precision agriculture through efficient or less carbon-intensive agricultural tools and food production practices.  

The company also announced a substantial investment in Octopus Energy Group to help it increase its profile in the US. Following an initial investment of £608 million in 2021, it was announced in May 2024 that Generation IM secured new backing from pension funds in the US and Australia – now, it owns 13% of the $9 billion valued company.  

As we approach another US election and 2050 draws ever-closer, funds such as Generation IM will be pivotal in proving that sustainability and profitability don’t need to be in opposition with one another.  

Companies transforming legacy industries like fashion and tech are operating alongside platforms that are redefining the future of employment and preparing the world for new ways of working. Despite the challenges climate change is bringing, there is a way forward that can benefit both the planet and investors’ pockets – and it needs to be adopted quickly. As Al Gore puts it, “we don’t have time to be depressed about it, you just got to keep fighting.” 

 — Lew 👋

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