Progress towards global climate goals will require more than reducing the use of plastic straws. Local investment firm North Sky Capital is pioneering the movement after making profitable investments in projects and businesses that have breached the Sustainable Development Goals.

The Wayzata-based company – which makes investments in sustainable infrastructure and also invests money in the impact side product market – has been operating quietly for years.

Now that environmental, social and governance (ESG) investing and impact investing have become mainstream, North Sky CEO Scott Barrington and his colleagues are more open to discussing their business.

A 2020 report from the US Sif Foundation found that by early 2020, the amount of assets under management under sustainable investment strategies had grown to $ 17.1 trillion, or one in three of the 51. $ 4 trillion in US assets under professional management.

Barrington was Director of Piper Jaffray Private Capital in 2004 and was looking for an investment direction. He found that some of the early work was underway in clean and green technologies, industrial process improvement, and alternative energy projects.

Barrington saw an “early innovation supercycle” underway that included the development of efficient electric cars, LED lights, biofuels and solar panels. He and his other portfolio managers were evangelizing this growing category of investment.

“We were telling people that this is a movement, that it is happening, that it is an investment trend and that you should get started early because there is a lot going to happen,” he said. Barrington said.

The sector went from 15 managers to 50 in 2005. A year later, it had 75 managers, then 300 in 2008, he said.

In 2006, Barrington and his group launched their first private equity fund while they were still at Piper. Prior to that, they mostly invested using a fund of funds approach. The group’s early successes included investments in the companies of Elon Musk, Tesla, Solar City and SpaceX.

For regulatory and strategic reasons, the team separated from Piper Jaffray through a management buyout to form North Sky Capital. The split was amicable and many of those Piper veterans are still with North Sky.

Now the group has two distinctive styles of sustainable infrastructure and secondary impact.

The company’s investments in sustainable infrastructure have focused on environmental infrastructure (energy recovery projects, water treatment, pollution control systems), clean energy (solar, wind, hydroelectric) and l ” efficiency and improvement of the electricity network (energy storage, transmission and optimization and stabilization of the network). .

“The biggest opportunity we see right now is in environmental infrastructure,” Barrington said, “particularly in renewable natural gas.”

A recent example of one such investment is the Golden Bear Project in Victorville, California, a project to transform methane from wastewater into renewable natural gas. The project captures methane from a wastewater treatment facility that was released into the atmosphere and converts it to pipeline grade natural gas that is sold to the local regulated gas utility.

The project, said North Sky, will prevent 6,000 metric tonnes of methane per year from being burned or released into the atmosphere while producing enough energy to power nearly 4,470 homes per year.

“The economics are really attractive,” Barrington said of the potential of the methane gas capture projects. “And from a market size perspective,… it seems almost nothing has been done in this regard so far. “

There are 16,000 wastewater treatment plants and 13,000 landfills in the United States and only 860 wastewater treatment plants and 550 landfills are connected to a gas capture / reuse system, Barrington said.

Being an industry pioneer who knew almost every early investor and fund manager gave North Sky a head start in developing its second strategy. In 2013, North Sky launched the first secondary impact fund of its kind.

With this fund, North Sky provides a variety of liquidity solutions to venture capital and private equity investors looking to exit multi-year commitments quickly.

“Usually they’re already part of a portfolio, and we come in five or six years after the portfolio starts and we buy out an existing investor’s stake in that portfolio,” Barrington said. “Or maybe we are layering fresh capital on a very mature portfolio.”

In terms of impact secondaries, North Sky is investing in four themes: clean technologies / climate technologies; sustainable food and agriculture; health care; and waste and water.

One of the clean / climate technology investments is in STEM, a California-based artificial intelligence-based energy storage company for industrial applications that recently went public.

It has also invested in Intellihot, a manufacturer of tankless hot water systems for residential and commercial applications; Zevia, a naturally occurring calorie-free sugar substitute; and Medable, a California-based company that is transforming the way medical trials are done.

Since 2006, North Sky has invested over $ 1 billion in new impact funds for clients including pension funds, endowments, foundations, family offices and certain qualified individual investors. It currently has $ 237 million invested through 57 investments in three active impact sub funds and $ 629 million invested through 33 investments in three active sustainable infrastructure funds.

Barrington could not say if any new funds are being considered, but the success and age of the current funds suggests there will be more. Not to mention that the recent Glasgow Climate Change Summit raised awareness that more aggressive action on climate change is needed around the world and that the new $ 1 trillion infrastructure bill of the President Biden is planning billions of dollars for clean energy, electric vehicles and other areas of sustainable infrastructure.

A recent Form D filing with the Securities and Exchange Commission also suggests that North Sky is in the early stages of a new $ 350 million sustainable infrastructure fund.

“We think we’ve got something that’s pretty unique, pretty special and we love to share it,” Barrington said of making funds accessible to clients.

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