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Brookfield looks to grow energy transition business to $200bn

The global transition fund, soon to close at $15bn, will be “just the first fund in what we believe will be a very attractive growth avenue,” Brookfield managing director Natalie Adomait said.

Brookfield Asset Management is set to close a debut global energy transition fund, something it views as a first step in building an ambitious climate strategy worth more than $200 billion.

Brookfield Global Transition Fund “was raised faster and is larger than expected”, CEO Bruce Flatt said in a fourth-quarter 2021 letter to shareholders. It is now “in the final stages” of wrapping up at $15 billion, he said.

At $15 billion, the flagship vehicle would be twice its $7.5 billion target and well ahead of a $12.5 billion hard-cap. Brookfield will be its single largest investor.

Brookfield is one of the world’s biggest investors in power and renewable markets. In launching the transition fund, it aims to leverage this track record to “deliver strong financial returns and also a positive environmental impact”, managing director Natalie Adomait said in the fourth-quarter earnings call.

“Climate change is one of the most pressing and significant issues facing the economy today,” Adomait said. Through the transition fund, she said Brookfield will contribute to “the massive amount of capital” and expertise needed to drive decarbonisation of the energy system and achieve net-zero emissions over time.

Natalie Adomait, Brookfield Asset Management

Adomait highlighted two key areas of opportunity for the vehicle. One is adding clean energy to the global electricity grid, a theme the firm touched on in its acquisition last month of solar and energy storage company Urban Grid for $650 million.

The second, what Brookfield calls “business transformation”, involves helping industries like steel, cement, chemicals and utilities reduce their carbon footprint. In the auto industry, for example, major investments in electric vehicle charging infrastructure are required to decarbonise transport.

“To have a material impact, you need to be willing to go where the emissions are,” Adomait said.

The global transition fund will be “just the first fund in what we believe will be a very attractive growth avenue,” Adomait said. Over the next decade, the firm sees the potential to grow the climate business to “$200 billion-plus” through additional products, “including equity and debt and at various risk-return profiles across the spectrum”.

Adomait is part of the team that oversees the fund and an evolving climate strategy. It is headed by Brookfield vice chair Mark Carney, the former Bank of England and Bank of Canada governor, and Connor Teskey, CEO of Brookfield Renewable.

Brookfield raised an all time high of $71 billion across its flagship strategies last year, $27 billion of which came in during the fourth quarter. Final closings included Oaktree Opportunities Fund XI, which at $16 billion is the largest private debt pool on record, according to affiliate title Private Debt Investor.

Several other funds remain in the market or are just getting started. Along with the transition fund, they include a sixth flagship private equity offering, which is targeting $12.5 billion, affiliate title Buyouts reported (registration or subscription required). A fifth flagship infrastructure offering is also being rolled out.

In the earnings call, Flatt was asked if Brookfield was concerned about a less robust fundraising market in 2022 due to “fatigue among LPs”. He replied: “I’ll give you a short answer: no.”