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Commonfund eyes sustainability secondaries with new fund

With the rise in primary fundraising for sustainable investment, the manager of philanthropic and endowment capital sees the secondaries market following suit.

Commonfund Capital has closed its debut sustainability fundraise on $233 million, which is being deployed into both direct and secondaries investments.

The private markets firm’s Environmental Sustainability Partners 2020 fund received an “overwhelming majority” of commitments from endowments and foundations, while also counting pension funds and other LPs among its investor base, according to Ethan Levine, co-head of Commonfund’s real assets and sustainability investment group.

The fund has a two-to-three-year investment period and has already deployed around 40 percent of its capital since holding its first close in March 2021, Levine told New Private Markets. Commonfund is investing up to $15 million per deal in growth-stage and buyout deals in the renewable energy, agriculture, water and resource efficiency sectors. The firm invests a global mandate, focusing on deals based in North America and Europe.

Commonfund is deploying around 30 percent to 40 percent of capital into “asset-based” direct investments, while the rest is being invested in corporate equity, Levine said.

“Investors are looking for standalone financial returns in sectors such as environmental sustainability that are exhibiting growth while providing a complement, or in some cases a substitute to their historical portfolios,” Levine said. “Secondaries can be derivative of primary markets, and we’ve seen primary fundraising for environmental sustainability has increased over the past several years.”

A dedicated sustainability strategy is a first at Commonfund Capital, which launched more than three decades ago in 1988 as part of The Commonfund for Nonprofit Organizations, a group specialising in the investment and management of philanthropic and foundation capital. Connecticut-based Commonfund Capital has managed private equity, venture capital and natural resources funds and works alongside Commonfund Asset Management.