Brookfield to launch Global Transition Fund 2 in H1 this year

Brookfield Asset Management plans to launch its second Global Transition Fund in the first half of this year. GTF 2 will be “meaningfully larger” than its predecessor, which closed on $15 billion in June 2022, president Connor Teskey said in the firm’s year-end results call yesterday.

Like its predecessor, GTF 2 will be a growth equity and infrastructure strategy focused on emissions reduction and emissions avoidance worldwide, in “hardest-to-abate but critical sectors such as power, industrials, transport and energy”.

Size matters

At $15 billion, GTF 1 is the largest energy transition fund on record. Could GTF 2 be Brookfield’s “largest fund to date”, a listener asked, given that sophomore funds in Brookfield’s infrastructure strategies “have always been at least twice as large as the number one fund”. Teskey responded: “We do see a lot of similarities in the potential of those two [infrastructure and transition] platforms.” The GTF funds are “one of the largest strategies we can offer” due to opportunities in the transition space for “very large investments and therefore very large funds”.

Brookfield plans to grow its Transition business to “over $200 billion within the next 10 years”, said Teskey, mooting future products within the Transition business for private credit, a perpetual strategy and for private wealth investors.

Big deals

GTF 1 is more than 50 percent invested. “The relatively rapid pace of deployment has surprised investors to some degree,” a listener told Teskey on the results call. In response, Teskey cited “the number of very attractive opportunities” accessible to Brookfield due to the fund’s size. For example, GTF 1 has made two $500 million investments into carbon capture last year.

On the Global Transition business’s “flagship” growth equity and infrastructure strategy, which applies to GTF I and II, Teskey said Brookfield looks for “strong cashflow visibility and downside protection and where we are able to exercise our significant control or influence”.

GTF 1’s portfolio spans low-risk assets that are yield-generating or under development, such as renewable power assets, and higher-risk stakes in early-stage proven technologies such as carbon capture, battery storage and recycling.

For power investments, “we are looking for opportunities where we can buy businesses that may have existing thermal generation with the goal to help them decarbonise. Our strategy will be to rationalise and convert some of that existing thermal capacity while simultaneously… build[ing] out new renewables to provide clean power generation going forward”.

For industrial sector investments, Brookfield sees opportunities to “provide capital at scale” to corporations “to transition their businesses to proven low-carbon products and solutions that they will require to support their own net-zero goals”.