Jul 28, 2021 - Energy & Environment

The private climate finance surge

Illustration of bills piling up.
Illustration: Aïda Amer/Axios

There's so much private equity and infrastructure fund action in the climate tech space these days that it's hard to keep up.

Driving the news: Brookfield Asset Management on Tuesday closed $7 billion for its Global Transition Fund that aims to scale clean energy and help carbon-intensive industries cut emissions.

  • The fund, with founding partners Ontario Teachers’ Pension Plan Board and Singapore-based investment heavyweight Temasek, has a cap of $12.5 billion.
  • The news hit about the same time that private equity giant TPG — backed by huge institutional investors and companies — announced $5.4 billion for the inaugural round of its TPG Rise Climate fund that's focused on energy, agriculture, transport, natural solutions and more.
  • Those are just the latest in a suite of recent fund announcements and closings. PitchBook calls it a "climate-focused fund frenzy," with efforts also underway from private equity firms including KKR and Carlyle.

What they're saying: "Asset owners are finally waking up to the reality of the climate crisis in a big and meaningful way, but looking to the most established asset managers to deploy their capital into climate solutions, across asset classes," Daniel Firger, managing director at Great Circle Capital Advisors, tells Axios.

The big picture: The Brookfield and TPG funds are somewhat different in focus, with the TPG money focused on growth equity investments in companies.

  • But in another way, they're of a piece, representing a surge in finance — for private equity and VC firms and infrastructure investors — heading into companies and projects that can help cut emissions.
  • "If Brookfield were to raise the full $12.5 billion it is seeking, it would amount to nearly the total capital raised by buyout firms for impact funds over the past five years," Bloomberg notes, citing the data provider Preqin.
  • And via PitchBook: "So far in 2021, global investors have already closed as many climate-focused funds as were raised during the previous five years combined."

Catch up fast: You only need to look back about 10 days to find another $6 billion heading toward clean technology companies or project finance.

  • Generate Capital, a sustainable infrastructure firm, announced it raised $2 billion on July 19.
  • That came right after General Atlantic unveiled plans to raise $4 billion for a growth equity fund focused on climate tech companies.

Quick take: There's no single factor driving the action, but market and social forces include...

  • Clean energy is increasingly cost-competitive and attractive.
  • Overall, the money surge is a bet that policymakers in big markets will continue getting more aggressive on climate.
  • Many corporate giants have set emissions-cutting targets, which drives demand for tech and projects to implement the pledges.
  • The finance industry is under growing pressure to get greener.

The bottom line: "The decarbonization opportunities are bigger and are coming sooner than we might have expected a few months ago," Brookfield's Mark Carney, the former Bank of England head, tells Bloomberg.

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