By Abby Schultz

Arnold Ventures, the philanthropic vehicle for John Arnold -- a former hedge fund manager focused on trading energy products -- and his wife Laura, recently created what they call their mission-aligned portfolio to structure investments that support their philanthropy but aren't grants or market-rate-of-return vehicles.

Through Arnold Ventures, which as a limited liability corporation versus a foundation, has more latitude to engage in advocacy and other types of investing, the couple has supported what they call "evidence-based solutions," in criminal justice, health, higher education, infrastructure, and public finance.

With a career that began as an oil analyst for Enron, Arnold, 51, has long been interested in energy, too. Recently he was a key investor in a new type of investment vehicle called the All Aboard Fund that aims to finance fledgling energy technologies through the capital-intensive phase of proving commercial viability.

Barron's recently spoke with Arnold about mission-aligned investing and why a fund like All Aboard is needed. An edited version of the conversation follows.

Barron's: How does your focus on mission-aligned investments fill a niche?

We were seeing an increase in the number of deals that didn't fit cleanly into, 'give a grant and get back zero dollars,' nor into, 'make an investment and get market-rate or better returns.' There was kind of this messy middle of deals. We had started doing these -- sometimes they were loan guarantees or below-market loans to companies. Sometimes they were an equity investment that return-maximizing investors weren't doing, but that we thought had high societal value if the enterprise worked.

As we were starting to do more, there was a gap as to who handles them internally -- is this from the investment side or is it from the internal grant making teams? We wanted somebody with expertise to help the structuring and diligence of those types of opportunities we were seeing in the market. [Arnold Ventures hired Chris Chen, a former partner at the Gates Foundation's Strategic Investment Fund, to oversee its mission-aligned investments this past June.]

What's the difference between "impact investing" and what you're doing?

What we're trying to do is [determine] where are there deals that the private sector isn't funding. The impact investing space is almost trying to crowd into deals that are going to happen anyway and then telling a story about their societal impact.

We're really trying to think about what is the additionality to the investment [created] by our capital.

The impact-investing space has been plagued by too many people doing deals that were market rate and had some societal investment and were going to happen anyway. You can kind of tell a story about how almost anything has societal benefit. We're trying to think about where is the real additionality -- where we can prove a concept or derisk something.

Chris Chen focused on health issues at the Gates Foundation. Will that be useful to you?

There's a lot of investment capital in the healthcare space. We're trying to find areas we think are underinvested. You can think of generic-drug repurposing. There are some commercial rewards for doing that but it can be limited. Is there some revenue potential there, but not enough to attract true return-only investors into it?

There's a ton of money for general healthcare innovation. We're fairly specific about the opportunities we're looking for in health. Similar to what Gates did -- finding the areas where pharma didn't have the incentive to put R&D into it. How can [capital] crowd into these companies to start thinking about rare diseases or diseases that don't really affect the West. Then, how do you structure a deal to align incentives and do something that is going to create more investment into the space that wouldn't have happened otherwise.

How does the All Aboard Fund fit into your approach?

I've been interested in energy technology, energy innovation for some time. I was largely kind of an observer during what I'll call Clean Tech 1.0, which was roughly 2005 to 2010, when there was a wave of capital that came into the venture capital community trying to fund a lot of energy tech. A lot of those funds had mediocre returns at best.

Then you saw the price of oil and gas drop precipitously post the financial crisis. That space emptied out. There wasn't a lot of demand from limited partners or general partners in doing future funds. That coincided with a time when there started to be growing interest in climate solutions and alternative sources of energy.

Also, a lot of money that went into energy from the federal government through programs like ARPA-E [the U.S. Department of Energy's Advanced Research Projects Agency -- Energy] to fund energy tech, basic science, and some of the early commercializations, were starting to get to the end of the lab phase and transitioning to being companies and there wasn't much capital there.

At COP21 in Paris (in 2015) when Bill Gates tried to convince countries to invest more in the basic science of energy technology, the push back was that there was no capital, or little capital, to commercialize these technologies. He promised to start a venture capital fund. I was one of his first calls. He knew I was in energy and investments and had interest in this space. I helped start Breakthrough Energy Ventures with him [which today manages more than $5.5 billion in assets through several vehicles, although its Catalyst fund aimed at scaling up fledgling technologies recently stopped making new investments].

I was a lead director, helped hire the team, did all the processes and rules and structure of the fund. That was back in 2017. I served on the board for about five years. As it became a mature vehicle, I cycled off.

I've been interested in this space and where my capital could be most helpful. Just like in other areas of venture capital, you have these waves of boom and waves of bust in LP interest in energy tech in general as well as in specific solutions. I've had some insight into what was scalable and commercially competitive and viable. There are times when there is a lot of interest from outside capital in investing here and times when it's all kind of pulling back and there are interesting investments to be made.

And now a lot of capital seems to be pulling back?

There still seems to be a lot of capital in nuclear in both next generation fission and in fusion, and in other areas it's very much pulling back. It's a bit more nuanced today. I do think there's been a structural pullback over the last couple of years. From 2020 to 2022 there was a big wave of money that came into the field, just like there was in many other parts of venture investing. Feels like it's been more selective of late.

Why choose All Aboard as an investing vehicle for energy?

One of the challenges that companies have is going from pilot scale to the first commercial plant. You generally need equity dollars and the project finance markets aren't available during that phase. It's this time when companies are struggling because they need a lot of money. It can be $50 million to $1 billion-plus to build their first commercial plant and that money is very expensive for them. Figuring out how to build [a plant] with equity especially when returns for a first [facility] are generally the worst as you are trying to optimize the plant and get the learnings to figure out how to improve the economics for the second, third and fourth.

A number of companies that came out of Breakthrough Energy's portfolio [for example] have now reached that stage, where they need that growth-equity round to prove out what the economics of their technologies are at commercial scale. Many have had trouble trying to do that round. And so All Aboard is focused on that part of the capital stack and maturity of a company.

Do you see All Aboard as a way for family offices and other individual investors to participate in this growth-equity phase for climate tech?

It's a low cost way for investors. We kind of started with the premise that the diligence process on these companies is hard. One of the theories of building Breakthrough was that a reason Clean Tech 1.0 failed is the diligence phase wasn't strong enough.

There's a huge difference in diligence needed for a hard tech company versus a software solution. Who do you trust whenever you decide whether to invest in a hard tech company? And how many people need to be doing real diligence? One of the struggles for family offices looking at deals directly or even small funds, is how do you find and pay for the technical consultants to look at these and then how do you trust their work once you've done so?

What All Aboard is trying to do is leverage some of the most sophisticated investors in this space, and say if three of them have done the work, and we trust their process, then we'll co-invest. Utilizing that model can lead to a much lower cost structure for the limited partners.

Maybe the risk adjusted return is a little bit tight relative to other investments, the fact that there is a lot lower fee structure here [less than half that of a traditional private growth-equity fund] can make up for it and can provide the investor with both a reasonable return as well as help prove out some of these energy technologies.

What low carbon technologies do you find particularly promising?

The geothermal space is one. That's now proving it can work. The cost structure needs to come down. The question is how quickly can the field go through learning curves and find efficiencies, optimize the drillings and the completions and the power equipment and improve the economics.

But if you start comparing where that field is compared with small modular [nuclear] reactors, geothermal looks highly promising and it's starting to get a lot of interest from offtakers [companies that buy power] including the hyperscalers [cloud computing companies that are high-demand offtakers].

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February 24, 2026 03:00 ET (08:00 GMT)

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