Bill Gates-backed Breakthrough fund targets third $1bn capital raising

The Breakthrough Energy Ventures investment company backed by Bill Gates is aiming to raise another $1bn for its third and latest fund to take stakes in companies and technology tackling global warming.

Gates told the FT that Breakthrough was “in the process of raising fund three and that’s going very well”. The number of companies that Breakthrough Energy Ventures invested in would increase by some 40 per cent to about 140 holdings across sectors from energy to agriculture as a result.

“We have a little more than $1bn in funds one and two, and fund three will be about the same size. And then we will do some other funds that are more for follow-on type things,” he said.

The first fund, which closed with about $1bn, drew an array of fellow billionaires, while the second fund closed with $1.25bn in 2021. The group also has a $100mn Europe-focused fund. The Breakthrough board and investors include Mukesh Ambani, Jeff Bezos, Reid Hoffman and Sir Chris Hohn.

While the earlier funds were raised when interest rates were low, the opportunistic third fund comes at a time when venture capital for start-up companies is challenged by rising interest rates and economic uncertainty.

“Some will go away so you can subtract [from that 140],” he said, because some companies “will not succeed or some will not work at all”, though Breakthrough had a low failure rate across the portfolio, he added.

“We closed [about] 15 per cent of the things we’ve invested in. A lot of these [that failed] are companies we’ve founded . . . we have theories where there are no companies, and we’ve created a bunch of companies [to test the theories].”

Breakthrough investments include US green hydrogen electrolyser producer ElectricHydrogen, Arkea Bio, which is working on reducing methane from livestock, green cement maker Solidia, and Fleetzero, which focuses on battery technology for cargo shipping.

For everything you can, you want to solve it by never generating the carbon dioxide

While Gates is a well-known and avowed advocate of technology to address climate change, he has also long been sceptical about the use of carbon capture and storage (CCS) as a wider solution to limiting the greenhouse gases produced by the burning of fossil fuels for energy.

The technology is being promoted by the coal, oil and gas industry as a way to continue operating for decades to come.

But CCS was unlikely to be economically viable for mass-scale use in the long term, Gates maintained. “It’s kind of a brute force solution,” he said. “It always costs money.”

“You eventually want to get to the point where you’re willing to tax any emission activity at the marginal cost of capture and then actually spend it on capture. That’s the way you get to zero [emissions],” he said.

“But for most cases, you should use an alternative technique rather than emitting and then paying for capturing,” he said. “For everything you can, you want to solve it by never generating the carbon dioxide.”

Reflecting what he sees as the residual role for carbon removal technologies, however, the Breakthrough funds are investors in direct air capture start-ups.

While oil and gas producing countries such as Saudi Arabia have pushed for the inclusion of the capture of emissions as a factor in global climate change agreements, Gates said: “They are not doing any CCS [at scale], they’re not funding the companies that work on CCS.”

In any case, the world would miss its near-term goals on cutting greenhouse gases by almost half by 2030 to limit global warming to 1.5C since pre-industrial times. It required innovative companies to address the challenges of cutting emissions in difficult sectors from steel to cement, he said.

“Innovation is how you square the circle.”

Climate Capital

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