Climate tailwinds carry DACH debutant to €415m hard-cap

Vidia Equity, a first-time fund manager targeting industrial climate solutions in Europe, has raised €415 million for Vidia Climate Fund I, hitting its hard-cap within a year and a half of launch, the firm said on Tuesday.

Vidia will pursue buyouts of “hidden climate champions” in German-speaking Europe and the Nordics, investing in mid-market – or mittelstand – companies that in some way enable the decarbonisation of heavy emitting industries. It executed its first two investments last year: German industrial plastics recycling business BPM, and Wierig Group, which instals solar panels and other alternative energy systems on large industrial flat roofs.

The team previously worked together at Munich-headquartered private equity firm Orlando, which also focuses industrial businesses throughout DACH Europe and the Nordics. The firm’s partners, Johanna Struthmann and Stephan Rosarius, have worked together in the industrials space for over 10 years, according to the announcement.

Struthmann left Orlando in 2020, wanting to dedicate her career to climate. She subsequently decided to focus on industrial climate investing, because “that is a huge white space for an investor with the right experience”, she told New Private Markets.

The fundraise was kicked off with the support of a previous LP who, having noted Struthmann’s departure from Orlando, approached her with a commitment to back her next venture as an anchor investor. Vidia then held a first close at the start of 2023, featuring a “substantial” amount from previous investors, said Struthmann.

The investor base comprises “European and North American institutional LPs, including public pension funds, insurers, global PE consultants, endowments and foundations”, according to the press release. Rede Partners acted as placement agent for the fundraise.

Team-building

While the fund operates with a climate-focused mission, it is seeking market-rate financial returns, underwriting deals on a base case of up to 3x money, “but we have achieved quite a bit more than that”, said Struthmann.

The subject of impact-linked carry, where part of the GP’s carried interest is dependent on impact goals, was discussed internally at length, said Struthmann, but ultimately they decided to follow a conventional carry structure. This is partly because of the clear ‘co-linearity’ between the fund’s returns and the decarbonisation mission, said Struthmann, and partly because of the difficultly of accurately measuring results: “A huge problem with climate investing is that people over-estimate their impact. If all the climate funds today met their goals, I think the climate crisis would already be solved. We believe in being cautious and conservative.”

Vidia currently numbers 18 staff, but a recruitment drive will follow the fund’s final close. Struthmann will seek to hire two additional mid- to senior-level investment professionals (“we are seeing a lot of dealflow and would like to be over-staffed, rather than under-staffed”) as well as professionals in HR, investor relations and a CFO.