Brookfield back on the road for Global Transition 2, seeking more than $15bn

Brookfield Asset Management has commenced fundraising its second Global Transition Fund, chief financial officer Bahir Manios announced in the firm’s first quarter earnings call this week. Brookfield expects the second fund to be “larger than the first”, which closed in 2022 on $15 billion, said Manios, although he did not specify the target.

Brookfield previously announced the planned launch of GTF II in its 2022 year-end earnings call in February. It is a growth equity and infrastructure fund focused on emissions reduction and emissions avoidance worldwide, in “hardest-to-abate but critical sectors such as power, industrials, transport and energy”, president Connor Teskey said in February.

Despite the volatile macroeconomic backdrop, high interest rates and a fundraising crunch in both private equity and infrastructure, chief executive Bruce Flatt sounded a confident note about the firm’s transition, infrastructure and real estate businesses on this week’s earnings call. “This is a really constructive environment for the asset classes… It’s all a cycle. We are long-term asset-owners, and a short-term increase in interest rates is not going to drive us to make a knee-jerk reaction around our return targets.”

Fund I is 85 percent invested following the acquisition in March of Origin Energy, an Australian coal- and gas-fired power plant operator that was valued at $9 billion. Brookfield plans to transition the company to net zero, Flatt said.

The firm’s transition business could also see some upside from the proliferation of artificial intelligence, Flatt said.

Asked by a listener how Brookfield is affected by the rise of AI, Flatt said it is a “tailwind to our largest businesses. If artificial intelligence is going to scale at the level that is being talked about in headlines today, the two biggest things that are required are more data centres around the world, and very significant increases in electricity to power those data centres… and the biggest users of green electricity are the tech companies. So… two of our largest asset classes, renewable power and transition and infrastructure, should be immediate beneficiaries of growth in artificial intelligence.”

Decarbonisation is also one of Brookfield’s priorities for its flagship infrastructure strategy, Teskey said this week. The firm is seeing dealflow potential in “demand-side decarbonisation or energy efficient solutions”.

There is “a market opportunity for infrastructure capital to alleviate the high upfront cost and installation and the ongoing complexity of servicing and maintaining this increasing installed base of decarbonisation equipment… These opportunities are driven by consumer preferences for energy-efficient solutions that can help them manage their carbon footprint, save money, and meet legislative net-zero targets.”

Brookfield’s fifth flagship infrastructure fund has so far raised $24 billion against a $25 billion target, according to PEI Group’s database. BIG V is “40-45 percent deployed”, Flatt said.