UK pension pool Border To Coast Pensions Partnership plans to invest £1.35 billion ($1.8 billion; €1.6 billion) over three years in climate funds across venture capital, private equity, infrastructure and private credit. The allocation sits alongside separate buckets for its ‘main’ private markets strategies.
“We felt there was appetite from our investors for a standalone fund that could go further in terms of looking at new technologies and smaller, more niche strategies that wouldn’t necessarily have formed part of the main [private markets] strategy,” Mark Lyon, head of internal management at Border To Coast, told New Private Markets.
The allocation will pursue investments in six sectors: clean energy, technology, transport, industry, agriculture and carbon sequestration, Border To Coast announced. Approximately 20 percent of the allocation will be in venture capital investments, said Lyon.
“[The vehicle] won’t just have low carbon investments,” said Lyon. “It will have a range of investments – some will be low carbon and some will contribute to reducing high carbon-emitting sectors.
“Personally, I’m most excited by carbon sequestration – either through direct air capture or carbon capture and storage.”
Direct air capture is a nascent technology that extracts carbon from the air, mixes it with water and funnels it underground, where the solution turns into geological formations and forms part of underground rock.
“If the costs [of building engineered carbon capture infrastructure] can fall in the way that renewable energy assets fell, then that is a real gamechanger for getting carbon out of the atmosphere,” said Lyon.
Border To Coast is also “looking for funds that can introduce technological process improvements, such as low carbon cement,” said Lyon. “The hard-to-abate sectors – industry, cement, manufacturing – are probably always going to be high carbon emitting. But if we can invest in processes or products that reduce that carbon exposure, that will help the whole economy to reduce carbon emissions. That could be a potential gamechanger too.”
Last year, Border To Coast set a target to reach net zero greenhouse gas emissions across its portfolio by 2050. Its latest climate change investment policy excludes coal investments and oil and gas extraction investments, but the pension pool has some exposure to portfolio companies with assets in fossil fuel industries, Lyon told New Private Markets.
The £1.35 billion climate allocation is part of a £4 billion private markets allocation. The remaining £2.65 billion will be invested in private markets over the next year: £1.03 billion in infrastructure, £705 million in private equity and £985 million in private credit.