Brookfield eyes first close for Global Transition Fund 2; starts deploying

Brookfield Asset Management plans to reach a first close on its second transition impact fund in “the back end of 2023”, president Connor Teskey announced on the firm’s Q3 results call yesterday.

Global Transition Fund II, a growth equity and real assets strategy, launched earlier this year. The target has not been disclosed, but is understood to be higher than the $15 billion raised for the first fund. Brookfield has already lined up BGTF II’s first two deals, which will total $1.5 billion, Teskey said on the call.

BGTF I closed in 2022 and is the largest impact fund raised in private markets to date. Teskey yesterday described BGTF II’s LP base as “significantly larger” than the debut fund’s. “Not only is the investor spectrum widening, it is growing in terms of size of commitment as well.”

Since BGTF I’s fundraise in 2021, Teskey continued, “many more institutional investors around the world either have carved out a decarbonisation or transition investment bucket, or at a minimum have firmly decided that that investment strategy fits within their portfolio, and therefore they are much more willing and able to allocate capital to these strategies.”

But Brookfield is not the only fund vying for a share of these institutions’ climate buckets. It will soon be joined on the climate roadshow by TPG, which is preparing to bring its second Rise Climate and debut Rise Climate Infrastructure vehicles to market in the coming months. There are others, too: KKR, for example, launched a climate strategy this year within its infrastructure business; and Blackstone is yet to close its fourth energy transition private equity vehicle. (Neither Blackstone’s not KKR’s strategies have been given the ‘impact’ label by their GPs.)

“All investors, regardless of their decarbonisation objectives, are seeing one of the largest investable universes and very attractive risk-adjusted returns,” Teskey said.

“The environment for transition investing is very, very robust. Right now, you are seeing one of the greatest capital needs in memory to build out data centres, renewable power, and that is happening at a time when capital is becoming increasingly scarce for some market participants and some developers of those assets. That creates a great opportunity for us both on the infra side and on the transition side to be both a capital provider and an operating partner to those businesses. The market opportunity set is larger than it has ever been before, while being more attractive than it has been in recent memory.”