A group of international investors are planning to use Ivy League foundation strategies to create a climate endowment that they expect will grow to as large as €40 billion ($45.4 billion) in assets under management over the next 30 years.
The endowment is being launched by Berlin-based family office and impact investing adviser Wermuth Asset Management, along with Munich-based multi-family office AQAL.
The investors said the Climate Endowment will focus on the large scale rollout of sustainable and commercially viable technologies and business models that result in sustainable long-term investment returns, as well as a significant reduction in global CO2 emissions. They also said the endowment will invest in the “champions of the Green Industrial Revolution,” and aims to provide an attractive option for European Union pension funds and insurance companies to invest in.
“The shifting tide of public opinion on climate protection has reached a critical mass,” Jochen Wermuth, principal of Wermuth Asset Management, said in a statement. “I believe there has never been a better time than now for the investment community to step forward and initiate this change.”
The endowment will attempt to mimic the model for portfolio allocation and investment execution used by Yale and Harvard University endowments. In particular, it will follow the Ivy League schools’ lead in the use of alternative assets with a strong focus on illiquid and hard assets, such as infrastructure, real estate, and private equity. The fund will target the lower-risk return spectrum for the overall portfolio in order to offer conservative investors the opportunity to invest within their risk parameters.
The foundation will initially target infrastructure projects, such as the rollout of solar photovoltaics, new treatment technology for wastewater treatment plants, commercial scale solar roof programs, and the electrification of public transportation. It will invest directly at early project stages, which it said should result in a risk-adjusted diversified portfolio of private and public equities and debt spread across industries and geographies.
Key personnel working for the endowment include Wermuth, who is also an investment committee member of KenFo, Germany’s €24 billion nuclear waste storage financing vehicle; Markus Bodenmeier, co-founder of AQAL AG; and Patrick Horend, former member of the Global Special Situations unit at the Abu Dhabi Investment Council, a sovereign wealth fund.
Additionally, the endowment will be supported by a group of senior advisors that include Mats Andersen, former CEO of Swedish pension fund AP4, Stephen Blyth, former CEO of Harvard Management Co., and Philippe Defosses, former CEO of ERAFP, France’s largest pension fund.
The endowment will also seek to have relatively lower management costs with the help of direct investments made by an in-house team. It also aims to have a clear and transparent corporate governance and external impact verification, particularly in the reduction in CO2 emissions, which will be certified by an external consultant.
The endowment is slated to launch this fall and will be headquartered in Berlin.