Promoting long-lasting environmental sustainability can be categorized into three strategies– one having to do with mitigation, another with adaptation, and the third with resilience. Mitigation involves offsetting the negative impacts of a changing climate by reducing greenhouse gas emissions and transitioning to renewable energy sources.
Adaptation means anticipating adverse effects of worsening and extreme weather events and taking action to prevent or minimize potential damage, such as building flood defenses or switching to drought-resistant crops. Resilience refers to an ecosystem’s ability to keep functioning despite environmental disturbances through transformation or restoration to its original condition.
A fund from The Lightsmith Group, a New York-based private equity firm, aims to address adaptation and resilience issues by investing in technology to combat the impact of floods, droughts, storms, and other ecological disruptions.
The Lightsmith Climate Resilience Partners fund launched with $186 million in financial backing. It will invest in growth-stage companies whose technologies are addressing ecological sustainability, which represents an estimated total addressable market of more than $170 billion.
The Lightsmith Group calls it the first private equity fund to focus exclusively on climate resilience and adaptation. The new fund will initially focus on six technology areas: water efficiency and smart water management, resilient food systems, agricultural analytics, geospatial intelligence, supply chain analytics, and catastrophe risk modeling and risk transfer.
“Climate resilience technologies are an overlooked, multi-billion dollar investment opportunity that will just keep growing,” Jay Koh, co-founder and managing director of The Lightsmith Group, said in a press release. “Increasing drought, agriculture stress, and supply chain disruption linked to climate change will drive demand for data and analytics to understand those risks and for the solutions to manage them.”
As of late January, the Lightsmith Climate Resilience fund had made investments in two startups: SOURCE Global, a water harvesting technology company with an off-grid solution to produce affordable drinking water from sunlight and air; and WayCool Foods, India-based agriculture, and food supply chain services company that applies physical automation and digital technology to reduce food wastage and improve farm output.
The Lightsmith Group originally planned to raise $250 million for the fund, Bloomberg reported. But the firm decided to wrap up fundraising early. The fund’s biggest investor is the UN’s Green Climate Fund (GCF). Other investors include the European Investment Bank, the German Agency for International Cooperation, the Nordic Development Fund, and PNC Financial Services Group.
Richard Kauffman, former chairman of Energy and Finance for New York State, will serve as chairman of the investment committee for the Lightsmith Climate Resilience fund.
“Lightsmith has brought together a team with a unique combination of experience in direct investment and climate change and has secured the commitment of leading global investors to invest in climate resilience,” Kauffman said in a press release.
The Lightsmith Group was co-founded in 2016 by Koh and Sanjay Wagle, the firm’s other managing director. On its website, Lightsmith says its mission is to pursue “superior financial returns along with measurable social and environmental impacts by investing in companies that address major societal needs.”
In addition to eyeing companies with attractive financial, growth, and market share metrics, The Lightsmith Group looks for those that either have or can put in place Environmental Social and Governance (ESG) processes and apply key performance indicators to assess their social and environmental impacts.
Koh has more than 20 years of experience in investing and public policy in both the public and private sectors. Before co-founding Lightsmith, he was a managing director and partner at Siguler Guff, a global alternative investment firm. He also worked at Overseas Private Investment Corporation, R3 Capital, and The Carlyle Group and served as a law clerk to U.S. Supreme Court Justice David H. Souter.
Wagle is another industry veteran, having built up more than 20 years of experience in investing, company management, and government focused on clean energy, resources, and climate. He previously worked at VantagePoint Capital Partners and the International Finance Corporation.