Ara targets $2bn for third climate fund, charting meteoric rise

Ara Partners’ industrial decarbonisation buyout fund could be one of the biggest impact funds in private equity if it hits its target – the firm has also launched a $300m-target infrastructure climate fund.

Ara Partners has launched a buyout fund with a $2 billion target for industrial decarbonisation, two sources familiar with the situation have told New Private Markets. This is the third vintage of its flagship private equity strategy. Ara is also raising its debut infrastructure fund, which has a $300 million target, a source said.

If Ara reaches its target for Fund III, this will be one of the biggest impact funds in private equity – although the firm is hitting the road at a time when private equity fundraising is highly congested. Other impact funds that have closed above the $1 billion mark include Brookfield’s Global Transition Fund; TPG Rise Funds I, II and III; TPG Rise Climate; Goldman Sachs’ and KKR Global Impact I. Notably, all these funds have been managed by established private equity funds. Ara was founded in 2017 as a specialist decarbonisation-focused impact firm.

Ara Fund III is a global strategy, one of the sources said, and will invest in decarbonisation solutions for industries such as manufacturing, materials and chemicals, energy, food and agriculture, in line with its previous funds’ strategies.

The news comes just over a year after Ara closed Fund II at $1.1 billion, having targeted $600 million. LPs in Fund II include Texas Municipal Retirement System, which committed $75 million; Alaska Permanent Fund, which committed $40 million; and the Denver Foundation, according to PEI Group’s database. Fund I had targeted $500 million and closed in 2020 at $400 million, PEI Group’s database shows.

Infrastructure Fund I also has a global strategy and will invest in climate and decarbonization-related assets, New Private Markets’ source said. It is co-headed by Teresa O’Flynn, BlackRock Alternative Investments’ former head of sustainable investing, who joined Ara in October.

Rede Partners has been appointed as a placement agent for Fund III and Infrastructure Fund I, according to filings with the US regulator. Lazard acted as placement agent for Fund II. Rede Partners declined to comment.

Ara Partners, headquartered in Houston, Texas, has been on a hiring spree in recent months: as well as O’Flynn, last month the firm recruited Manasi Desai, a former principal in KKR’s energy team, as a vice president. It has also recently appointed Ari David, from AUA private equity and JPMorgan Asset Management, as a vice president; and Gearóid Maher, from Legal & General Capital’s clean energy team, as a principal.

Ara Partners did not respond to requests for comment at the time of publication.