A trillion-dollar fund manager on climate investing in 2025
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Security is your job, and it's theirs too. With Microsoft Security, you have a partner that helps your business move forward confidently. To learn more, visit microsoft.com slash CISO. That's microsoft.com slash C-I-S-O. Welcome to Xero. I am Akshat Rati. This week, climate investing in the Trump era. Things are getting a bit uncertain out there.

Tariffs go up, then they come down. Policy gets announced, then it gets scrapped. The whole world is working out how to exist in this new era of policy determined by US President Donald Trump via social media posts. What is not uncertain though, is the need for climate solutions and the need for money to implement those solutions.

So today we're talking to a climate investor, someone who has to make those decisions here and now about which companies and technologies to invest in. Greg Wasserman has been investing in climate companies for nearly 20 years. He began his career working at Goldman Sachs, then became the head of the Global Solar Initiative at the Clinton Foundation, and spent eight years after that as a partner at Al Gore's Generation Investment Management.

He now leads the private company climate investment team at Wellington Management, investing in companies that are not yet publicly listed. Wellington has well over $1 trillion of assets under management. So I asked him, is 2025 a good time for investing in climate-focused companies? Where are the climate innovations happening? And how should investors think about handling growing market uncertainties?

Also, we are recording this interview on May 12th, Monday afternoon London time. Worth noting because the news has been changing quite rapidly these days. Greg, welcome to the show. Good to see you. Appreciate being here. So you've been investing in climate since 2006, almost 20 years, and you've been at many places doing this. So thinking about today and what has changed over the last 20 years, what have you been

How do you think the space has evolved? And what is your thesis for choosing the right companies to invest in? Yeah, it's definitely been a big evolution in the time that I've been invested across the space. And I really think there's been a couple of key changes. One is when I first started investing back in 2006,

Most climate-related technologies were really expensive. This was early days of solar, early days of wind. People weren't even talking about some of the AI or resilience or connectivity solutions we have today, and so everything was just really expensive. And so at that time, it was all about you have these emerging technologies that we think can play a role and be green. They're very expensive, and we need government support to get down the cost curve and get them deployed.

And everything was really built around some version of that. Government support to get things going or dependence on willingness of people to pay a green premium, right? So either I want green, I'm willing to pay more for it, or I want to be green and I'm willing to accept a worse solution, right? If you think about early days of green cars or early days of, you know, plant-based foods and things like that that were just worse, green laundry deterrent that didn't clean, people were just willing to take that to be green.

And so I think if you roll forward to today, there's just been a massive technological shift where R&D and innovation has just gotten things to where the performance is much better and the cost is much cheaper. And so that's really flipped that equation on its head where, you know, many times the green solution is now better. And, you know, electric vehicles is kind of the obvious, clearest example of that. And so I think you see that dynamic playing across a lot of technologies that we see.

Then if I think about the market for capital, right, I'm obviously investing kind of growth equity and private capital out there. And I think the market there has really evolved as well, you know, pretty substantially. If you look back 20 years ago, you know,

There were a number of green funds out there that focused on climate change that were basically all venture capital funds that were doing asset-heavy deals that VC funds really shouldn't have been doing, but that was the one pocket of green capital that's out there. And then if you roll forward to how the markets evolved today, there's so much segmentation that's come out where you now have early-stage VC, growth-stage VC. You have buyout. You have private equity. You have infrastructure finance.

You have sector specialists, you have people that do deep tech, people that do digital, everything in between. And so there's just much more of a segmentation in the capital that's out there, which really lets you find a better match between the capital and the risk that it wants to take and the returns that it's seeking. And so there's just way more capital out there to finance things. And so I think that's a pretty important evolution that's happened recently.

Yeah, my colleagues here at Bloomberg and EF have found that 2024 saw $2.1 trillion invested in the energy transition. And anything that starts with a trillion, you can bet that there's a lot of specialization and a lot of variety in the way people invest. And the other thing they recently wrote a note about was...

At least in power generation, now there are places in the world where running existing fossil fuel power plants is more expensive than building clean energy projects. Not true everywhere, but it is starting to become truer. And so now there is, in fact, a brown premium to running things on fossil fuels. So it's been quite the change. But let's just situate ourselves in your current role. So Wellington has more than $1 trillion under management.

How much of that investment is climate-oriented, and how big is your portfolio specifically, both in money terms and the number of companies you've invested in? Right. We have billions of dollars in our climate platform, and it really spreads across the public space and the private space. So we have a number of public funds that are focused on climate, either dedicated strategies or just energy investment vehicles that also focus on climate.

We have a dedicated strategy that focuses on climate adaptation on the public side. And then I'm really focused on the private side, on companies that are doing growth stage deployment of technologies out in the space. And so across the firm, we just have a nice pool of capital that can really cover the space pretty broadly.

And what is the rough average size of an investment that you make into companies? What stage are they at? Sort of growth means what for those companies? We really look for companies that are in commercial revenue and scaling. And so not developing their technology and making sure it works, not deploying it to their first customers and getting through some pilots and proving that people buy it, but really one or two steps past that.

And so these are companies that have at least 5 million of revenue. The average across our portfolio tends to be more like 20. You know, they're generally doubling every year. So these are pretty high growth. The stage of company we look at is usually in the series B, series C, series D, if you sort of use venture and growth terms. And we're investing checks.

We can do anywhere from 10 up to 40 million, just depending on the situation. Could you give examples of some of those companies just so people might get a sense of how you are investing and where you're investing and what type of companies these are? Yeah, sure. We're invested in a company called Span that's focused on residential electrification and enabling that with a smarter software-enabled circuit breaker panel.

TS Conductor, which has a next-generation transmission conductor for more efficient and higher capacity transmission build. A company called Irenia that is focused on data analytics for energy transition project developers, all the way through to a number of companies focused on the manufacturing side. AssetWatch that's focused on a hardware-software solution that

monitors equipment to make sure it's operating efficiently and prevents breakdowns. There's a number of others, but it's really quite broad. I think a theme across everything is we look for companies that are either addressing the underlying cause of climate change in the form of carbon emissions and what are things that help reduce emissions. And then we also look at the effects of climate change in extreme weather.

and just say, how can we become more resilient to fire, storm, drought, flood, water shortages, everything that's happening across the board. A little bit different than a lot of other climate investors out there.

We tend to focus a bit more on asset-light digital solutions versus deep tech science-heavy solutions. What are enablers to do things better, faster, cheaper versus looking for big scientific breakthroughs? What does success look like? Of course, you're an investor, so you're going to look for returns, but returns from private companies can be harder to get as an investor. And beyond the return side, are there other metrics on emissions, et cetera, that you count as part of your success? Yeah.

obviously returns is the key one you know very importantly

a climate strategy. There's no reason that climate strategy should have returns that's any different than best-in-class other comparable asset classes just because you're investing in climate, and so it's really about that opportunity. That comes from investing in great founders that have a great idea and can get that to market and build scale and get an exit, you know, either through an acquisition or through the public markets. And then we track the impact that these companies have. And so,

for it to fit a climate strategy, like I said before, it has to either reduce emissions or it has to build resilience to extreme weather. And so we actually track for each company, how do they do that? And that could be anything from this company sells widgets and each widget helps reduce CO2 emissions. And we can track that, you know, all the way through to if you are giving investors and energy transition assets access to better data so they can make smarter decisions.

you know how many people are out there how many investors are out there that now have access to smarter decision making information or um you know how many assets have been built on that platform using that tech it's really just a broad range of metrics like that that are important to

So let's come to the investment environment for climate companies right now, which has become more complicated. I mean, you're right that it's evolved over the last 20 years, but the evolution has been either perhaps been too rapid in the past few months, given where policies had it, especially in the U.S.,

So we've had this backlash against ESG, which started even before Donald Trump was elected. How are you feeling the ESG backlash? I think it really depends. And I think that we feel like there's, you know, there's huge opportunity right now. And if I take your question in a couple pieces, so one is the first one that you're calling ESG backlash. That's obviously been happening, you know, as we've seen in the last few months. I think it's largely misunderstood. I think ESG generally is misunderstood because ESG

The way that some people implement it is about checking boxes and hitting quotas and things like that. But that's not what real ESG is. ESG is all about identifying risks and opportunities and making sure that you're minimizing or maximizing those, ultimately with the goal around investment returns. And so on the S side of ESG on social, we look at that and think it's all about

company culture, right? Making sure that you are taking surveys of your companies and making sure that you know any problems coming up in the culture because that's all about employee retention, which is all about driving value for the company. You know, the E piece is all about opportunity around the environment, which is

translates perfectly to value generating opportunities. G in governance is all about making sure you don't have many of these blow-ups that we've seen where people have no boards and there's been poor oversight and it's led to management teams making really poor decisions and there hasn't been proper governance around that or ability to exit. And so we really think about it through that lens. So it's much more about generating value than ticking boxes. And so I think the opportunity there is just as real and just as needed as it's ever been.

And then if I think about the opportunity for climate investing, there's a lot of different approaches to how you can invest around climate. I think our approach skews towards the end that's much more insulated from policy and regulation.

in the sense that everything we look at, you know, we generally look for solutions that deliver a value proposition. It's not just green. This is kind of what we were talking about before. And so the buying decision of the customer, whoever the end buyer is,

is not based on green or green premium. It's not based on saving carbon, but it's about value. This is saving me money. It's solving a pain point. It's reducing waste, you know, which translates back to money, or it's giving me access to power that I don't have access to. And so we really look for those opportunities. And I think in this market, that opportunity set really hasn't changed.

Obviously, for people that invest in things that were heavily dependent on DOE loan programs and, you know, high incentives for hydrogen or high carbon prices for carbon capture, you

It's more complicated right now, but that's not where we focus because those are a bit more on the green premium sort of end. And then I think with the whole opportunity around resilience, right, and just resilience to extreme weather, that only becomes stronger in this current environment if you see U.S. leadership pulling back a bit on this issue. One of the things I love to say about climate change is the reality is climate change doesn't care about politics, right? Wildfires and storms and floods are happening more often than

They don't care if it's Republican or Democrat. And the need to build resilience and adapt and survive through those doesn't matter if people are Democrats or Republicans. If you have fires, it doesn't even matter if you think that fire is caused by climate change or not. Just reality is there's a fire and you have to deal with it. And so the need for resilience is just as strong and I think only getting stronger. And we think that's big opportunity set. On the S side,

One thing that's notable is Wellington is still proud about its diversity, equity and inclusion section. It's still there on its About Us page, something that we have seen many other companies in the U.S. actually pull back. Doesn't it worry you that it might become a target for the Trump administration? Yeah.

Yeah, I in my role, I tend to ignore that noise and just really focus on my role investing around climate. And I'm proud to be a Wellington and value our approach, which is all about generating value for our companies and ultimately delivering investment returns.

How do you weigh the uncertainty that Trumpian policies bring into investment decisions? You talked a little bit about the fact that you're not investing based on policy and regulations. You're not reliant on tax credits from the government. But it does create an environment that makes it difficult to, say, get a co-investor in a project or get the companies that are classed as climate companies find people

customers. So how exactly do you deal with uncertainty in that instant as an investor? It's definitely complicated and it's very situation specific, I would say. If I think about the pockets of uncertainty right now, everyone talks about the Inflation Reduction Act and where that's going to end up as part of the tax package. We really care about something like solar and where solar ends up.

We don't think as much about, you know, the hydrogen side or the carbon capture side or wind. We don't really, you know, we don't really invest much around wind. And so for us, related to the IRA, it's very much about solar. And I think that in a lot of ways, regardless of what happens with the IRA, solar will still be a very key and growing part of the energy environment. Tariffs is the other big uncertainty where I think there's two different levels to think about it. One is inflation.

Any company either we're invested in or we're looking at being invested in, how are they directly impacted by tariffs? And so if they manufacture a product, where do they manufacture it? And do we have visibility onto what that tariff situation will be or not? Sometimes that's existential. Sometimes it's not. So you just have to look at that situation specific and just say, is the likely scenario cost maybe goes up a little bit if there is a tariff?

Or is it so much uncertainty that if the tariffs that are being discussed actually come into play, the product doesn't make any sense? And then the second one is just what is the underlying impact to different sectors that happen from tariffs? And so solar, a lot of solar equipment is subject to tariffs because a lot of it comes from, you know, there's a lot made here in the U.S., but a lot comes internationally.

And so you have to think about how costs go up if a lot of the components are tariffed. You also have to think about the cost of the competing technologies and how those go up. A lot of power equipment is also, even for traditionals, manufactured internationally. We also try to think through what are the opportunities to lean in around that. And so I mentioned before we're invested in a number of companies focused on manufacturing tech and manufacturing optimization and efficiency. If tariffs really come into play, there's huge opportunities there because there might be new shoring opportunities.

Anybody that has manufacturing capacity needs to get the most out of it. And so that's a big opportunity set. There's huge opportunities in supply chain tracking, right? If all of a sudden you need more options around who your suppliers are, you need to know where things are coming from. You need to know where your suppliers, suppliers, suppliers are coming from.

so that you know if you're secure or not. Supply chain visibility becomes really important. And there's just lots of interesting solutions around that that we think are pretty exciting. And we're talking on a day when tariffs in China went down from 145% to 30%. Just before I came in to record the interview, there was a comment from the Treasury Secretary Scott Besson saying that

They could go lower, but 10% is the baseline. So they could go below 30% and come down to 10%. If you look at tariffs and you said there's opportunity set that comes in, is there a particular sector that you're holding back on in investing given the uncertainty around tariffs right now? I don't know if I'd say we're holding back on anything. I think we're being thoughtful about how different tariffs might impact different spaces in different ways. And so, you know, I touched on something like solar.

If you look at, you know, storage and batteries is something that climate space talks about a lot. All of a sudden, a lot of the batteries and components come from China. And so what happens with where costs level out? And is there maybe a period of time where they go up a little bit before they keep coming back down? It's all about also looking at just supply chains and demand.

Our food ecosystem is heavily globalized. And so, you know, we actually have an investment in a company that tracks food supply chains and inventory levels. And all of this really makes inventory forecasting and monitoring, you know, even more important. There's puts and takes here, but we try to make sure we're being thoughtful about the risks and then being opportunistic where we see opportunities to lean in.

We'll be back with more of my conversation with Greg Wasserman after this short break. And hey, if you're enjoying this episode, please rate and review the show on Apple Podcasts and Spotify. Your feedback really matters and helps new listeners discover the show. Thank you.

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Now, you mentioned a number of your companies and portfolio companies are digital. They're focused on software solutions. How has the development of AI changed your investment strategy? It's obviously been the biggest trend that everybody's talking about. And I think that it impacts everything we're looking at on a ton of different levels. So there's obviously the physical build of AI there.

and how that's affecting the energy space generally. And so there's been a huge explosion in data centers, data center load growth. If you look at the US, we've had flat load growth for a while. It's back picking up.

A lot of the projections talk about, you know, huge build for data centers over the next decade that translate to a lot of load growth. We do think there's some noise in the numbers because if you look at the pipeline of data centers versus what actually gets built, it's, I don't know if it's a third or a quarter, but there's a lot of duplication across the network. But the U.S. is in a position in the world where we're just, we're back to load growth.

And so that creates a ton of opportunity around new generation, right? Where's that new generation coming from? Solar and renewables have been the biggest source of new generation, and I think will continue to be so. You'll see fossil plants that had meant to be decommissioned coming back online or extending their life. You know, you've seen nuclear plants that were mothballed signing contracts to come back up. So I think there's just a lot happening with energy generation.

I also think there's an ongoing huge opportunity in the grid and how you make the grid more dynamic. And the data center and AI growth just keep driving that. You don't always have to have the grid size to meet demand. You can flex demand and move things up or down. You can shape the load profile with storage. You can actually do smart things with data center loads and AI loads. Some AI loads are time sensitive. Some are not.

And so, you know, orchestration software that determines, well, this needs to run right now versus this can run at three in the morning and just schedule things when they make sense. That's sort of one window on AI.

You know, I think there's a second one around just targeted use cases of applying AI to solving climate that are really huge. In particular, I think some of the things we're seeing on resilience, just smarter response to climate change and climate

better planning, better response in the moment. I can give a lot of opportunities around that, but there's just, there's a lot happening. Yeah. Can you give me examples of companies that you find are using AI to try and deal with climate change? Yeah. If you think about the effects of climate change, so extreme weather, some of that is longer term trends, right? Just certain areas are going to be more prone to

Occasional flooding over time, there'll be warmer over time. Some of that's much more acute. There's a storm that's barreling down on us right now, like what do we do? And I think AI can play huge opportunities across all that, in particular on the more acute side, where something major is happening and you need to get whatever data you can to figure out what you think will happen.

And then make a decision based on that, right? And so, you know, if you are a town manager, somebody needs to decide, do we issue an evacuation order or not? You could decide that just based on what the storm's telling you, like, is it going to hit or not? And do we issue that?

When do you issue that? You might want to take traffic analysis into that, right? Depending on what time, how early or late you issue it, traffic may be worse or better and give more people time versus sitting in traffic jams. When you think about in the moment, there's a wildfire happening, there's a storm happening, people call 911, 911 call centers get overloaded, people call their utility that there's power lines out and utility call centers get overloaded. And so if you can have layers of AI that can help

Take those calls, analyze those calls, pull in other situational data, right? Because it's not just the person calling saying something's happening, but you have news reports, you have data, you have cameras, you have sensors. There's a ton of information. And so if you can have smarter situational awareness that the 911 responder or the firefighter on the ground that's battling the fire, you can give them better information to make smarter decisions on what to do. You can just become more resilient, you know, especially in moments like that where you're

human emotion gets in the way of reasonable judgment in times of stress, you know, which obviously is critical and things like that. We even see things like that on the corporate side where, you know, there's a storm happening and you're an airline. Should you cancel the flights or not? Should you reroute the planes or not? You know, historically, there's people that sit there that are meteorologists inside the airlines that look at the data and best guess and

You can now have AI that can give a smart recommendation. You know, here's what I would do. You still have people make the decision on whether you do that or not. But there's just so many interesting layers of that across how you can build resilience. Is that something that's already being implemented by companies or are these just ideas that are coming across your table? Yeah, 100%. We've seen, you know, we've seen companies focused on AI for 911 call centers. We've seen companies focused on AI for utility call centers, right?

We've seen companies that sell AI to use cameras to track

look out in fields and monitor for fires starting so you can see there's maybe a little bit of smoke and that I think that might be a fire and go put that out before that happens. We're even seeing it used in greenhouses where you can monitor how plants grow under different circumstances and therefore as weather changes you actually know how specific plants will respond to different types of heat and water stress and you can better tailor the nutrients that go to them or other ways to manage that. And

And then a lot of people don't think about this necessarily as a resilience angle, but insurance is a really big one. You have these dynamics where people can't insure their house in California because of the wildfire risk or insurers pulling out of Florida because of the flood risk. And a lot of that is just because it's hard to price specific property risk. And so they just look at the whole area.

And reality is, you know, this house might be very different than the house next door or the risk, depending on what mitigation efforts they have or not. Some of this needs regulatory change because you can't necessarily price insurance policies based on some of this, but I think that's coming. And so just smarter insurance is part of resilience because it's financial protection for you. Beyond AI.

AI, are there other areas of technology that excite you most right now? It's really broad across the board. We look at all of the themes that we care about, and we spend a lot of time thinking about enablers and just ways that you can take what's already working and do it better, faster, cheaper. And so there's just tons of opportunities with that. Again, if you think about people building energy transition projects,

You mentioned the trillion-dollar number before of investment that's happened in the climate space. A lot of that's infrastructure, right? People building major solar projects and utility-scale solar battery storage projects and things like that. What's the data and tools and software platforms that just make them invest better, faster, cheaper, and manage the assets better? And that's anything from data that goes into their modeling on the projects to

That goes into construction tech. It goes into robotics to automate some of it, all the way through to, you know, drones that can monitor plants once they're built and make sure they're operating efficiently. And some of the drones can even do repairs. So that's one huge opportunity. And then we really look at broad themes around technology.

labor challenges and how that translates to opportunities around automation and robotics and where those intersect with climate benefits, just because a lot of times automated solutions are more efficient than humans.

That could be on the agriculture side, that could be in the industrial side, and just smarter supply chains. You know, I touched on that a bit before, but we're just seeing tons of opportunity with food supply chain, industrial supply chain, that we have to look for the climate angle. So a lot of that's around reduced waste and more just in time. But all that translates to the current environment of navigating shocks, which could be climate shocks, but it could also be tariff shocks.

At Bloomberg Green, we've launched a series this year that looks at the bottlenecks that are holding back electrification of the economy. Now, things that are beyond the obvious stuff, so not permitting reform or high interest rates, which are issues that slow down electrification.

But the less obvious stuff. So the first story was looking at the shortage of transformers. We've got a few future stories coming up. But from your perspective, what kind of unusual bottlenecks to electrification are you seeing? I mentioned one of our companies before Span that sells a software-enabled circuit breaker panel. A huge, unappreciated bottleneck for electrification is when you take your house,

And you start adding an EV charger. You know, you didn't power your car from your house before. You do now because you add an EV charger. You add a heat pump instead of a gas furnace. And so that's now electric-powered versus gas-powered. You do the same thing on the hot water side. You get an electric hot water heater instead of a gas hot water heater. People are doing induction stoves. All that stuff's great for electrification. These are great technologies that are better user experience. They all use more electricity than the thing they're replacing.

And so all of a sudden the power supply into your house is a chokehold. And so one way to solve that is get more power into your house. So grip up the yard and add a second panel and have the utility run more lines. The other is just be smart about when things are running in your house and better utilize the power in that you currently have.

And so our portfolio company, Span, is really focused on that. So I think that's a huge one around just avoiding the need to build more transformers and substations and capacity and grid build out, just better utilize what you have. There's even random stuff like there's been a well-published shortage of electricians. Google just the other day actually announced they were going to start training electricians. But we've seen platforms that come up that are focused on software for training electricians.

We've even seen some interesting Gen AI platforms popping up around, if you think about electricians work, some of it's designing the system, some of it's installing the system.

If there's a shortage out there of people and you say, well, can Gen AI do a better job of designing the system automatically and therefore the electrician can spend more time actually installing it, you can solve some of the bottleneck that way. And so we see a lot of interesting things like that that we think are quite exciting in early days of just getting to market but are pretty disruptive.

Well, you almost guessed the second story that's not yet been published, but that's going to look at the shortage of skilled workers. So it's a real shortage that I've heard so many people in the industry talk about. Now, another thing that sort of, I would say, among left and right and in agreement, that there is perhaps regulation that is coming in the way of helping the energy transition in some places or helping electrification in other places. If you had the power to get rid of one legislation and add another one, what would you do?

The one that I would get rid of would be permitting restrictions. It takes so long to build things. Transmission is something we think about a lot. It takes forever to build transmission, but even just anything, right? You know, we were talking about electrification before. You know, somebody wants to upgrade their house. It might take months and months to get the permits. It might take six months to get a permit to install an EV charger if you need one. And so I think that

Reducing red tape around permitting, I think would be a really big one. And so that's probably what I would look to reduce. I'm definitely not one for adding regulation generally, but if I were, I would probably say that any construction decisions need to take into account the future of where you're building.

and making sure that it's resilient for what the future looks like. Now, that obviously can get quite complicated, but you might be putting a house somewhere today that is fine, but in 50 years, all the data says that it might be flooded. Instead of in 40 years from now, you're starting to see floods and you have to go install some remedial solutions.

Why not take into account just requirements that things should be resilient today? Things should be electric ready today. And that's probably another big one. Just buildings should be electric ready because it's disruptive to try to build that earlier. And so if I were to add a regulation, it would probably be around electric ready and resilient ready. Thank you, Greg. Thank you. Great to be here. Really enjoyed the discussion. Thank you for listening to Xero. And now for the sound of the week.

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This episode was produced by Oscar Boyd. Bloomberg's head of podcast is Sage Bauman and head of talk is Brendan Newnham. Our theme music is composed by Wonderly. Special thanks to Jessica Beck, Somersadi, Moses Andim and Amanda Coulson-Hurley. I'm Akshat Rati, back soon.