Apollo prioritises debt over equity for $50bn-target clean transition platform

The firm has announced plans to raise private equity climate fund this year, but the lion's share of its energy transition strategy will be debt and 'hybrid' capital.

Apollo sees debt and ‘hybrid’ capital as the mainstay of its energy transition platform, with private equity forming a smaller component.

“The scale of money required [for the transition] is like nothing else we’ve ever seen,” said chief executive Marc Rowan during last week’s second quarter earnings call. “What kind of money is that? Most of what we see is debt and hybrid. Our goal is to build a leading financier of energy transition and sustainability worldwide by having put together a perpetual evergreen fund focused on doing that.”

In May, the firm’s co-president Scott Kleinman said the firm expected to launch a dedicated clean transition private equity strategy in the third quarter of this year. The strategy would sit within Apollo’s multi-strategy clean transition platform, from which it plans to invest $50 billion by 2027. There is no indication that plans for this fund have changed, but Rowan downplayed the role of private equity in the firm’s climate strategy: “We will raise bespoke equity drawdown funds from time to time, but those will be in my opinion smaller than the opportunity that we see.”

The firm launched Apollo Clean Transition, a debt and hybrid fund, in April this year. The fund launched with $4 billion of “deployable capital from Apollo affiliates and strategic partners”, according to an April statement from the firm. Apollo planned to put this capital to work and build an “investment track record from which we can eventually raise additional third-party capital”, Kleinman said in the May results call.

The firm has also previously invested $6 billion in transition assets – primarily renewables – via other vehicles.

Speaking of Apollo…

The listed firm’s Impact Mission Fund has acquired a baling wire manufacturer, Accent Wire-Tie, according to a press release. The company’s products are used to tie materials together for agriculture (tying hay bales), manufacturing, wholesale goods and waste management, including materials destined for landfill and recycling. Apollo’s impact fund closed last year at approximately $1 billion.