Apollo Global Management aims to launch a clean transition private equity strategy, as the flow of climate-related opportunities continues to build.
A dedicated programme is expected in the third quarter, co-president Scott Kleinman said in the firm’s first-quarter earnings call. The goal, he said, is to “continue to expand the scope and scale of our activity in the sustainable investing area”.
Further details, such as the strategy’s leadership team and its potential to include a third-party offering, were not disclosed.
A private equity-focused platform is Apollo’s latest effort in a broad plan to invest in the energy transition and decarbonisation of industry. Last year, it said it would deploy $50 billion over the next five years and perceived an opportunity to deploy more than $100 billion by 2030. Olivia Wassenaar was named head of sustainable investing to drive the plan.
In April, a first green initiative was announced. Apollo Clean Transition Capital was created to provide flexible financing, typically in the form of yield and hybrid investments, to assist businesses in their shift toward low- and no-carbon energy alternatives. The platform was seeded with $4 billion of capital by Apollo affiliates and partners.
ACT Capital “should enable us to build a diversified portfolio and investment track record from which we can eventually raise additional third-party capital”, Kleinman said in the earnings call.
Investment in the global energy transition totalled $1.1 trillion in 2022, “a new record and a huge acceleration from the year before”, according to a BloombergNEF report. Private equity and other alternative asset firms are contributing to the unprecedented outlays with the help of recent fundraising.
This is happening, despite today’s rocky environment for raising capital, because of several factors.
First, many LPs are seeking opportunities in harmony with their net-zero and other ESG policies. Sixty-nine percent of LPs are either starting, maintaining or increasing investment in renewables, up from 55 percent four years ago, Coller Capital’s Global Private Equity Barometer Winter 2022-2023 found.
Second, there is a growing view among GPs that there are major, long-term secular drivers behind investing in sustainability themes. Tailwinds are being supported by government regulations and subsidies, including the $370 billion of incentives contained in the Biden Administration’s 2022 Inflation Reduction Act.
A third influence, TPG executive chairman Jim Coulter said last year, is changing weather patterns, something that is “on everyone’s mind in a deep way”.
Because of these and other variables, the fundraising market is flooded today with climate-related offerings coming from sponsors both big and small. Apollo is the latest large, multi-strategy shop to inaugurate green platforms adapted to more than one asset class.
Another is Blackstone, which is in the market with private debt and private equity funds geared to clean transition investing. If successful, it could soon have as much as $13 billion of dedicated capital for near-term activity, affiliate title Buyouts reported.
The largest fund raised to date is Brookfield Asset Management’s $15 billion debut energy transition vehicle, closed in 2022. The firm plans to this year launch a second that is “meaningfully larger”, president Connor Teskey said in a year-end earnings call. Another large vehicle is TPG’s inaugural climate fund, which wrapped up last year on $7.3 billion.