Energy storage and transport among priorities for KKR’s debut climate fund

While the climate strategy sits within KKR’s infrastructure vertical, it plans to scale new solutions with growth investments as well as real assets.

KKR’s newly-launched climate strategy is addressing grid stability – as well as renewables deployment and other themes – to support the transition to green energy.

KKR has been building the climate strategy over the past year, registering the KKR Global Climate Fund and hiring three co-heads of global climate (Charlie Gailliot, from Goldman Sachs; Emmanuel Lagarrigue, from Schneider Electric; and Neil Arora, from Macquarie Asset Management). The strategy sits within KKR’s infrastructure business.

It is not explicitly an impact strategy, but “the overall focus… is to support the transition to a low carbon economy”, Shreya Malik, a director in the firm’s infrastructure team, told New Private Markets. Malik declined to comment on fundraising matters, but said the team will pursue mature renewable energy projects as well as scaling new climate solutions.

The strategy’s debut deal is a $750 million growth investment in Zenobē, a UK-based company that provides vehicle electrification and energy storage services. KKR and Infracapital, the company’s previous majority shareholder, have “co-control”, a spokesperson for KKR said. KKR’s investment comes entirely from the new climate fund, New Private Markets has learned.

Accelerating the deployment of energy storage solutions to support electric grids is a key part of the new climate strategy. “To meet net-zero targets, you need stability of the grid as much as you need green power,” said Malik. “As more and more renewables are added to the system… the energy supply becomes more intermittent. Having solutions which can stabilise the grid with storage solutions is quite key; we by definition need more storage. To complement the grid and ensure it remains stable, we do need to keep adding battery capacity to keep the grid stable and not have blackouts.”

Transport is another area of the focus for KKR’s climate strategy. “Decarbonising transport is a really key part of meeting net-zero targets, and accelerating and scaling that deployment is important,” said Malik. “We have to see a rapid shift in the electrification of buses and fleet vehicles. The opportunity set is significant and focusing on that is a key priority for [KKR’s climate] business.”

The strategy will include real asset and project finance as well as growth investments of earlier-stage climate solutions. “We are flexible about the different stages and sizes that opportunities might come in,” said Malik. Speaking to affiliate publication Infrastructure Investor last month, Gailliot said most climate strategies typically focus on either mature renewable energy assets and or climate ventures. He described a “sweet spot” of less-tapped opportunities in “the development and scaling of assets of the physical economy, and that’s a less well-travelled space”, Gailliot said.